One of the benefits a market in a steep decline offers is that it drops a lot of companies to prices that investors haven't seen for years. Buying the companies at significant discounts to their underlying value is one of the keys to achieving long-term success. Companies as well as individuals know this, and health-care giant Johnson & Johnson (NYSE:JNJ) is taking full advantage of the situation. It began its tender offer to acquire breast implant maker Mentor (NYSE:MNT) three weeks ago, and it just closed on its purchase of Omrix Biopharmaceuticals, a manufacturer of products to stop bleeding during surgery.
Yet, it's not a strategy without risk. Hospitals are under pressure as the recession causes a drop in the number of patients who are having elective procedures, while raising the institutions' levels of bad debt. That's contributing to a deterioration in capital spending that directly impacts medical device makers. Of course, as a stand-alone company, Mentor might have found itself in more challenging circumstances, but as part of Johnson & Johnson, it would seem to now have the depth of resources to ride out the storm.
Motley Fool CAPS member nerd1951 believes J&J's acquisitiveness is a much-needed shopping spree that will pay dividends in the future:
What can I say about [Johnson & Johnson] that hasn't already been said? Well there's one thing. Like many smart investors with cash [J&J] seems to be on a investment shopping spree. While others are panicking, [J&J] is gobbling up pharma and other health care product companies, positioning itself for growth when the economy turns around.
What's hot, what's not
Johnson & Johnson is just one of several stocks Google's search activity shows as drawing more interest lately. Below are a few more hot stocks we've found by watching the giant's search trends, which we then pair up with ratings from the Motley Fool CAPS community. Over the first 20 months of tracking the collective intelligence, the data showed that newly minted five-star stocks offered the best opportunities for investors, whereas the lowest-rated companies fared the worst. A five-star rating is the highest a company can get in CAPS.
By adding in some performance measures for the past year, we can get a handle on how the stocks are expected to do in the future. Here are a few topping the search engine.
|
Stock |
CAPS Rating |
Return on Capital, Last 12 Months |
5-Yr. Consensus Growth Est. |
|---|---|---|---|
|
Allstate (NYSE:ALL) |
**** |
0.6% |
9.7% |
|
BP (NYSE:BP) |
***** |
20.9% |
2.0% |
|
CBS (NYSE:CBS) |
** |
6.8% |
4.7% |
|
Deere (NYSE:DE) |
**** |
6.7% |
10.0% |
|
Johnson & Johnson |
***** |
18.2% |
9.2% |
Sources: Google Finance and Capital IQ, a division of Standard & Poor's.
Soul searching
When it comes to the price of oil, demand seems to overshadow everything else these days in determining which way it will move. Even with the situation in the Middle East becoming tense again, the price for light, sweet crude fell below $42 a barrel. Total U.S. fuel consumption fell 3.7% over the four weeks ending Dec. 26, compared to the year-ago period. Gasoline demand itself fell 2.2%.
For the near term, that's a problem for oil companies like BP and ExxonMobil (NYSE:XOM). Still, CAPS member StckPickr3000 thinks oil's price is too low right now to not overcome demand concerns in the future:
Oil is too low not to head back north. Instability in stocks means people will start migrating to tangibles. I'm thinking that as inflation creeps (especially with all the money the US is pumping into the system) companies are going to try to lock in low prices in the futures market. My opinion is because over $100.00 barrels of oil is still fresh in everyone's memory, if there is even a little fluctuation upwards in the oil price, we're going to see a steady buy up to a more reasonable oil price, which obviously is going to positively impact the bottom line of companies like this.
Seek and ye shall find
It takes more than a brief glimpse and a few searches to make buy or sell decisions. So, start your own research on these stocks on Motley Fool CAPS. You can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.
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