Which companies are tomorrow's big winners? In our ongoing series, I'm chatting with Fool analysts and advisors to find out the stocks on their watchlists and the catalysts that would induce them to buy. By the end of today's article, you'll get three companies that the man in charge of training our analysts thinks you should be watching and three that he recently bought for his personal portfolio.
Large caps on sale
Buck Hartzell has been investing for decades and can't recall a time when large caps have been quite as cheap. A numbers-focused guy (his 100-point rating system for interview candidates is the stuff of Foolish lore), he decided to dig in on key multiples of six companies on his watchlist that share some commonalities:
- Strong and growing businesses.
- Very low multiples.
- Unparalleled balance sheets.
- Trend of buying back more of their shares.
- A dividend that now or soon will outpace inflation.
After a thorough exploration, he found that three of them were worth watching a bit longer, and three he decided to buy.
Three to keep watching
Shares of Hewlett-Packard
And Buck has concerns about upcoming regulations that will require printer makers to let us know how many pages we can actually print with each toner cartridge (a shocking concept), so he's keeping this one on his watchlist for now.
Joining HP is Intel
Earlier this month, Automatic Data Processing
If you want to keep an eye on these stocks, click over to MyWatchlist.com, the Fool's free customized hub to follow the performance and Foolish coverage of the companies you're watching.
Three that Buck bought
Once he started investigating his watchlist, Buck was hit by three great companies that were simply too cheap to let go. He purchased all three of the following stocks, and is convinced that the last one represents a buying opportunity that shouldn't be missed by any investor.
Johnson & Johnson
The reasons behind the drop in Cisco's
Buck's biggest winner
In this environment where once again capital is precious, Buck loves strong, stable companies that lead their industries. If you believe the hype and the headlines, Microsoft
The behemoth has stable gross margins (at a stunning 80%) and its top and bottom lines have grown at a strong rate of 10% and 8%, respectively. The company's buying back its shares, using its massive cash hoard to reward investors. And Microsoft has just begun. With a bucketful of cash on hand (over $5 per share, versus debt of just over $1 per share), Buck expects CEO Steve Ballmer to increase the company's current 2.5% dividend yield, meaning huge returns for investors at today's prices. Microsoft could increase its dividend to almost 7% and still be paying out an acceptable 75% of its earnings. That's why Buck bought (and I'm doing the same as soon as our trading guidelines allow).
Buck's not the only one bullish on Microsoft. In the Fool's recent report on 13 high-yield companies, analyst Jim Royal calls Microsoft the "dividend play of a lifetime." To get instant access to this report and another dozen outstanding dividend payers, click here – it's free.
Roger Friedman doesn't own shares of any companies mentioned, but they're all now on his watchlist. Intel and Microsoft are Motley Fool Inside Value picks. Automatic Data Processing and Johnson & Johnson are Motley Fool Income Investorpicks. The Fool has a bull call spread position on Cisco Systems. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel and diagonal call positions on Johnson & Johnson and Microsoft. The Fool owns shares of Johnson & Johnson and Microsoft. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.