A look at 5 Defensive Plays 1 Year Later!

Here is a look at five defensive stocks I wrote about 1 year earlier and where they are now. The market was tanking but did not reach a bottom for another 5 months. Keep in mind that their are many fundamentals to look for when picking individual stocks, however I tried to kept it simple with just a few important ratios mentioned here.

1) The P/E ratio All five stocks mentioned at the time had a P/E ratio of under 18. Only three currently have P/E's under 18.

2) Return On Equity or REO All had REO's of 14% or better while four of these still do. The higher this figure the better. REO shows how well a company uses investment funds to generate earnings growth.

3) Dividend Yield All paid dividends, and all have increased their payouts since.

4) Debt to Equity Ratio This is a measure of a company's financial leverage. Debt/equity ratio is equal to long- term debt divided by common share holders' equity. Generally the lower this figure the better. Last year P&G had the highest D/E ratio in this group which was .52 today it stands at .33 .

These are the types of companies that the legendary investor Warren Buffett invests in. In fact Coca Cola (KO), Costco (COST), Johnson & Johnson (JNJ), and Proctor & Gamble (P

G) are a part of Buffett's holding company Berkshire Hathaway. The five stocks mentioned returned a combined 11.05% before dividends. If you add on the average annual dividend yield of 2.67% for these five companies over the past year you will get a 13.72% total return. You will notice that all five issues are companies that make products we use and consume everyday, which is another trait that Buffet looks for.

One year later three out of five still look reasonably priced, those being HRL, JNJ, and PG.

Author currently long JNJ.

11 Small Cap Stocks Trading Near Book Value

Benjamin Graham considered the father of security analysis and value investing used a set of tools to pick stocks. These tools much like a carpenter uses to build or fix a house, Graham used to find undervalued stocks. His tools were low P/E ratios, stocks that traded near book value, stocks that made money over the past 5 years, and stocks that showed consistency of paying a dividend. Here is a list of 11 small cap companies trading near their book value. Most of these companies have several characteristics that a Value Investor such as Graham would be looking for. All trade at a low P/E ratio with earnings growth over the last five years. All but one pay a dividend. Six of these issues have paid out a dividend for 10 straight years.

.

American Physicians Capital- founded in 1975 through its subsidiaries, is a regional provider of medical professional liability insurance focused primarily in the Midwest, with Michigan, Illinois, Ohio, Kentucky, and New Mexico as our core states. Based on direct written premiums as reported by A.M. Best Company, we are among the top writers of professional liability in Michigan, New Mexico and Illinois. We rank 19th nationally among professional liability insurers, with approximately 9,300 policies in-force.

Apogee Enterprises- founded in 1949 and is based in Minneapolis, Minnesota transforms plain glass to create distinctive solutions for architects, building owners, contractors, picture framers and others. Our glass and aluminum window, storefront and curtainwall systems make commercial buildings look great, reduce energy consumption and protect against hurricanes and blasts. Apogee's glass also reduces fading and reflection for picture framing customers.

Chase Corporation- founded in 1946 and is headquartered in Bridgewater, Massachusetts engages in the manufacture of specialty tapes, laminates, sealants, and coatings, as well as in the provision of contract assembly services for the electronics industry worldwide.

Espey Mfg. & Electronics Corp.- founded in 1928 and is based in Saratoga Springs, New York engages in the development, design, production, and sale of electronic power supplies, various transformers and iron-core components, and electronic system components primarily in the United States.

Friedman Industries- founded in 1965 and is based in Houston, Texas. Together with its subsidiaries, engages in steel processing, pipe manufacturing and processing, and steel and pipe distribution in the United States.

Oil Dri Corp. of America - founded in 1941 is a leading developer, manufacturer and marketer of products for consumer, industrial and automotive, agricultural, sports fields and fluids purification markets. Oil-Dri -- Creating Value From Sorbent Minerals

Preformed Line Products Company- founded in 1947 and is headquartered in Mayfield Village, Ohio. Together with its subsidiaries, designs and manufactures products and systems employed in the construction and maintenance of overhead and underground networks for the energy, telecommunication, cable operators, and information industries worldwide.

Patterson-UTI Energy- founded in 1978 provides onshore contract drilling services to exploration and production companies in North America. The Company has approximately 350 marketable land-based drilling rigs that operate primarily in oil and natural gas producing regions of Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Alabama, Colorado, Arizona, Utah, Wyoming, Montana, North Dakota, South Dakota, Pennsylvania, West Virginia and western Canada. Patterson-UTI Energy, Inc. is also engaged in the businesses of pressure pumping services and drilling and completion fluid services.

Servotronics- founded in 1959 engages in the design, development, and manufacture of high quality components, systems and sub-systems for use wherever precise control, reliability and cost containment are primary requirements.

The Stephan Co.- founded in 1897 and is headquartered in Fort Lauderdale, Florida together with its subsidiaries, engages in the manufacture, sale, and distribution of hair care and personal care products.

Versar- founded in 1969 and based in Springfield, Virginia provides various professional services to the government and private sector with solutions for infrastructure, facilities management, construction, environmental quality, defense, and homeland security needs in the United States and internationally.

Ticker	Price as of 9/18/2009	Book Value	Price Book Ratio	Free Cash Flow	P/E	Current Ratio	Mkt Cap	Total Debt	Earnings Growth Past 5 yrs	Yield %	Industry
ACAP	29.54	22.37	1.37	40.9m	8.54	4.92	313.4m	25.9m	24.3	1.1	Property & Casualty
APOG	15.94	11.51	1.35	31.2m	8.94	1.63	444.8m	8.4m	31.4	2.2	General Building Material
CCF	11.6	7.86	1.46	12m	13.57	3.04	99.1m	0	7.8	3.1	Industrial Equipment & Components
ESP	18.1	13.44	1.37	4.7m	14.23	13.3	38.2m	0	53	5.1	Diversified Electronics
FRD	6.15	8,2	.75	3.8m	4.38	9.48	41.8m	54,030	16.27	0.6	Steel & Iron
ODC	14.31	12.93	1.14	5m	11.23	2.92	101.1m	21.5m	12.71	4	Specialty Chemicals
PLPC	39.50	28.19	1.40	5m	13.48	3.07	206.8m	7.8m	11.4	2	Heavy Construction
PTEN	15.04	13.81	1.11	168.6m	12.45	2.05	2.3b	0	11.8	1.3	Oil & Gas Drilling & Exploration
SVT	7.20	9.63	.78	2m	6.32	4.92	13.9m	4.1m	38.15	2	Industrial Electrical Equipment
TSC	2.42	5.51	.46	2.1m	13.97	6.61	10.3m	426,000	22.13	3.3	Personal Products
VSR	4.04	3.06	1.21	5.0m	11.67	2.73	36.8m	0	23.56	0	Technical Services

4 Stocks With Rising Dividend$

Below is a screen I ran this morning on dividend stocks. This screen seeks to identify quality companies that have a history of good dividend growth and that also have an additional kicker: their shares are sporting above-average yields. All four are ranked A or better by Standard & Poor's Investor service. All four have grown their dividends at double digits over the last 5 years.

The Strategy for owning/investing in dividend stocks

Cash dividends are tangible. They can't be fabricated, or falsified, or manipulated. Over time, dividends are a true record of a company's performance. They can also represent a significant proportion of an investment's total return. Since 1926, dividends have accounted for almost 42% of the total return (capital appreciation plus reinvested dividends) of the S&P 500. The attraction of a safe, secure dividend, moreover, will help to support and cushion a stock when the market is going through bad times and is under downward pressure.

Company Name	Ticker Symbol	S&P Rank (earnings/div. rank)	Dividend Yield	Dividend Growth Rate(5 yr avg)	Trailing P/E	Current Ratio
VF Corp	VFC	A	3.4%	17.81%	14.9	2.3
Johnson & Johnson	JNJ	A+	3.24%	11.45%	13.4	1.8
Sysco Corp	SYY	A+	3.72%	13.05%	14.5	1.7
Emerson Elec Co	EMR	A	3.47%	10.53%	15.6	1.5

Your Garbage Can Pay You Dividends

First Posted On Our Sister Site @ HighYieldingDividends

Who said their wasn’t money in trash. Well these three companies pass their profits to share holders. Listed below are three companies that are in the waste management industry. Two large caps and one small cap. All three pay a nice dividend. One well known tycoon has a significant stake in Republic Services.

Waste Management, Inc. - was founded in 1894 and is based in Houston, Texas. Waste Management (WM) is the leading provider of comprehensive waste management and environmental services in North America. As of December 31, 2008, the company served nearly 20 million municipal, commercial, industrial and residential customers through a network of 367 collection operations, 355 transfer stations, 273 active landfill disposal sites, 16 waste-to-energy plants, 104 recycling plants, and 111 beneficial-use landfill gas projects.

Republic Services, Inc. - was founded in 1996 and is headquartered in Phoenix, Arizona. Republic Services (RSG) is a leading provider of solid waste collection, transfer, recycling and disposal services. We operate 400 collection companies in 40 states and Puerto Rico and provide top quality services to commercial, industrial, municipal and residential customers. Republic serves millions of residential customers under contracts with more than 3,000 municipalities for waste collection and residential services.

American Ecology Corporation - was founded in 1952 and is headquartered in Boise, Idaho. American Ecology (ECOL) is one of the nation’s oldest providers of radioactive and hazardous waste services. The company accepts hazardous and low-level radioactive waste from commercial and government entities, such as refineries and chemical production facilities, manufacturers, electric utilities, steel mills, and medical and academic institutions. American owns one commercial nuclear waste disposal site and three hazardous waste sites in the United States.

Related Articles:

3 Stocks With Good Dividends and Sales

Garbage in, profits out (A hazardous - waste disposal firm cleans up)

5 signs of a Strong Dividend Stock

Project turns landfill gas into energy in Bay Co.

Kansas landfill to produce, sell electricity

*William (Bill) H. Gates is chairman of Microsoft Corporation, the worldwide leader in software, services and solutions that help people and businesses realize their full potential. Mr. Gates owns 15% of the common shares through his investment vehicle Cascade Investment LLC and The Gates Foundation.

*Mr. Heil is a land developer and private investor, and has owned and operated one of the largest solid waste landfills in the mid western United States. Mr. Heil has more than 40 years experience in the construction and waste service industries and has, since 2002, served as President of E.F. Heil, LLC, operator of a landfill in Plainfield, Illinois. Mr. Heil is a director of American Ecology and the largest individual share holder in the company owning close to 6%of the common stock.

Can Kraft Feed Buffett's Appetite?

One of Warren Buffett's stocks takes it on the chin this morning by posting a 72% decline in profits and trimming forecast for 2009. Kraft Foods(KFT) is trading down -$2.49 to $26.25 in pre-market this morning 2/4/2009. Kraft is the #2 food maker in the WORLD! Buffett usually makes Few but BIG bets and says his holding time frame is forever. I guess when you get to be the size of Berkshire Hathaway(BRKA,BRKB) you do have to hold a long time. Buffet likes companies with good steady cash flows which Kraft has and seems to be passing this on to shareholders in dividends which have been growing steadily. The current dividend is yielding over 4%. Keep in mind WALL STREET likes to focus on earnings, however the Intelligent Investor should focus on the the underlying business and its cash flows. Organic revenue for the 4 quarter and the year 2008 just ended grew 4.4% and 6.6% respectively. Here's a look at Kraft's(KFT) RECENT REPORT dated February 4th 2009.

Author long KFT

Ben Graham & The Almighty Dividend

Ben Graham quotes in his book The Intelligent Investor that...  

One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company's quality rating. Indeed the defensive investor might be justified in limiting his purchases to those meeting this test.

Certainly with all the major indices in the tank, dividend yields should be greater. This is true but keep in mind that just because a stock pays a dividend does not mean it is a good buy or good investment. However paying a dividend is just another tool and perhaps a very good tool in finding a suitable stock investment.

Where should one start, well their are many financial sites on the web that have this information. A couple  of the easy places to start are Google Finance(GOOG) and Yahoo Finance (YHOO), both have excellent sites for quick and  easy reference. 

Also over at the DividendGrowthInvestor who covers the  subject  of dividend investing, offers a wealth of information.

Graham used the dividend as just one of several criteria for picking stocks.  Why was this? To show that a company was sharing some of the earnings with the stock holders. So often company's will reinvest the earnings back  into the business. In some cases this makes sense, but quite often not.

.....We have  always heard that  "Cash Is King"..... So give me that Dividend Payment Please.

Ben Graham Nuggets Part 2

The Market Crash of 2008 has created many opportunities for the investor especially the most prudent of investors- the Value Investor. While many stocks look like bargains not all are. Many are value traps however many might be diamonds in the rough. One of Ben Grahams strategies while managing money during his 30 years of running "Graham-Newman Partnership" was to buy a basket of beaten down stocks . While there are many stocks currently that fit in the mold or come close to Grahams strategy here is the latest list:

All issues mentioned have a current ratio better than 1.5, a book value under 1.5, a p/e ratio under 15, positive eps growth over last 5 years, very low or no debt, and pay a dividend of at least 2 percent or better.

7 Ben Graham Nuggets

Williams Pipeline LP(WMZ)- Williams Pipeline Partners L.P. owns and operates natural gas transportation and storage assets in the United States.

Lufkin Industries(LUFK)- Lufkin Industries, Inc. and its subsidiaries engage in the manufacture and sale of oil field pumping units, power transmission products, and highway trailers.

Bebe Stores(BEBE)- bebe stores, inc. engages in the design, development, and production of womens apparel and accessories. Management holds a large stake in this one.

Heidrick &Struggles(HSII)- Heidrick & Struggles International, Inc. provides executive search and leadership consulting services in the Americas, Europe, and the Asia Pacific.

Titanium Metals(TIE)- Titanium Metals Corporation produces titanium melted and mill products.

Williams-Sonoma(WSM)- Williams-Sonoma, Inc. operates as a specialty retailer of home products.

Intersil Corporation(ISIL)- Intersil Corporation is a global technology leader specializing in the design and manufacture of high performance analog semiconductors.

More Ben Graham Nuggets here:

http://stockmanmarc.blogspot.com/2008/10/few-more-ben-graham-nuggets.html

*These are not recommendations but ideas for further study before investing.

Investment Dont's

I was flipping through the pages of a book "The Money Masters" I have in my personnel library(books piled in a brown  box, lol). The book was published in 1980 and was written by John Train.

It covers the strategies of 9 great investors Warren Buffett,Paul Cabot, Phil Fisher,Ben Graham,Stanley Kroll,T.Rowe Price,John Templeton,Larry Tisch and Robert Wilson. Perhaps some of you have already read it, if not Amazon(AMZN) sells the second addition printed in 1994. While each chapter is focused on one of these individuals and their investment strategies, I found Chapter 11 unique. This chapter contains techniques that The Money Masters agree don't work.  *Here is a brief passage from the book.

Investment Dont's

1. Avoid Popular Stocks or Glamour Stocks- a glamour stock is a good company overpriced because it's everybody's darling at the time. 

2. Avoid Fad Industries- Fads and Brokers ' stories are variations on popular stocks. The ones you can remember are limited only by how old you are: computer stocks of the 60's, bio tech  of the early 90's , Internet stocks of the late 90's and most recently energy companies.

3. Avoid New Ventures- Venture capital is for the pro's, not passive portfolio investors.  Out of the Microsoft's(MSFT), Dell(DELL), Cisco's(CSCO) and WalMart's(WMT) many of thousands go bust. The ones that make money here are the promoters and upper management.

4. Avoid "Official" Growth Stocks- Stocks that have the growth label on their back and the price tag to go along with it.  For example these stocks might have been the big gainers in the last cycle, but going forward they cannot sustain their growth.

5. Avoid Heavy Bluechips- While we here the term Bluechips alot this is usually a name for a dividend paying company that was once good . Many are in cyclical industries and have eratic earnings. 

6. Avoid Gimmicks- Gimmicky investment "products" with high transaction costs and no intrinsic growth of value, such as derivatives, this is plain a*s gambling. Take my advice go to vegas if you want to gamble, lots of glitz and they give you free drinks.

7. Bonds Don't Preserve Capital- A final bad deal for the investor, usually is bonds, unless they reinvest all the income. Many think that bonds are "conservative" this is highly exaggerated. After tax, bonds generally yield less than inflation. If you use the interest you will probably run through your capital base in 20 years.

8. Forget About Technical Analysis- These are companies or individuals that try to predict which way the stock is heading and when it will get their. Hey they might tell you where the stocks been but they can't tell you where it will be in one week or one year.

I thought this was unique because mostly what we read or here is "this is what you should do" or "this is the way I did it".

Buffett Likes Those Quarterly Cash Payments

The Oracle of Omaha Warren Buffet has probably been in the news more in the last couple years than his first 50 years of his business career. One reason is that he is one of the richest people in the world second he has made his fortune strictly off of investing and third he is at the twilight of his career. But the reason for this article was to touch upon his investing style, and what he looks for in order for him to invest or buy the complete company. I will not get into the details with this post, but I do want to bring up a point, which is Warren Buffett- The Ultimate Dividend Investor(see dividendgrowthinvestor.com, a good article) has transformed as an investor over his long career. Yes Warren Buffett still very much adheres to the rules that Ben Graham wrote nearly 75 years ago which were Margin of Safety and Mr. Market. I do believe he is the ultimate dividend investor. Many of his public companies are dividend paying ones, plus the companies that are wholly owned subsidiaries send profits back Berkshire Hathaways(BRKA, BRKB) bottom line, much like the float of his insurance companies do. Buffets Berkshire(BRKA, BRKB) has been forced to change just out of its shear size. However I do believe in his personnel portfolio he still looks for 50 cent $1 bills. This is just my personnel observance while reading many books and articles that have been written on him.





This article intends to point out that he has gravitated to investing in large, cash paying companies rather than his early years which were Ben Grahams, cigar butt style of investing.

A Few More Ben Graham Nuggets

• These stocks come very close to meeting Ben Grahams criteria:
  
  All issues mentioned have a current ratio better than 1.5, a book value under 1.5, a p/e ratio under 15, positive eps growth over last 5 years, very low or no debt, and pay a dividend. 8 out of 10 companies have earned money for last 10 years straight while 2 companies have been positive for at least 8 of those 10.
  
  Abercrombie (ANF)- A specialty retailer catering towards the younger crowd. This one surprised me to be on this list. Has a high ROE that has averaged over 30+ % for last 10 years.
  
  Ashland Inc.(ASH)- A well run diversified chemical company trading at a sales ratio of .17 and 43% of book value.
  
  Bel Fuse(BELFB)- Manufacturers electronic components trading at 2x cash.
  
  Movado(MOV)- Another retailer that manufacturers and markets fine watches and jewelry.
  
  Nam Thai Electronics(NTE)- Electronics company that has increased cash flow over last 6 years straight. Value investors the Kahn Brothers (Irving Kahn served as teaching assistant to Ben Graham in the 1930's) have stake in company.
  
  Seaboard(SEB)- Insiders own 72% as well as the Kahn Brothers.
  
  Thor Industries(THO)- The largest manufacturer of recreation vehicles and a major builder of small buses. Insiders own 36%.
  
  
  These are not recomendations but ideas to further study before investing
  
  STOCKMANMARC

5 Defensive Plays

Here are 5 stocks for uncertain times. Each company pays a dividend, has a PE ratio of 18 or less, a high return on equity, and debt/equity ratio of .52 or less. Four out of five companies have been in business for over 100 years.

P/E ROE Div% D/E ratio

Costco(COST) 18 14 1.2 0.25

Hormel(HRL) 14 16 2.3 0.21

Johnson&Johnson(JNJ) 13 26 3.3 0.30

Coca Cola(KO) 16 27 3.7 0.48

Proctor & Gamble(PG) 16 17 2.7 0.52

* prices as of 10/10/2008

Costco is a Big Box discounter that sells everything from, snack foods to home furnishings.
Hormel Foods sells meat products under various brand names such as SPAM, Dinty Moore, and Valley Fresh. Everyone knows Coke with its bright red cans and funny shaped bottles which serves up brands such as COKE, FANTA, and SPRITE. Proctor & Gamble is in the personal products industry and owns brand names such as Head & Shoulders, Cover Girl, and Gillette. While Johnson & Johnson has TYLENOL, BAND-AID, LISTERINE.


The author suggest further research before investing. The author does not hold positions in any of these companies except JNJ.

STOCKMANMARC