Are the 5 Greatest Places to Work Good Investments?

Daniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Fortune's 2012 list of 100 Best Companies to Work For produced some interesting results. If sifted correctly, Fortune's lists can often reveal some interesting investment opportunities. In this article I'll take a look at the top five on the list and examine their investment prospects.

Google (NASDAQ: GOOG)

<table> <tbody> <tr> <td>Market Cap</td> <td>P/E</td> <td>Price/Free Cash Flow</td> <td>Average Analyst Recommendation</td> <td>Industry</td> </tr> <tr> <td>$242.34B</td> <td>23.1</td> <td> 19.2</td> <td> Outperform</td> <td>Online Search</td> </tr> </tbody> </table>

Any company that can claim 60% worldwide market share in anything is worthy of an honorable mention on your watch list. As the world leader in online search, Google not only owns the advertising platform behind its search engine, but it has found a way to create a customized and automated advertisement experience on millions of other websites as well.

With search down pat, Google has its eyes on Apple's enormous profit margins in mobile hardware. The company has already flooded the market with its Android OS and launched a very competitive 7" Google Nexus tablet. Finally putting its Motorola acquisition to work, there is a rumored Google phone in the works.

At just 19.2 times fee cash flow, I don't think the significance of Google's growth opportunities and limited downside are fully priced into the stock. At today's price, Google is a great bet for the long-term investor.

Camden Property Trust (NYSE: CPT)

<table> <tbody> <tr> <td>Market Cap</td> <td>P/E</td> <td>P/Free Cash Flow</td> <td>Average Analyst Recommendation</td> <td>Industry</td> </tr> <tr> <td> $5.76B</td> <td>43.7</td> <td>  -</td> <td> Outperform</td> <td>Real Estate Operations</td> </tr> </tbody> </table>

The home ownership rate in the U.S. is at a 15-year low of 65.4%. A Morgan Stanley housing market report has dubbed this trend as the new "Rentership Society." This is great news for Camden Property Trust, an apartment-management firm managing properties housing 100,000 people in 13 states. Though the stock lagged the S&P 500 in 2012, it's up over 230% since 2008.

Renting trends are clearly in the firm's favor. But at 2.4 times book value, the company trades significantly higher than the industry average of 1.9. There is no margin of safety at today's price. I'll take my money elsewhere.

DreamWorks Animation (NASDAQ: DWA)

<table> <tbody> <tr> <td>Market Cap</td> <td>P/E</td> <td>Price/Free Cash Flow</td> <td>Average Analyst Recommendation</td> <td>Industry</td> </tr> <tr> <td> $1.38B</td> <td>19.75</td> <td>  -</td> <td> Outperform</td> <td>Motion Pictures</td> </tr> </tbody> </table>

DreamWorks Animation has the rights to some valuable franchises including Shrek, Madagascar, and Kung Fu Panda. But its heavy reliance on feature films as a percentage of revenue leaves the business susceptible to flops and poor success streaks. On the other hand, however, it's concentrated portfolio of motion pictures means that blockbuster successes can have a significant, positive influence on the stock.

With only about five films produced every year, each film is critical to the company's success. The company's recent release of "Rise of the Guardians" is a great example of the affect poorly performing films can have on the stock price. The stock now trades at all all-time historical low.

The pullback on the stock price, however, offers investors a decent price to jump in on a motion picture stock. Though the future of this motion picture stock seems too risky for me, it could be a good bet if you are confident in the firm's ability to make the most of its current franchises.

NuStar Energy (NYSE: NS)

<table> <tbody> <tr> <td>Market Cap</td> <td>P/E</td> <td>P/Free Cash Flow</td> <td>Average Analyst Recommendation</td> <td>Industry</td> </tr> <tr> <td>$3.73B</td> <td> -</td> <td>  -</td> <td> Outperform</td> <td>Oil Well Services and Equipment</td> </tr> </tbody> </table>

As one of the world's largest independent liquids storage and transportation operators, NuStar Energy's geographically diverse network of crude oi and refined product pipelines and terminals (80% of revenue) enjoy a durable competitive advantage; Regulators are reluctant to grant rights for new pipelines or expansions unless there is a clearly demonstrated economic need.

But there are a few fundamental problems that will keep me away, despite its competitive advantage. The firm is highly leveraged, at 2.02. Also, the firm trades at 27 times forward earnings estimates. I'd require a significant discount to fair value for a business as complex and leveraged as NuStar. But when compared to peers, the stock doesn't look very expensive. At just 1.4 times book value and .5 times sales (both metrics significantly lower than industry averages), there is still room for upside in the valuation. So I don't think it's time to sell, either.

Chesapeake Energy (NYSE: CHK)

<table> <tbody> <tr> <td>Market Cap</td> <td>P/E</td> <td>Price/Free Cash Flow</td> <td>Average Analyst Recommendation</td> <td>Industry</td> </tr> <tr> <td> $11.13B</td> <td> - </td> <td> -</td> <td> Outperform</td> <td>Oil and Gas Operations</td> </tr> </tbody> </table>

Through an aggressive approach to expansion, Chesapeake has amassed quite the portfolio of natural gas reserves. At last count, the firm's reserves totaled 18.8 trillion cubic feet. Even more impressive, the firm has large acreage positions in nearly every major U.S. resource play.

Much of Chesapeake's success, however, is the result of unconventional financing, usually through joint venture partners. Financing of this sort is unpredictable and not always sustainable. This leaves the company's ability to fully utilize its current inventory at risk. I will avoid Chesapeake, but it's at least worth a closer look.

The Bottom Line

Renting may be on the rise, but Camden Property Trust just doesn't trade at a deep enough discount. DreamWorks Animation and Chesapeake Energy are both worth a closer look at today's prices, but investors should expect a volatile future for both companies. NuStar Energy's pipelines and terminals are primed for steady fee-based cash flow, but the stock isn't cheap enough for a buy. Finally, Google is a great, undervalued business.


DanielSparks has no position in any stocks mentioned. The Motley Fool recommends DreamWorks Animation and Google. The Motley Fool owns shares of Google and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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