Call Me, Shia! The Sequel
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
So about a month ago I wrote a post about how actor Shia LaBoeuf made a prescient stock pick about McDonald's on the David Letterman Show in September 2010. This was after he parlayed $25,000 of his own money to $489,000 while he was studying trading in prep for his "Wall Street: Money Never Sleeps" role. I titled it Call Me, Shia! in hopes he might give us all the benefits of his stock wisdom again. Needless to say Shia hasn't called, emailed, tweeted, etc. so I've been trying to drill down and make an educated guess what Shia might have picked.
So the best performing Dow stock for the year after the time of his pick was IBM but McDonald's did very well, coming in number 2. So far, Merck is the best performer for June 2012 but that doesn't help much, either. It wasn't a Dogs of the Dow theory either because McDonald's was already up in 2010.
The best Dow performer in 2012 has been Bank of America, yes I can see you and Letterman shaking your heads, No Really?! For the first quarter of 2012 it was up an astounding 72.43%. Bank of America (NYSE: BAC)could hardly have gone anywhere but up after its dive last fall. But I'm sure my man Shia would not pick a company with a negative EPS and a paltry .5% yield. Nor would he go for other big banks right now as he would probably say too far, too fast.
A Fixer-Upper Maybe?
Maybe it's THE HOME DEPOT, INC (NYSE: HD)which has been a strong performer of late. It has a 2.2% yield despite its run and a 19.97 P/E. It hasn't seen this share price since the early part of this century. Last Friday it closed almost at its 52 week high of $53.28. It has certainly moved up since its 2009 low in the high teens.
Since I think Shia is a fundamental guy I think he'd say Home Depot has many things going for it: the trend toward fixing up homes to sell or to stay in and DIY, the continued drive for better customer service at the stores with handheld gadgets for employees to aid customers, the trend to purchasing appliances at the hardware store rather than the big box electronics store and a possible uptick in home construction. In any case it seems to be an anointed stock and with the summer upon us more purchases for lawn and garden and other items on the outdoors honey-do list will keep things hot at Home Depot.
Why Not Wal-Mart?
Wal-Mart Stores Inc (NYSE: WMT) just hit a multi-year high of $69.72 on the last day of trading in 2012's first half. Despite a scandal concerning their operations in Mexico and the Foreign Corrupt Practices Act, Wal-Mart really didn't turn a hair. Once the poster boy for Dead Money, Wal-Mart is the kind of contrarian though solid play Shia might have picked, having only a 15.02 P/E and a 2.3% yield.
While I personally don't care to shop at Wal-Mart my personal preference means nothing to retail investors. Not all Wal-Marts are as depressing as my local store. Lots of people shop at Wal-Mart or Sam's Club or it wouldn't have that 235 billion market cap. Wal-Mart has many of the items found at Amazon at significantly lower prices according to recent consumer blogs. The grocery sections are expanding and no one can dispute the kind of pricing clout that behemoth Wal-Mart can muster. Plus it's benefiting from a trade-down trend as well as lower gas prices. This is yet another stock that would have Letterman going, "No, really?!" as investors are just beginning to pick up on the stock's gains recently.
Kraft Foods, Inc (NASDAQ: KRFT) and I are not related though all my life people have asked, "Like the cheese?" when I recount my last name. The brand recognition is really quite impressive as even overseas IT phone techs ask it, too. I certainly wouldn't mind finding out I was entitled to some shares but actually the company has not traded for very long as a stand alone having split off from Altria just a few years ago. And now it's splitting itself up again which is seen as a positive by most analysts.
This stock has not run up as much as the others, possibly because it is seen as having increasing competition from private-label manufacturers. But it does have the largest yield, a solid 3% and a P/E of 19.32. It is trading near a 52 week high of $39.99 and the average analyst price target is $43.57. While this may be the dark horse in the race with analysts citing the costs of the Cadbury acquisition and trouble increasing their earnings since the 2008 break up into a north American grocery stock, still Kraft and the international snacks company, to be tickered MDLZ, is looked on favorably.
Shia I'm Still Waiting
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services recommend The Home Depot. 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.If you have questions about this post or the Fool’s blog network, click here for information.