Blast From the Past Stocks
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The comedy "Blast from the Past" features Adam (Brendan Fraser) facing a modern LA after 35 years in his parents' fallout shelter. In the happy ending he funds a life together with Eve (Alicia Silverstone) from the stock proceeds his prescient parents bought in the early 1960s. Funny movie but I always wondered what stocks they bought.
The first stock that occurred to me was International Business Machines. One could buy IBM for $5 in 1962 and once the fallout door unlocked in 1997 have a twenty bagger; same with Walt Disney, which went for $2.00 in 1962 and almost touched $40 in 1997.
Which stocks to buy before a Blast from the Future?
Assume that the stocks in the movie had yield and so compounded interest. To hedge your bets you would need to diversify and pick up a promising small cap, some mid-caps and big caps with yield. Maybe you wouldn't want too much tech as one game changer could tank an entire company. Another factor to consider is that you wouldn't want a company too dependent on a charismatic CEO or visionary founder.
Imagining a world 35 years away one could expect media content as well as tech to be the most changed. I would want to stay away from those industries for a portfolio that will be held untouched. The energy industry as well might be unrecognizable in 35 years.
What companies would be flourishing in 2048? I like Waste Management (NYSE: WM). It is in an industry that is never going away and is innovative with ambitious energy conversion plans using the waste and landfill gas it collects and then converting it to energy. CEO David Steiner told CNBC viewers that it creates more energy from its facilities, five times more, than all US solar companies combined. Waste Management has been converting its trucks to natural gas, working closely with Clean Energy Fuels. Their compressed natural gas fleet now numbers 2,000.
This largest waste management company in North America has a forward P/E of 17.41 and a yield of 3.50%. Waste Management isn't the revenue grower it used to be, however, but plans to monetize all its garbage into compressed natural gas fuel and to generate clean electrical power are already underway. For its future energy potential alone Waste Management is a buy.
An ever expanding global population merits an agriculture stock. I was torn between DuPont and Deere & Company (NYSE: DE). What sold me on Deere was the dividend chart below with a better rise in yield for Deere.
Another factor in choosing Deere is the backlash against genetically modified seed companies like Dupont rival Monsanto. A chemical company like DuPont has historically had more headline risk than the venerable Deere. Warren Buffett also recently bought Deere for the Berkshire Hathaway portfolio. (Not a bad name either for a buy and hold for a 35 year portfolio).
Deere's trailing P/E is low at 10.87 with a 2.30% yield. It manufactures and sells equipment through its two divisions: Agriculture and Turf and Construction and Forestry. This is a good all around play on emerging markets, agriculture, and a housing resurgence.
For triple bang for your buck a mid cap health care facility REIT with yield could really outperform as those boomers and the boomer babies enjoy ever longer lives but not necessarily in the best of health.
One with recent insider buying is Omega Healthcare Investors (NYSE: OHI) with a 5.70% yield and a ten year track history of increasing the yield. Omega Healthcare primarily invests in long term health care facilities in the US, some 400 in 35 states.
Omega compares favorably on trailing P/E at 26.89 and PEG of 2.88 with big cap rivals HCP Inc and Ventas as well as its industry average of 61.64 P/E and 3.26 PEG .
I used the Motley Fool CAPS screener to find a small cap with yield, gross margin over 15%, P/E between 5 and 15, and with insider conviction. It didn't fail me delivering Cal-Maine Foods (NASDAQ: CALM), the largest US egg producer and distributor. It offers a 3.8% yield with an 11.8 trailing P/E.
The company has large insider ownership of 32.8% mostly by Chairman Fred Adams Jr. and CEO Adolphus Baker who together hold 2 million shares. This defensive name's gross margin is 19.8% and it controls 20% of the fragmented US shell egg market. As animal proteins get ever more costly eggs will be the default protein for Americans.
Last, a diversified industrial conglomerate is in order and it was tough deciding between General Electric and rival Siemens Aktiengesellschaft (NYSE: SI). An international stock couldn't hurt and with a lower trailing P/E of 16.33 than GE's 17.51 it looked like Siemens would take it all but GE has a higher yield of 3.30% to Siemen's 2.80%. It was the PEG that finally won the day with Siemens at only .24 to GE's 1.29.
What I like about both GE and Siemens is they encompass healthcare, infrastructure, energy solutions, aviation, and more, competing virtually head to head even on household appliances. One could honestly say Siemens is the German GE. In the future the energy industry's top players could be wildly different so Siemens which offers solutions to energy companies involved in natural gas, oil, and alternative energies, is a safer bet.
Analysts expect a stunning 64.80% five year EPS growth rate (yoy) for Siemens. Why? Siemens is acquiring companies like Invensys Rail as part of its Infrastructure and Cities division and it is involved with future-forward smart grid technology. At half the market cap of GE Siemens could grow much more and in 35 years the taint that European stocks have been burdened with will be a distant memory.
The future is already here
These companies benefit from multi-generational trends. They offer innovation or growing market share and all have yield that will likely grow. With this diverse group of mid cap, small cap, big caps with a REIT, defensives, industrials, and international exposure, this is a portfolio that you could safely set the door locks on that underground bunker for 35 years.
Waste Management has been a longtime favorite for dividend seekers everywhere, but the share price performance over the last few years has left many investors wanting. If you're wondering whether this dividend dynamo is a buy today, you should read The Motley Fool's premium analyst report on the company today. Just click here now for access.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Waste Management. The Motley Fool owns shares of Waste Management. 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!