Investing For The Other Half
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The severe market sell offs after the tech and housing bubbles appear to have left a large swath of the American public fearful of investing. That's not surprising, but it is a sad remnant of a difficult period. Dipping a toe back in the stock waters, however, can be done in a fun and relatively safe way by buying what you know.
50%, or so
The New York Time's Economix blog recently ran an article highlighting that the percentage of Americans who own stocks either directly or through a mutual fund has fallen from 65% in 2007 to 52% in early April of this year. That's the lowest percentage ever recorded by survey company Gallup.
Although some might blame the recession, today's low commission costs on purchases of as little as one share make cost a virtual non-issue. That leaves fear as the biggest obstacle. The way around that is buying what you know.
Here are a few great companies to look at:
Put on a Band-Aid
Johnson & Johnson (NYSE: JNJ) is a household name by its own standards, however its list of consumer products is so long that you probably use more JNJ items than you realize. However, that consumer facing business is just the start of this health care giant. JNJ also has leading positions in the pharmaceutical and medical device markets. These are the real growth engines of the company.
What's nice about the company today is that it looks like the business is turning a corner. Production and recall problems on the consumer side have been dealt with, new drugs are gaining traction, and a recent purchase in the medical device space should help boost results in that division. Put together, this looks to be setting JNJ up for solid top and bottom line performance over the next few years.
Conservative investors would do well to look at the shares and their around 3% dividend yield.
Be Mickey's Friend
Disney (NYSE: DIS) is another company that people of all ages know and love. And, unlike JNJ, the biggest “unknown” brand in the company's stable is a tossup between ESPN and ABC. Both of which, of course, are household names. So, keeping tabs on Disney is pretty easy and, frankly, pretty enjoyable.
The shares, however, are usually afforded a premium by the market. That said, Disney is not only well run, but it's a leader in the hot content space. The purchase of Lucasfilms (Star Wars) and Marvell Comics are just two examples of how Disney is solidifying its industry position. So, as the demand for good content increases, and more companies want exclusive deals, Disney and its shareholders look set to benefit.
Although Disney's yield is low, at around 1%, it has a long history of dividend increases and is a name the entire family can be brought in on.
McDonald's (NYSE: MCD) and Darden Restaurants (NYSE: DRI) are two restaurant stocks worth looking at. McDonald's is an obvious choice because of its brand name alone. However, it is a world leader in the fast food burger space, with over 30,000 locations in around 120 countries. While mature markets are tough right now, McDonald's future is in emerging markets around the world. Luckily, the company has an early mover advantage in many of these markets, a brand known the world over, and a relatively low-cost menu that even emerging markets can easily afford.
Darden is a more obscure name, but its Olive Garden and Red Lobster brands are well known. In addition to those two headliners, the company has a host of smaller restaurants it is building up from the high-end Capital Grill to beer-focused Yard House. The big driver, however, is the casual dining segment. That's been a tough market of late because of the weak economic recovery. However, Darden is the largest player in the industry with a top notch operation. And, it is just starting to expand overseas, which should be a nice growth avenue over the long term.
McDonald's shares aren't exactly cheap, but they yield around 3% and the company has a long history of annual dividend increases. Darden, meanwhile, has been struggling to keep its core brands growing, so the shares have been depressed. With a near 4% dividend yield, however, investors are getting paid to wait for an eventual turnaround. These are two more easy to follow stocks worth setting and forgetting, and to eat at—just to make sure food quality is up to snuff.
Dipping a Toe in the Water
The wonderful thing about buying stock is that it only takes one share to be a part owner. That means spending as little as around $60 to buy Darden, including commissions. Investing is all about trust. There's no better way to build that than starting small and sharing the experience with your family. Every one of the companies above is a good company that would be easy to explain and follow.
Don't let fear overtake you. Start small and build from there.
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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson, McDonald's, and Walt Disney. The Motley Fool owns shares of Darden Restaurants, Johnson & Johnson, McDonald's, and Walt Disney. 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!