4 Old Places to Stash New Money
Demitri is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Despite worries about the death of the IPO, the appetite on Wall Street for untested companies with limited business histories is still strong. After shunning the Zynga and Facebook debuts, investors welcomed real estate research provider Trulia (NYSE: TRLA) to the market last week. Shares jumped 30% in their first day of trading.
In weighing whether to join that frenzy, readers of Trulia's IPO filing could review just a few years of financial results. They saw revenue that grew from $10.3 million in 2009 to $38.5 million last year. And they saw operating loses that stretched back for the company's entire brief history.
Thankfully, there are plenty of companies with longer business histories to consider for investments; results that span decades and include both economic booms and busts. Below, I profile four of these old hats that I think are ripe for new investments.
|Market Cap||In Business Since||Gross Margin|
|Coke (NYSE: KO)||$170B||1892||64%|
|H.J Heinz (NYSE: HNZ)||$18B||1869||38%|
|Lowe's (NYSE: LOW)||$34B||1946||34%|
|Sotheby's (NYSE: BID)||$2B||1774||54%|
To say that Coke has been through it all would be an understatement. The company started slinging fizzy drinks over a century ago and hasn't let up since. Through wildly varied business cycles, Coke has managed to protect its huge profit margins despite intense competition and the occasional failed innovation (new coke, anyone?). The company's brand, supported by a $3 billion annual advertising spend, puts it in a class by itself, frustrating competitors for decades. Coke's shares have followed the market higher lately, but are well off their peak and still yield over 2.5%.
If Trulia's three-year run of revenue growth doesn't impress you, take a look at centenarian Heinz' current streak of 29 consecutive quarters of organic growth. This ketchup producer has been delivering its product to the market for well over a century and now sells over 600 million bottles of ketchup a year. The company boasts top-dog brand positioning in over 50 countries and has shown impressive pricing power through the last bout of commodity inflation and flat consumer spending.
Next up is the venerable hardware store, Lowe's. Because of its close ties to real estate this retailer was hit hard by the collapse of the housing market. But the company is no stranger to rough times like these. Since going public a half-century ago, Lowe's has weathered a few bad recessions -- including the collapse in housing starts in the early 80's. Through it all the company maintained its dividend, and it is still one of the few so-called "dividend aristocrats" that have raised dividends for at least 25 consecutive years.
Finally, if the newest stock listed on the NYSE doesn't tempt you, maybe the oldest one will. In 2011, auctioneer Sotheby’s reported some of the best results in its 265 year history. No, that’s not a typo. The company traces its roots back to 1744.
But it’s not just works of art that can hold value for centuries. Sotheby’s role in the auction market duopoly with Christie’s has provided business through all kinds of market environments. Most recently, sales were down last quarter in an overall soft global art market. On a broader level though, Sotheby’s can look to Asia to power future growth. Revenue from the company’s Hong Kong office has tripled as a percentage of total sales since just 2007.
While the unpredictable art market makes Sotheby’s business prone to big revenue swings from year to year, investors have plenty of results to analyze when considering an investment here. The same can’t be said for IPOs like Trulia’s. If you’re wondering which new company will dominate a given market over the next decade, it’s often a safer bet to pick the old company that dominated the previous one.
SigmaSwan has no positions in the stocks mentioned above. The Motley Fool owns shares of The Coca-Cola Company. Motley Fool newsletter services recommend H.J. Heinz Company, Sotheby's, and The Coca-Cola Company. 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.