The Ten Best American Companies: Part 3
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
So here it is - my final three American companies (in no particular order). We discussed Colgate, Google, and Costco in my first post. My second post talked about my belief in Coach, Under Armour, Whole Foods, and Pepsi. This post will show why coffee shops, clothing stores, and cleaning supplies should be in your portfolio, but hopefully they aren't needed in the same day throughout your life.
When a guy says, "I have nothing to wear," he really means, "I need to do laundry." When a woman says, "I have nothing to wear," she really means, "I want to go shopping." So, she goes shopping. We will call this woman Susan.
Susan decided to go to Nordstrom (NYSE: JWN) for a quick shopping spree. She was preparing for the unusually early Easter this year, and bought a nice colorful dress. She may not have realized the effect this purchase will have on the three companies I will discuss here.
Nordstrom has a market cap of $10.8 billion dollars, with a respectable Free Cash Flow (FCF) yield of 5.3%. While this doesn't show a tremendous value, the company's revenues have increased 82% in the past decade as it made approximately $10.8 billion in 2012. 2009 marked the only decrease in Earnings Per Share (EPS) over the past decade, as they have increased from $0.33 to $3.14 in 2012. Gross margins have grown from approximately 33% to over 39% over the same ten year period. Amazingly, Nordstrom's average employee earned $19 per hour, which is 60% more than the industry average.
After a stressful afternoon of decision making (shopping), Susan decided to splurge and grab a drink from her favorite coffee place, Starbucks (NASDAQ: SBUX). She had just started to enjoy her Grande Latte when a bystander bumped her table and spilled her delicious drink all over her brand new dress. What a bummer. This is bound to happen at times, as there are currently 17,000 stores in 55 countries. Susan wondered what she could do about this disastrous occurrence.
Starbucks is a coffee shop's model of success. They thrive in customer service and quality, yet many people wonder if their products are overpriced. I will leave that up to them - but I will look at some other figures. The company's revenues have increased 326% in the past decade, while gross margins are at 56.3%. Starbucks' Return on Equity (ROE) and Return on Invested Capital (ROIC) have both increased from 14.09 and 13.78, to 29.15 and 25.71, respectively. They have experienced a large drop, though this was in 2008. The company shows a market cap of nearly $42 billion and a FCF yield of only 3.4%.
Susan rushed home after this unfortunate incident and went to wash her clothes. The only substance Susan trusted to use was the obvious one - Clorox (NYSE: CLX). Fortunately for Susan, her clothes did get clean, and no further damage had occurred. Clorox isn't just something people use to remove coffee stains - the company owns Kingsford charcoal, Glad garbage bags, and many other name brand items. Amazingly, 90% of the company's products rank first or second in market share for their category.
Consistency is a word that Clorox has become accustomed to. For 35 years the company has increased its dividends, although some investors think the company will fail to meet growth expectations. The company currently shows a 5% FCF yield and a market cap of just over $11 billion. Although revenues have only increased 32% in the past decade, its gross margins are still 42.1. The company currently has $557 million in FCF, and everyone knows their name and uses their products.
Look at the chart below to see how these companies compare to the most commonly used benchmark: the S&P 500.
The Foolish Bottom Line
As you can see, all three of these companies have walloped the most common benchmark used by investors - and they have done so with ease. These three companies all offer great products, great customer service, and are known by virtually every American alive. I would expect them to perform well in the near future, even though Clorox may face obstacles after a while.
This concludes my top ten choices of American companies, I hope you enjoyed it!
tlwofford has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. 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!