September 7, 2004  Email this  Print this
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Fourth Quarter Favorites
by Steven Goldberg  If you're looking for a solid stock newsletter that recommends a lot of blue chips and doesn't require a ton of trading, then consider Dow Theory Forecasts. It's one of my favorites. Of course, Kiplinger's is still my pick for general investing tips, ideas, trends and other personal finance information, but if you're looking to supplement your current reading list with in-depth stock analysis take a look at Dow Theory.
Founded in 1946, the newsletter's results have been decent, if not spectacular. On a risk-adjusted basis (the newsletter recommends holding cash at times), Dow Theory Forecasts has tied the S&P 500 over the last ten years, according to the Hulbert Financial Digest. In raw performance, its average portfolio has handily beaten the S&P over the past five years, though it trails over the last 15 years.
The newsletter takes a common sense approach of looking for stocks with growing earnings that are trading at reasonable prices. It insists on quality companies with good balance sheets and solid track records. I think that kind of approach will do well in this market. And the newsletter will keep your brokerage costs low: On average, it recommends holding stocks about 18 months.
Dow Theory Forecasts is offering a 30-day free trial. After that, a subscription costs $22.95 a month.
Five stocks for the rest of '04
Editor Rich Moroney gave us a peek at the five stocks he and his analysts like best for the rest of this year. Following are their favorites and their reasons for liking them.
Biomet (BMET) has a great franchise. It's one of the world's largest makers of orthopedic and other medical devices used in such things as surgical implants.
The beauty of the business is that once surgeons become accustomed to Biomet's products -- and Biomet is dominant in many areas including hip and knee replacements -- they don't want to switch, even if Biomet charges a little more than the competition. So profit margins are high. Plus, the company has delivered 18% earnings growth over the last five years, as demand for orthopedic implants grows.
The negative: Biomet isn't cheap, trading at 30 times 2005 anticipated per share earnings of $1.51.
Bunge (BG) is one of the three biggest players in global agribusiness. Helped by increased demand for fertilizer, soybeans and food products, Bunge's operating income should grow by 10% or more annually over the next five years.
The company is planning to expand in India and China and already has huge operations in North and South America. At 13 times expected 2004 earnings of $3.06, the stock looks like a bargain.
Citigroup (C), the financial services behemoth, has enough different financial businesses that it's somewhat protected from the interest rate cycle. It's involved in asset management, corporate banking, brokerage, insurance and consumer banking.
Citigroup is inexpensive based on its historic P/E. It trades at 12 times expected 2004 earnings of $4.00.
Delphi Financial Group (DFG) offers employee benefits, including workers compensation and insurance. The company is increasing its sales force and, at the same time, weeding out low producing salespeople. The stock is cheap compared to its peers, trading at 12 times estimated 2004 earnings of $3.26.
Nike (NKE), the market-leading athletic shoe and apparel maker, recently bought Converse, which should boost sales, as should improvements in inventory management. Half of sales are overseas, and the company plans to focus more efforts on selling into Asia and Europe.
The stock sells at 19 times expected 2005 earnings -- at the low end of its five-year P/E range.
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