Home > Stock Analysis

Core Stocks For 2010

Posted: Jan 07, 2010 15:19 PM by Greg Sushinsky

Tickers in this Article: AMZN, CL, COP, FLR, MCD, T

Investors who are just starting out, and sometimes even veteran investors, often wonder which stocks to buy. It's an age-old question for individual investors, who should always read and research as much as they can and gather information from reliable sources before making such decisions. If you are interested in being a long-term, fundamental investor, though, you might want to begin by looking at well-known companies as ideas for possible stock purchases and research them. We present a group of just such companies for investors to consider. (For a quick refresher, check out What Are A Stock's Fundamentals?)

Get Free Stock Analysis By Email

IN PICTURES: Eight Ways To Survive A Market Downturn

Best In Breed, Or Awfully Good
One way to look for strong, solid companies to invest in is to begin with the leaders in an industry. They are usually large, well-known brand names that have often been around for awhile. Obviously, something - namely business performance - has put them there. They used to be called blue chips, though that name seems to have fallen out of favor. McDonald's (NYSE: MCD) is just such a company, which not only has strong earnings growth history but also pays a reasonable dividend. The company is an all-around winner. Wait until its stock price pulls back a bit before buying. (For more, see The Characteristics Of A Successful Company.)

Fluor (NYSE: FLR), a large engineering and construction firm, is also a stalwart, though it has battled through the recession as all construction firms have. Its forward business includes possibly being part of a contract that could be worth $3 billion for constructing a coal gasification plant. Whether Fluor lands this contract or not, its extensive forward bookings are part of its strong business model. Its stock has been trading at an attractively low price for value and growth buyers.

Colgate-Palmolive
One of the best companies in any industry, not just its own consumer products industry, has been Colgate-Palmolive (NYSE: CL). Although the company has a slightly higher than ideal debt-to-equity ratio, its earnings growth trajectory looks outstanding. The company earned $3.87 per share in 2008, will come in at $4.33 for 2009 and is predicted to bring in $4.90 in 2010. Even if the 2010 number is high, this is terrific growth for a company that also pays a consistent dividend, which recently yielded over 2%. Coupled with its earnings growth, this is a tremendous stock. It has been trading on the higher end of its 52-week range recently, but you might want to grab shares with a price pull-back. (For more, see The Value Investor's Handbook.)

ConocoPhillips (NYSE: COP), one of the major oil companies, pays a dividend that currently yields over 4%. And ConocoPhillips looks set to rebound in its earnings like many of the oil companies. We chose ConocoPhillips not just for its dividend, but also for its earnings growth prospects. A company like, for example, AT&T (NYSE: T) yields 6% but essentially has flat growth. One of ConocoPhillips' new projects may be a coal seam gas LNG (natural gas) operation in Australia. Oil stocks' prices have fallen with the earnings falloff of major oil companies this year, so this can be a good time to pick up shares.

Amazon.com (Nasdaq: AMZN), the dominant online retailer, still has tremendous earnings growth prospects and should be a growth stock for some time to come. Its competitors, at the moment, are way behind. Unfortunately, its stock price has run up as investors have taken note of Amazon's success. Wait for a more attractive buying price.

Core Stocks As Platform
These stocks provide a mix of long-term value with some growth possibilities thrown in, and with a mix of dividends as an adjunct to their growth. These companies are historically well-managed; most have been stable, steady growers and have been around awhile, though Amazon is newer by comparison. These core stocks should give investors a way to think about, and perhaps begin researching, their own ideas for quality companies whose stocks may make good long-term holdings. Remember, buying stocks of companies at good prices, based on the intrinsic value of their underlying businesses, is a time-honored approach of some of the most successful investors in stock market history. It can work for you, too.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

By Greg Sushinsky

Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.

Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.

Filed Under: Stock Analysis

Rate this Article: Your Rating: Overall Rating: Vote Now!