Saturday, August 13, 2011
The last three weeks have been among the worst ever on Wall Street...
Which investments held up the best? After such a dramatic selloff, which companies should you buy now?
Let's take a quick look at the selloff and its best performers to find out...
Between July 22 and August 8, the S&P 500 fell nearly 17%. This was one of the worst 11-day periods in stock market history. We've seen crashes this bad just five times since 1946.
After such a historic crash – where companies like Bank of America (America's biggest bank) and U.S. Steel (America's biggest steelmaker) fell as much as 35% – it's important to know which companies barely budged during the crisis. We know these are some of the safest companies in the world.
Yesterday, I screened the S&P 500 to find the best performers between July 22 and August 8. The table below shows the results...
Company |
Ticker |
Return July 22-Aug 8 |
Market Cap (in billions) |
Sector |
Lexmark |
LXK |
2.15% |
$2.4 |
Technology |
National Semi |
NSM |
-0.81% |
$6.2 |
Technology |
Cephalon |
CEPH |
-3.02% |
$6.2 |
Health care |
Pepsico |
PEP |
-4.24% |
$99.8 |
Consumer Goods |
Southern Company |
SO |
-4.42% |
$32.9 |
Utilities |
Priceline |
PCLN |
-4.78% |
$25.8 |
Services |
Kraft |
KFT |
-4.85% |
$60.4 |
Consumer Goods |
Colgate-Palmolive |
CL |
-5.50% |
$40.5 |
Consumer Goods |
Mead Johnson |
MJN |
-5.60% |
$13.9 |
Consumer Goods |
General Mills |
GIS |
-5.84% |
$23.2 |
Consumer Goods |
Consolidated Edison |
ED |
-5.92% |
$15.2 |
Utilities |
Coca-Cola |
KO |
-6.61% |
$153.1 |
Consumer Goods |
Altria |
MO |
-6.90% |
$52.2 |
Consumer Goods |
As you can see, only 13 S&P 500 companies fell less than 7% during the crash. And only one company, Lexmark International, managed to move higher. (Lexmark had its own crash before the broad market crash, and it reported better than expected quarterly results.)
There's an important idea in this list... one we've written about many times in DailyWealth. The idea is to own the best dividend-paying businesses in the world... ones that sell products that never go out of style, no matter what the economy is doing.
Companies like Coke (soda), General Mills (cereal), Pepsico (chips and soda), Kraft (food), Colgate (toothpaste), Mead Johnson (formula), and Altria (cigarettes) sell the "basics." And they held up well during the crash.
Think of them as beach houses that held steady during a hurricane... while most homes were devastated.
The strength these companies showed is no fluke, either. During the 2008-2009 recession, Pepsico, Coca-Cola, and General Mills, for example, all grew revenue and net income. They grew earnings per share by an average 17.6%. The ability to grow through one of the worst recessions in history is a huge mark of stability.
And on top of that growth, their share prices "only" fell an average of 26% during the housing bust and financial crisis. This is just over half of the 48% decline we saw in the S&P 500...
If you're thinking of jumping back into stocks, consider buying some of the names on this list. They have the best brand names in their industries. Many pay stable dividends. And they held up extraordinarily well during one of the worst stock crashes in history.
Good investing,
Brett Eversole
Further Reading:
Dan Ferris has found a way to use these brand name companies to increase shareholders' income year after year... With his strategy, you can "sock a little money away every year," he writes, "no matter what the economy or the market is doing."
Learn more about his strategy here: How to Earn Predictable Returns That Go Up Every Year.
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