With stocks bouncing around like they’re on a trampoline, it can be difficult for investors to find companies that offer any possibility of steady growth or protection against a further slump -- particularly with the economy looking increasingly weak. 

But Morningstar analyst R.J. Hottovy told On Wall Street he and his team had “identified a list of names we thought would have the most stable operating results, even if we enter a period of greater economic volatility.”

The companies that Hottovy singles out share several characteristics, he said. They all have economies of scale, all have the ability to maintain or raise the price of their products or services, all offer exposure to emerging markets and all possess the financial strength to be able to extend their brands.

They also all offer strong dividend growth potential.  All these stocks fit broadly in the consumer product area.

In general, Hottovy reports that Morningstar is anticipating a “modest deceleration” in sales and earnings growth in the consumer products sector,” but even given that somewhat gloomy prognosis, these stocks still should do reasonably well, or should at least hold their own."

Among the stocks in this select group are five in which Morningstar’s fair value estimate -- defined as the “intrinsic value of the stock, based on the future cash flow potential of the company -- is significantly higher than where the stock is currently trading.

These companies include:

-- Amazon.com (AMZN): This company, Hottovy explains, benefits from a trend among consumers to shift to low-cost alternatives during tough economic times, and with its low overhead, it is able to underprice store-based competitors. Morningstar estimates the “fair value” of the company’s shares at $235

-- Anheuser-Busch InBev SA (BUD):  Described as a “powerhouse” in the global beer market, this company, the world’s largest beer brewer has strong markets in both developed and emerging markets. Like Amazon, it stands to benefit from any shift by consumers from pricier products to cheaper alternatives. The Morningstar fair value estimate for its shares is $62.

-- Colgate-Palmolive (CL):  The leader in its market segment -- oral care -- Colgate is seen as having a better position than its competitors to control costs in ongoing battles for market share. The Morningstar fair value estimate is $92 a share.

-- Las Vegas Sands (LVS):  Hottovy says that the market is “underestimating the growth potential” for this company’s operations in Singapore, “similar to when the market significantly underestimated the Macau casino market when it was still nascent.” The Morningstar fair value estimate for the shares is $74.

-- Procter & Gamble (PG): This firm has been working to reclaim lost market share with heavy promotional and advertising spending. Hottovy said that while the shares have “languished” of late, some optimism is warranted. He said the company’s brands have room to expand in developing economies, it has new products in the pipeline and has room to trim overhead costs. The Morningstar fair value estimate is $7 a share, and Hottovy says he expects that “patient shareholders will be rewarded.”







Register or login for access to this item and much more

All On Wall Street content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access