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Ken Fisher for Forbes - 'Too Big to Fail Stocks'
Posted by: Holly LaFon (IP Logged)
Date: October 9, 2012 04:46PM
Last month I introduced the notion of concentrating on only stocks larger than the global markets’ $80 billion average market capitalization. There are now only 70 such megacaps. The back half of almost every bull market has been led by this universe. Almost no one on Wall Street writes about this, but it works and has done so for decades. By sticking to these behemoths, you’ll miss lots of excitement—but you’ll also reduce the risk of underperforming. And if history repeats itself, this group will lead the market over the next few years.
Why does my late-bull megacap strategy work? Because skeptics who were originally resistant to owning stocks finally get up the courage to dip their toes in. They naturally find it easiest to buy what they know— giant, safe blue chips—stocks whose products are household names
Growth-stock junkies often pooh-pooh these as slow, consistent growers, but it’s a mistake. Small-cap cyclicals get all the attention early in every economic expansion because year-over-year earnings comparisons look great coming off a depressed base. However, as the expansions run, fewer firms are able to show improved earnings. The only ones that do are mature companies with years of experience managing real unit-volume growth. They are the standouts in an earnings growth deceleration phase.
Last month I gave you five great big blue chips. Here are five more. Remember, it’s advisable to have a 60%/40% portfolio split between U.S. and foreign stocks.
Pfizer (PFE)(24) is the world’s largest drug firm with a stunning A-Z array of big brand names like Advil and Viagra—and fits the high-consistency-of-earnings-growth theme perfectly. It continues to pump out new products. The latest: Bosulif, a daily pill to fight a rare form of blood and bone marrow cancer. It sells at ten times my 2013 earnings estimate with a 3.6% dividend yield.
Guru Discussed: Ken Fisher: Current Portfolio, Stock Picks
Stocks Discussed: PFE,