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A look at 5 Defensive Plays 1 Year Later! Coca Cola, Costco, Homel Food,Johnson & Johnson, Proctor & Gamble

A look at 5 Defensive Plays

October 15, 2009 | About:

Here is a look at five defensive stocks I wrote about 1 year earlier and where they are now. The market was tanking but did not reach a bottom for another 5 months. Keep in mind that their are many fundamentals to look for when picking individual stocks, however I tried to kept it simple with just a few important ratios mentioned here.

1) The P/E ratio All five stocks mentioned at the time had a P/E ratio of under 18. Only three currently have P/E's under 18.

2) Return On Equity or REO All had REO's of 14% or better while four of these still do. The higher this figure the better. REO shows how well a company uses investment funds to generate earnings growth.

[/i][i]3) Dividend Yield All paid dividends, and all have increased their payouts since.

4) Debt to Equity Ratio This is a measure of a company's financial leverage. Debt/equity ratio is equal to long- term debt divided by common share holders' equity. Generally the lower this figure the better. Last year P&G had the highest D/E ratio in this group which was .52 today it stands at .33 .

These are the types of companies that the legendary investor Warren Buffett invests in. In fact Coca Cola (NYSE:KO), Costco (NASDAQ:COST), Johnson & Johnson (NYSE:JNJ), and Proctor & Gamble (NYSE:PG) are a part of Buffett's holding company Berkshire Hathaway. The five stocks mentioned returned a combined 11.05% before dividends. If you add on the average annual dividend yield of 2.67% for these five companies over the past year you will get a 13.72% total return. You will notice that all five issues are companies that make products we use and consume everyday, which is another trait that Buffet looks for.

One year later three out of five still look reasonably priced, those being HRL, JNJ, and PG.


Author still long JNJ.



Rating: 3.0/5 (8 votes)


Valuefan premium member - 6 years ago
I have been adding to my PG lately. Almost added to JNJ, but didn't like the insider selling.

KO is too high to add to here. I don't own COST or HRL. I have been trying for years to get a

chance to buy COST at the right price. Someday...

Alex Garcia
Alex Garcia premium member - 6 years ago
Insiders sell for many reasons, I would be alarmed if it was HUGE insider selling, i.e. Angelo Mazzelo

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