Bulletin
Investor Alert
×

Need to Know Archives | Email alerts

Aug. 22, 2019, 9:31 a.m. EDT

These 4 big blue chip stocks are cheap for a reason, cautions money manager

Critical information for the U.S. trading day

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    S&P 500 Index (SPX)
  • X
    NASDAQ Composite Index (COMP)
  • X
    McDonald's Corp. (MCD)

or Cancel Already have a watchlist? Log In

By Barbara Kollmeyer, MarketWatch


Weinstein Company/Everett Collection
Worth the wait?

For all the angst the stock market seems to have caused recently, it looks to have been for nothing when you consider the stats — the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.0020%  down about 0.6% and the Nasdaq /zigman2/quotes/210598365/realtime COMP +0.07%  up 0.17% with five weeks to go until the end of third quarter.

Better off at the beach?

“Sometimes the best thing to do is to do nothing, and just sit on your hands and wait,” Lance Roberts, chief investment strategist at Real Investment Advice, an independent adviser, said in a YouTube segment recently. “The markets are going to tell us what they want to do eventually,”

Read: Five things investors need to pay more attention to than the yield curve

Onto our call of the day , which also pleads patience. It comes from Jesse Felder, a money manager who co-founded a multibillion-dollar hedge fund firm and now blogs at The Felder Report . He’s been tracking a basket of stocks he refers to as the “(not so) fantastic four” — McDonald’s /zigman2/quotes/203508018/composite MCD +0.04%  , Caterpillar /zigman2/quotes/203434128/composite CAT -0.72%  , Boeing /zigman2/quotes/208579720/composite BA -0.51%  and 3M /zigman2/quotes/205029460/composite MMM -0.22% — or McBaM.

Those stocks outperformed the big FANG stocks — Facebook /zigman2/quotes/205064656/composite FB +1.06%  , Amazon /zigman2/quotes/210331248/composite AMZN +0.22% , Netflix /zigman2/quotes/202353025/composite NFLX -1.70%  and Alphabet-parent Google /zigman2/quotes/202490156/composite GOOGL +0.49%  between 2016 and 2018.

Since that time, the McBaM group has fallen around 10%, but Felder argues they're still not cheap enough, making his case with the below chart, showing the group’s valuation based on average enterprise-value to revenue - the price you’d pay for a company plus the money it generates.

On that basis, he says those stocks are trading “more than 30% higher than at any other time over the past 35 years,” as long-term sales growth stumbles.

“In other words, it’s going to take a lot more 18 month periods like we have just had before these stocks approach anything near a historically normal valuation level (let alone a level that could be deemed “cheap”),” he says.

Read: 25 dividend stocks selected for value by an outperforming money manager

The market

The Dow /zigman2/quotes/210598065/realtime DJIA -0.19%  , S&P /zigman2/quotes/210599714/realtime SPX +0.0020%   and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.07%   are up as investors look to the start of the central bank’s annual financial symposium in Jackson Hole.

Gold /zigman2/quotes/210039486/delayed GCZ19 +0.37% is sliding, oil /zigman2/quotes/209726859/delayed CLV19 +0.95% is up and the dollar /zigman2/quotes/210598269/delayed DXY -0.06% is doing nothing.

Europe stocks /zigman2/quotes/210599654/delayed XX:SXXP +0.61% are mixed, while Hong Kong stocks /zigman2/quotes/210598030/delayed HK:HSI +0.03% led declines in Asia as concerns over political protests persisted.

Read: ECB minutes show discussion of ‘package’ of moves, changes to guidance

/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,182.88
+5.49 +0.07%
Volume: 1.58M
Sept. 19, 2019 5:16p
loading...
/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 210.52
+0.09 +0.04%
Volume: 2.61M
Sept. 19, 2019 6:30p
P/E Ratio
27.66
Dividend Yield
2.20%
Market Cap
$159.81 billion
Rev. per Employee
$100,120
loading...
/zigman2/quotes/203434128/composite
US : U.S.: NYSE
$ 130.12
-0.95 -0.72%
Volume: 2.74M
Sept. 19, 2019 6:30p
P/E Ratio
12.12
Dividend Yield
3.17%
Market Cap
$73.20 billion
Rev. per Employee
$526,173
loading...
/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 384.44
-1.97 -0.51%
Volume: 3.03M
Sept. 19, 2019 6:30p
P/E Ratio
45.02
Dividend Yield
2.14%
Market Cap
$216.33 billion
Rev. per Employee
$660,961
loading...
/zigman2/quotes/205029460/composite
US : U.S.: NYSE
$ 167.07
-0.37 -0.22%
Volume: 1.63M
Sept. 19, 2019 6:30p
P/E Ratio
20.18
Dividend Yield
3.45%
Market Cap
$96.11 billion
Rev. per Employee
$350,368
loading...
/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 190.14
+2.00 +1.06%
Volume: 10.47M
Sept. 19, 2019 4:00p
P/E Ratio
32.22
Dividend Yield
N/A
Market Cap
$542.46 billion
Rev. per Employee
$1.57M
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,821.50
+4.04 +0.22%
Volume: 2.08M
Sept. 19, 2019 4:00p
P/E Ratio
75.57
Dividend Yield
N/A
Market Cap
$901.02 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/202353025/composite
US : U.S.: Nasdaq
$ 286.60
-4.96 -1.70%
Volume: 8.55M
Sept. 19, 2019 4:00p
P/E Ratio
112.39
Dividend Yield
N/A
Market Cap
$125.48 billion
Rev. per Employee
$2.22M
loading...
/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 1,238.75
+6.10 +0.49%
Volume: 847,002
Sept. 19, 2019 4:00p
P/E Ratio
25.01
Dividend Yield
N/A
Market Cap
$801.32 billion
Rev. per Employee
$1.39M
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,094.79
-52.29 -0.19%
Volume: 216.44M
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,182.88
+5.49 +0.07%
Volume: 1.58M
Sept. 19, 2019 5:16p
loading...
/zigman2/quotes/210039486/delayed
US : U.S.: Nymex
$ 1,511.70
+5.50 +0.37%
Volume: 29,978
Sept. 20, 2019 1:01a
loading...
/zigman2/quotes/209726859/delayed
US : U.S.: Nymex
$ 58.68
+0.55 +0.95%
Volume: 174.00
Sept. 20, 2019 12:59a
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.21
-0.06 -0.06%
Volume: 0.00
Sept. 20, 2019 1:01a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
391.80
+2.39 +0.61%
Volume: 0.00
Sept. 19, 2019 5:50p
loading...
/zigman2/quotes/210598030/delayed
HK : Hong Kong Exchange
26,477.11
+8.16 +0.03%
Volume: 578,476
Sept. 20, 2019 12:05p
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Investing

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.