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Brett Arends' ROI
March 17, 2011, 5:17 a.m. EDT
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By Brett Arends, MarketWatch
BOSTON (MarketWatch) "” Even high-quality blue-chip stocks have been thrown overboard in the panic of the past six days.
Investors can hang on or look for opportunities in the market fallout from Japan's earthquake and nuclear-energy crisis, Chuck Jaffe says.
Shares in some of the world's strongest and most profitable names have been knocked down 5%, 10% or in a few cases even more in the global selloff.
Nobody knows what's going to happen next in Japan. And nobody can say for certain what it will mean for the global economy.
But there's more than a whiff of blind terror in these markets right now. There was a stampede for the exits Wednesday.
The kind of people who talk crazy stuff at the drop of a hat can now be heard talking crazy stuff. At times like this investors need to keep a firm grip.
Listen to Ben Inker. He's the head of asset allocation at fund shop GMO. "However horrific the human cost," he wrote this week, "economically, most disasters are hard to spot in the data. GDP does not necessarily fall, and if it does, the bounce-back is usually quite rapid."
And, as he added, the events of the next few months, even years, don't actually matter that much to the true value of the stock market anyhow.
OK, I came into this crisis deeply cautious about the stock market. Too many shares were too expensive. And too many people were way too cocky. It has been a challenge, for several months, to find good bargains.
I'm still deeply cautious. And things could turn very bad in a lot of ways. Japan is just one way.
But at some point you need to be willing to look for good stocks at good prices.
Even six days ago, before this terrible disaster struck, top-quality blue-chip names offered some of the few decent values left in the market.
They are now that much cheaper.
Yes, they're exposed to the international economy. Most are exposed to Japan. Hence the selloff. But has it gone too far?
There are no guarantees. But if you've been struggling to find decent places to invest, and you've been waiting for better prices, the following stocks are worth a look:
Wal-Mart Stores Inc. /quotes/comstock/13*!wmt/quotes/nls/wmt (WMT 51.09, -0.29, -0.56%) : Yes, it has its troubles. Like falling same-store sales here in the U.S., and too many customers living on food stamps. But it's still an incredible retailer. This stock is back to levels seen three years ago. As recently as January it was at $58. Today it's just $51.That's a paltry 12 times forecast earnings, and the dividend yield is 2.8%.
Coca-Cola Co. /quotes/comstock/13*!ko/quotes/nls/ko (KO 62.28, +0.68, +1.11%) : Last week it was nearly $66. Today it's tumbled all the way down to $61. And for the world's biggest brand name that's cheap, on 12 times forecast earnings, with a 3% yield.
Procter & Gamble Co. /quotes/comstock/13*!pg/quotes/nls/pg (PG 60.26, +0.53, +0.89%) : The classic widow and orphan stock. The Crest, Tide and Gillette behemoth, $67 recently, has been marked down to $60. Reasonable on fifteen times forecast earnings, with a healthy 3.2% yield.
Johnson & Johnson /quotes/comstock/13*!jnj/quotes/nls/jnj (JNJ 58.03, +0.37, +0.64%) : The health-care giant has had a rough few months, and has been hit by product recalls. The stock has tumbled to $58, from a peak of $66 in the fall. On 12 times forecasts, with a yield of 3.7%, it has priced in a fair amount of gloom already.
Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 24.81, +0.02, +0.07%) : I hate most of their software, and recently wasted hours grappling with a Windows Mobile product, but I can't deny the stock is cheap. It's down to just $25, from nearly $30 recently. Just 10 times forecast earnings, yielding 2.6%.
Merck and Co. Inc. /quotes/comstock/13*!mrk/quotes/nls/mrk (MRK 31.22, +0.14, +0.44%) : It's at $31, from nearly $34 recently. As with most of the big pharmaceutical companies, investors face the usual trade-off between slow growth and awesome cashflow. But at 8 times forecasts, and with a fat dividend yield of 4.9%, this stock has already priced a lot of that in.
Vodafone Group PLC /quotes/comstock/15*!vod/quotes/nls/vod (VOD 27.82, +1.04, +3.88%) : This British firm is the world's largest mobile-network operator, and owns a 45% stake in Verizon Wireless here in the U.S. The stock is down to $27, from nearly $30 recently. A bargain at 10 times forecast earnings, with a yield of 4.8%.
Diageo PLC /quotes/comstock/13*!deo/quotes/nls/deo (DEO 73.28, +1.52, +2.12%) : The world's biggest drinks company "” brands include Guinness beer, Smirnoff vodka, Captain Morgan rum and a whole range of Scotch whiskys. It's now $72, down from nearly $81 recently. Reasonable on 14 times forecast earnings, yielding 3.5%.
Nippon Telegraph and Telephone Corp. /quotes/comstock/13*!ntt/quotes/nls/ntt (NTT 22.57, +0.09, +0.40%) : Here's one Japanese stock even a grandmother might want to think about. Japan's Ma Bell has U.S.-listed depositary receipts. They're $22, from $25 recently. Now on 10 times forecasts, yielding a remarkable "” for Japan "” 2.8%.
GlaxoSmithKline PLC /quotes/comstock/13*!gsk/quotes/nls/gsk (GSK 37.21, +0.61, +1.67%) : Another cashflow-rich, slow-growth pharmaceutical giant. London-based Glaxo is now $37, down from $39 recently. But it's cheap, on just 8 times forecast earnings, yielding a huge 5.6%.
Brett Arends is a columnist for MarketWatch and The Wall Street Journal, based in Boston.
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co.
The New York Times is taking another crack at an online pricing plan, writes Jon Friedman.
12:38 p.m. Today12:38 p.m. March 17, 2011
"Ten stocks to look at in the panic http://on.mktw.net/fbxab2" 4:51 a.m. EDT, March 17, 2011 from MKTWArends
"Contrarian's trouble with new bubble http://on.mktw.net/fuzvgc" 1:07 a.m. EDT, March 14, 2011 from MKTWArends
"How the iPad 2 could cost you more than the Xoom http://on.mktw.net/fyvgU5" 12:25 a.m. EST, March 8, 2011 from MKTWArends
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