An update on a defensive play or two
{ Posted on Feb 24 2009 by Joseph Lazzaro }
Filed under: Coca-Cola (KO), AT and T (T), Procter and Gamble (PG), Verizon Communications (VZ), United Technologies (UTX), Stocks to Buy
It's a market that seems to know no (lower) bounds. The pronounced U.S. recession continues. The financial markets have stabilized but credit -- the lifeblood of commerce -- remains constrained. Further the nation awaits the U.S. Treasury's stress test for banks, a process that will help determine which banks are suitable to continue operating, and which may not be.
In sum, the defensive posture for investors continues, and back in December 2008 Stock Analyst C. Leonard Bauer recommended 5 defensive stocks as Buys. Without further delay, here's an update on those plays, followed by the revised calls.
Heads up: Bauer would buy shares in only one of the following defensive plays:
AT&T Inc. (NYSE: T). Original Price: $27.90, p/e: 12. Current price: $23, p/e 11. Simply, 'Ma Bell' has what it takes to survive the economic downturn -- one that's likely to thin the communications field, Bauer said. A global footprint, and ample engineering/research talent also means T will be well-positioned for Web 2.0's growth period, as the U.S. economy recovers. Revised call: Buy.
Verizon Communications Inc. (NYSE: VZ). Price: $33.00, p/e: 15. Current price: $28.40, p/e 13. Verizon has very good cash flow and a strong presence in a lucrative region -- the Northeast U.S. Broadband initiatives (FiOS, DSL) are also performing well. Further, VZ's cellphone business should offset some landline attrition. Revised call: Buy.
The Procter & Gamble company (NYSE: PG). Price: $60.50, p/e: 16. Current price: 50, p/e 13. A quintessential defensive play. A company with, arguably, the most-diverse global footprint, PG has the consumer brands that will endure, and has done a good job containing costs. Revised call: Buy.
The Cola-Cola Company (NYSE: KO). Price: $44.05, p/e: 17. Current price: $42.79, p/e 17.A good luck charm play, "Because no one ever went broke, holding Coke." In addition, KO remains the world's top soft-drink company, even amid the health / sports drink trend. It has four of the top five soft-drink brands: Coca-Cola, Diet Coke, Fanta, and Sprite. Revised call: Buy.
United Technologies (NYSE: UTX). Price: $51.05, p/e: 11. Current price: $42.90, p/e 9. The diversified industrial and aerospace giant is practically a blue-chip mutual fund in one company. What has special appeal? UTX's air conditioning/heating business, elevator business, and global footprint. Revised call: Buy.
Safest Defensive Play: Procter & Gamble, Bauer said.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX. Lazzaro owns frequent flyer miles in American Airlines (NYSE: AMR.).
Bauer has no positions in stocks, but owns frequent flyer miles in United Airlines (NYSE: UAUA) and American Airlines (NYSE: AMR).
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