I think it’s a decent way to generate value stock ideas and identify sectors that may be undervalued.
I see potential value in Big Oil companies right now. The market tends to swing too hard in both directions with either good or bad news. Oil is not going to stay at $50 a barrel.
KO and MCD face some serious long term challenges. They may have picked most of the low hanging fruit in terms of international growth, and there really is a trend among younger consumers away from junk food.
Merck and Pfizer also face some pretty serious challenges, as the era of the Blockbuster Drug may be over. As someone who works in Biotech, I can tell you the cost of developing new drugs keeps rising while the profits don’t necessarily increase. Any new drug has to be better than existing products. Merck is a better run company than Pfizer; Pfizer has serious problems top to bottom and I wouldn’t want to work there.
I rather like GE and CAT. Not too excited about Telecoms, although they sort of feel like utility stocks at this point; fairly safe, decent dividend. Who is planning to stop using their cell phone entirely this year? Anyone? So the market is pretty stable, even if it’s mature.
