The markets took a great beating yesterday with the Dow Jones (DIA) going down by more than 634 points. News headlines of a US debt downgrade by S&P had investors panicking and widespread chaos led to massive selling on Wall Street and billions of dollars of equity disappearing in a matter of hours.
What is interesting to note is that the rating downgrade was a result of the shortcomings of the deficit reduction plan passed by Congress and was not a reflection of the US’s financial position. At the core of the problem is the fear that the US is politically incapable of dealing with its debt crisis rather than being financially incapable. This does not warrant a downgrade of the US debt as it is hard to justify the downgrade of the world's safest investment.
For a long term value investor, it’s a good strategy to buy when the market dips especially if the stocks being bought have strong fundamentals. As long as you monitor your position, buying after a market pullback can be a great buying opportunity. Solid blue-chip companies with strong financials and dividend history are a safe bet in the midst of market volatility.
Here are five companies that did not lose their AAA rating as they have a global presence.
Exxon (XOM) - Exxon is the world’s largest integrated oil company with refineries in 20 countries and processing capacity of 6.3 million barrels a day. Exxon has very strong fundamentals and has paid almost $40 billion in dividends and repurchased over $130 billion worth of shares. With a 41% increase in Q2 earnings and gains in the international segment, Exxon is well positioned in the oil industry.
In 2009, ExxonMobil bought XTO Energy (XTO) for $41 billion making it the largest natural gas company in the world. With natural gas poised to become a huge player in the energy market, Exxon is in the right place at the right time.
It is more cost effective to buy cheap natural gas reserves than oil reserves and Exxon knows this. Natural gas prices have more than doubled since 2009 and demand is on the rise with many power companies switching from coal to natural gas. China's growing demand for natural gas in the coming decade will also impact gas prices. Exxon Mobil is definitely well positioned for the next 20 to 30 years.
Automatic Data Processing (ADP) - ADP is a safe investment in this market as the company has a rock solid balance sheet and only a nominal amount of debt. With a 20.8% ROIC and PE ratio of 19.76, ADP has the ability to generate strong cash flows through new offerings, increased market share and renewed customer contracts due to high switching costs.
Since capital requirements for its industry are minimal, ADP is able to ride out the economic scenario without being affected too much. ADP handles millions of paychecks every week and charges money to move money and as long as employers need to pay employees, ADP will provide the essential service of being the middle man.
It also earns interest on the taxes it withholds from clients and when the taxes amount to over $900 billion, it translates into a lot of interest income. ADP is the world's largest payroll processor with more than 585,000 customers worldwide.
Johnson & Johnson (JNJ) - Johnson & Johnson’s diversified business segments provide it with the necessary insulation against the downturns in the economy making it a safe bet. It is a leader in the healthcare industry with brands like Listerine, Band-Aid, Neutrogena, Splenda and Tylenol under its belt and has the ability to generate huge cash flows.
The company has consistently increased dividends for the last 45 years and this trend is expected to continue. As the baby boomers age, the need for medical attention will continue to rise and JNJ is positioned to be a leader in providing treatment for pain, arthritis and cardiovascular disease.
With a stellar reputation and a balance sheet envied by competitors in the healthcare industry, JNJ holds a AAA rating. With FDA approval for four key drugs, I expect to see this profitable trend continue to grow. The stock has been on an uptrend over the last 15 years except for times when the market crashed and just like in 2008, it’s a good time to buy JNJ cheap and earn short-term gains.
Microsoft (MSFT) - Microsoft is another steadfast dividend paying company that has paid out over $13 billion in dividends and made share repurchases of over $27 billion over the past three years.
Microsoft is sitting on over $52 billion in cash. This is greater than the GDP of many African countries. With cloud computing promising to be the next big trend, it opens up new profit and revenue opportunities for Microsoft and at the same time threatens the core of the Windows platform. But the company has the resources to build datacenters to support cloud computing and this can translate into increased shareholder value.
Microsoft's partnership with Nokia (NOK) promises to be the next cash cow for the company in the smartphone market and will drive large market share gains for the Windows Phone platform. Windows 7 has proved to a winner and Windows Azure is also set to boost company revenues. However, Microsoft needs to enter into the tablet market quickly if it wants to protect its Windows franchise.
General Electric (GE) - General Electric symbolizes a strong American corporation will a long-standing history of success and achievements that is recognized and admired the world over. With legendary operational efficiencies the company has made a strong presence around the world and is able to generate increasing returns on invested capital.
GE has slowly positioned itself in the energy sector and as we see energy demands continuing to rise, this segment will contribute substantial revenue toward GE’s bottom line. By entering into this field GE goes head to head with energy giants like Exxon, Chevron (CVX) and Shell Oil (RDS.A) but has the financial backbone to withstand competition.
The company is also making investments in clean energy by purchasing wind and gas turbines and developing its solar business. GE is the world’s largest maker of jet engines and electric turbines and with a strong performance in 2011, GE stands for solid long-term fundamentals and at $15 a share is definitely a good buy.
What is interesting to note is that the rating downgrade was a result of the shortcomings of the deficit reduction plan passed by Congress and was not a reflection of the US’s financial position. At the core of the problem is the fear that the US is politically incapable of dealing with its debt crisis rather than being financially incapable. This does not warrant a downgrade of the US debt as it is hard to justify the downgrade of the world's safest investment.
For a long term value investor, it’s a good strategy to buy when the market dips especially if the stocks being bought have strong fundamentals. As long as you monitor your position, buying after a market pullback can be a great buying opportunity. Solid blue-chip companies with strong financials and dividend history are a safe bet in the midst of market volatility.
Here are five companies that did not lose their AAA rating as they have a global presence.
Exxon (XOM) - Exxon is the world’s largest integrated oil company with refineries in 20 countries and processing capacity of 6.3 million barrels a day. Exxon has very strong fundamentals and has paid almost $40 billion in dividends and repurchased over $130 billion worth of shares. With a 41% increase in Q2 earnings and gains in the international segment, Exxon is well positioned in the oil industry.
In 2009, ExxonMobil bought XTO Energy (XTO) for $41 billion making it the largest natural gas company in the world. With natural gas poised to become a huge player in the energy market, Exxon is in the right place at the right time.
It is more cost effective to buy cheap natural gas reserves than oil reserves and Exxon knows this. Natural gas prices have more than doubled since 2009 and demand is on the rise with many power companies switching from coal to natural gas. China's growing demand for natural gas in the coming decade will also impact gas prices. Exxon Mobil is definitely well positioned for the next 20 to 30 years.
Automatic Data Processing (ADP) - ADP is a safe investment in this market as the company has a rock solid balance sheet and only a nominal amount of debt. With a 20.8% ROIC and PE ratio of 19.76, ADP has the ability to generate strong cash flows through new offerings, increased market share and renewed customer contracts due to high switching costs.
Since capital requirements for its industry are minimal, ADP is able to ride out the economic scenario without being affected too much. ADP handles millions of paychecks every week and charges money to move money and as long as employers need to pay employees, ADP will provide the essential service of being the middle man.
It also earns interest on the taxes it withholds from clients and when the taxes amount to over $900 billion, it translates into a lot of interest income. ADP is the world's largest payroll processor with more than 585,000 customers worldwide.
Johnson & Johnson (JNJ) - Johnson & Johnson’s diversified business segments provide it with the necessary insulation against the downturns in the economy making it a safe bet. It is a leader in the healthcare industry with brands like Listerine, Band-Aid, Neutrogena, Splenda and Tylenol under its belt and has the ability to generate huge cash flows.
The company has consistently increased dividends for the last 45 years and this trend is expected to continue. As the baby boomers age, the need for medical attention will continue to rise and JNJ is positioned to be a leader in providing treatment for pain, arthritis and cardiovascular disease.
With a stellar reputation and a balance sheet envied by competitors in the healthcare industry, JNJ holds a AAA rating. With FDA approval for four key drugs, I expect to see this profitable trend continue to grow. The stock has been on an uptrend over the last 15 years except for times when the market crashed and just like in 2008, it’s a good time to buy JNJ cheap and earn short-term gains.
Microsoft (MSFT) - Microsoft is another steadfast dividend paying company that has paid out over $13 billion in dividends and made share repurchases of over $27 billion over the past three years.
Microsoft is sitting on over $52 billion in cash. This is greater than the GDP of many African countries. With cloud computing promising to be the next big trend, it opens up new profit and revenue opportunities for Microsoft and at the same time threatens the core of the Windows platform. But the company has the resources to build datacenters to support cloud computing and this can translate into increased shareholder value.
Microsoft's partnership with Nokia (NOK) promises to be the next cash cow for the company in the smartphone market and will drive large market share gains for the Windows Phone platform. Windows 7 has proved to a winner and Windows Azure is also set to boost company revenues. However, Microsoft needs to enter into the tablet market quickly if it wants to protect its Windows franchise.
General Electric (GE) - General Electric symbolizes a strong American corporation will a long-standing history of success and achievements that is recognized and admired the world over. With legendary operational efficiencies the company has made a strong presence around the world and is able to generate increasing returns on invested capital.
GE has slowly positioned itself in the energy sector and as we see energy demands continuing to rise, this segment will contribute substantial revenue toward GE’s bottom line. By entering into this field GE goes head to head with energy giants like Exxon, Chevron (CVX) and Shell Oil (RDS.A) but has the financial backbone to withstand competition.
The company is also making investments in clean energy by purchasing wind and gas turbines and developing its solar business. GE is the world’s largest maker of jet engines and electric turbines and with a strong performance in 2011, GE stands for solid long-term fundamentals and at $15 a share is definitely a good buy.
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