Sky-high Market? Seven Value Stocks to Consider

We’re into week two of our “summer hole”, the 2-week void where the kids’ school is over and summer camps haven’t started yet. In the last 2.5 days, I’ve had a kids’ hospital appointment in a different state, 3 meal/parties at my college 20th reunion, a visit with my mom, helped my wife host her work friends for 2 more meals, fought off a cold, played competitive tag against a dozen 5-year olds, and packed for our next trip that starts in a few hours.

While the family will slow down on that trip, we are booked fairly solid until the 18th. That’s a very long of way of saying that I’m going to try to best to get some blog posts in, but the odds are against it.

Enough about me, let’s talk money!

It looks like the Vanguard Total Stock Market Index (VTI) is nearing a new all-time high. My retirement accounts have never been higher. (Sorry “me talk” again.) It’s completely possible that the market continues to go up, but this bull market can’t last forever, right?

Just like everyone else, I don’t know when it’s going to end, but I’ve started to be more cautious in my investments. For most of my life I’ve been 100% invested in aggressive growth equities. I’m holding more cash and bonds than I ever had. That’s still only 10% of my portfolio, but I might grow that. I’m also overweighted on international stocks that haven’t had exactly the same run-up as the US stock market. Vanguard’s Emerging Market’s ETF (VWO) is 12% off its highs, which could be considered a bargain in this market.

Consider VWO a bonus to the eight stocks, I’m going to mention below. I’ve had them all on my Google Spreadsheet watch list for some reason or another. It’s not like I ran a stock screener to find these stocks (but that might be a good way to start). Most of them in that “off 15-20%” from their highs. That, in my opinion, indicates there’s some room for these to go up. They are also somewhat near their lows, which may be a sign of them being cheap.

• General Electric (GE)
  This stock if down big from it’s 52-week high of nearly $30. There’s a lot of bad news around GE. There’s a lot of talk of people who think that all the terrible stuff is priced into the stock and it can only go up. There’s also some talk that there’s still some bad news left to come, but I have seen less of this. I like that it still has a dividend of around 3.5%.

  Disclosure: I am long this stock, having bought around these prices.

• Colgate-Palmolive (CL)
  CL is nearly 20% off its 52-week high and only 3% above its 52-week low. It has a 23.72 P/E, which isn’t super cheap, but it is reasonable. With a dividend of 2.65%, you’ll get some cash while you wait for it to recover to its highs.
• Johnson and Johnson (JNJ)
  JNJ is off more than 15% off its 52-week high and about 4% above its 52-week low. Its dividend is nearly 2.9%, so like the previous stocks, its going to pay you some cash in the meantime.

  You should be starting to see a trend here. I think these big, boring companies. For retirees looking to use the rule of 4% to live off a nest egg, these dividends get you close without even selling any stock.

• Proctor & Gamble (PG)
  This is yet another big company that is nearly 20% off its highs. However, its a 8% off its 52-week lows. I was able to buy in a little lower, so I’m up 6% on this investment. Of all the stocks I’ve mentioned thus far, this has the highest dividend at 3.72%. It also has a cheapish P/E of 18.31.

  Disclosure: I am still long this stock.

• International Business Machines (IBM)
  IBM is my favorite investment on paper. Its price has dropped 6.5% since I have been buying it over the last several years. I should hate this stock, but I don’t. Where else can you find a tech stock with a 4.3% dividend yield, a 12.30 price/earnings, and trading near its lows?

  If IBM can get back to growing the company, it should shoot up. However, as long as the earnings keep as steady as they have been, it shouldn’t fall much and investors will collect a healthy dividend.

  Disclosure: I am still long this stock.

• AT&T (T)
  I just started recently following AT&T. I’ve been a customer of its cellphone service for some time. It fits the familiar pattern of being off the highs by 15%, but only 7% off its lows. What’s unique is that it pays nearly a 6% dividend. It’s had some bad news with mergers and such, but it still seems like a well-positioned tech stock.
• Disney (DIS)
  I almost invested in this a month or two ago and I wish I did. I’m not sure if I’ll see sub-100 prices on Disney again. We know how well the Marvel, Star Wars, and Pixar line of movies are doing, but Disney has so much more such as the theme parks. Not everyone can hack Disney like our family and many are happy to pay full price.

  Their upcoming Netflix-like subscription service should be a big winner for the company. It’s trading at a relatively low 16.24 P/E, but it only pays a dividend of 1.62%.

With the exception of Colgate’s $55 billion market capitalization, these stocks are all household names with $120 billion market caps or more. They all have a long history of real earnings and weathering numerous recessions.

I still believe in buying and holding index funds. However, I am finding that many index funds are very tech heavy with Apple, Microsoft, Google, Amazon all valued twice of the companies here. Facebook dwarfs many of the companies here as well. For the most part, they don’t pay strong dividends and they are almost all at their highs. If the bull market ends, I think these tech stocks will be the hardest hit.

I might be in the minority, but I don’t mind speculating a little bit on big names at low prices during this bull market.