We think that dividend-paying value stocks will continue to be the place to be. Dividend-payers historically have delivered the best long-term returns, with capital gains accounting for the lion's share of the performance.
What'€s more, dividend-payers historically have been less volatile than non-dividend payers. And, in the first year of the Presidential Cycle, dividend payers have really earned their stripes, returning 7%+ on average, compared to 3% or so for non-dividend payers.
In terms of individual names, we always advocate broad portfolio diversification, so we actually have 60 to 80 favored stocks. That said, here are three names of particular interest today, each of which has been a laggard thus far in 2013 -- I'd rather buy the stocks that have yet to have their day in the sun!
Readers may be interested in the notes my right-hand man Jason Clark prepared on the three stock picks for my Sunday evening appearance on CNBC Asia.
Apple (AAPL)
More than $140 per share of cash on the balance sheetDespite record high revenue and profit in fiscal Q1 and solid performance in fiscal Q2, stock has plunged from $700 in SeptemberCompany announced increase in buyback to $60 billion from $10 billion and dividend increase of 15%. Plans to return $100 billion to shareholders by end of 2015Potential for large scale growth in China and other emerging markets (future contract with China Mobile for a cheaper iPhone€)New wave of products (iPhones, etc..) that will drive further upgrades and new products that will spur growthProven expertise in integrating hardware, software, services and 3rd party applications and using them in differentiated, premium devicesP/E ratio of 10.5; 2.7% dividend yieldBarrick Gold (ABX) Dividend yield of 4%Recent sizable pullback and long-term potential of ABX creates an attractive entry point for investorsThe miner continued to see gold output of 7 million to 7.4 million ounces at a cash cost of $610-$660 per ounce, with an 'all-in' sustaining cost of $950-$1050 per ounce.We like that the company has a geographically diverse asset mix.Management is willing to close or sell underperforming assets.Recently completed a $3 billion debt issue that substantially improved the financial liquidityDown over 50% during the last 12 months. True, gold has had a rough go of it, but the miners have overreacted to the downsideForward P/E ratio of 6Deere & Co. (DE)
We believe that DE is the best of the best in the agriculture universeDemand for ag equipment is likely to remain at high levels due to relatively high crop pricesDeere continues to see strong demand trends for large farm equipment in the U.S., Canada and Brazil and we believe strength will build in emerging economiesTurned in better-than-expected quarterly sales and earnings of $10.9 billion and EPS of $2.76. Although the results exceeded expectations and the company reaffirmed its full-year earnings guidance, investors hit shares hard because of a relat! ively uninspiring business outlook.Deere normally generates solid cash flow from operations and it is worth noting that management has returned 60% of this cash flow to shareholdersP/E ratio of 10.6; 2.4% dividend yield
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