One way to spot stock bargains today: Look for businesses with strong brands that are almost certain to prosper when the economy recovers — and that have plenty of cash and limited debt so they can maintain their strength until it does. Two such picks from John Nichol of the Federated Equity-Income Fund…
Johnson & Johnson (JNJ). Shares of this maker of pharmaceuticals, medical supplies and consumer health-care products have fallen 14% in the past six months, but the business remains soundly profitable. The company should report single-digit earnings growth in the next year, a strong performance at a time when many stocks will be recording declines. The consumer brand portfolio is extremely valuable — besides the Johnson’s label, it includes Band-Aid, Listerine, Neutrogena, Tylenol, Visine, Aveeno and many others. Recent share price: $57.95. Recent yield: 3.3%.
Mattel, Inc. (MAT). Shares of the global toy maker fell by nearly 40% in the past six months. Profits dropped 46% in the fourth quarter of 2008, reflecting weaker sales for such brands as Barbie and Hot Wheels. The stock is an attractive bargain now. Mattel has the financial strength to weather difficult times and bounce back strongly during an economic recovery. The company has little debt and $1.24 per share of cash. Mattel’s brands also include Fisher-Price, Matchbox and American Girl, among many others. Recent share price: $13.13. Recent yield: 4.9%.
