Safe stocks with steady growth

By Bill Capece
Collegian Staff
February 20, 2007

Recession or not, we can’t tell until we’re out of it.  As uncertainty about the health of the economy remains so widespread, the question of where to put your money rises. With increasing inflation, finding a growth rate that beats inflation is becoming ever more difficult. Strictly speaking on stocks, no one company is the solution. Only by diversification can investors remain active in the market while minimizing risk.  For help with this, two corporations stand out.

Coca-Cola, ticker symbol KPO, is a remarkable company, it has remained relatively unaffected by the fluctuations of the market. Coca-Cola’s sales grow steadily during poor economic times. Consumers do not see soft drinks as a luxury, only to be bought in times of prosperity, they are considered a necessity. Sales continue uneffected by the troubles in the sub-prime market.

Warren Buffet, a famous stock picker, knows the importance of owning a solid company with unwavering sales, and a lock on the consuming public. In 1988, he bought six percent of the company for around one billion dollars. Today Berkshire Hathaway, the company Warren Buffet created and operates, owns eight percent which equated to 200 million shares at a cost of $11.5 billion. He saw back then because of the lack of significant competition, growth potential and solid leadership. Coca-Cola currently trades at 22 times earnings and has 2.3 billion shares outstanding.  Net Income for 2006 was $6 billion which is about $2.65 in EPS.

The second corporation’s ticker symbol is Church and Dwight Co., ticker symbol CHD. CHD manufactures personal and household products.  They have created common household names such as Arm & Hammer, Brillo and Trojan.  These products are essential for homemakers to keep a clean house. Cleanliness and hygiene definitely withstands the pressures of a poor economy. Church & Dwight’s specialty products are comprises of sodium bicarbonate which is used in industrial and agricultural markets. It’s also used by other manufacturing companies as antacid in pharmaceuticals, as a leavening agent for commercial baked goods and as a carbon dioxide release agent in fire extinguishers. 

After unrolling the financial statements of the company, CHD presents itself as a growth stock. Whether the market is up, down or bent to the side, CHD continues to grow at a steady rate. CHD’s market capitalization is $ 3.6 billion with a stock price hovering between 45 and $55 per share for the past year. Since 2000, CHD has quadrupled its stock price and thus quadrupled investors’ return. 

KO and CHD are solid investments for those unsure of where to invest.  Although not currently selling at a discount, sales will continue no matter how the market reacts to any economic news. In these devastated financial markets exotics and speculative stocks are a recipe for disaster. Take a look around you know, very likely that someone is enjoying a Coke.

capecew1@lasalle.edu