For the past two weeks, one country has held much of the world's attention: the United Kingdom. With London hosting the Olympics, it's been hard not to see something in the media every day about the island nation.
While the country's Olympic athletes have performed well, its economy has not. In the three months ending in July, the British economy shrank by 0.2%, which followed a 0.7% drop the previous quarter. This means the U.K. is in a recession -- and it's a double-dip recession, which the U.K. hasn't experience since 1975. The FTSE 100 Index is up about 4.3% year to date compared with the S&P 500's 11.4% gain.
Even in a weak economy, some companies find a way to perform, and the U.K.'s business community is no exception. One does not need to break a world record to be a winner, and my guru strategies have found British stalwarts that deserve a place on the medals podium.
I use automated stock strategies based on the writings of well-known Wall Street gurus, and the strategy I based on Warren Buffett's investment style has highlighted London-based pharmaceutical AstraZeneca (AZN). Its large size and patent-protected products, earnings per share that have increased eight of the past 10 years, and average return on equity of 31.5% over the past 10 years all work in AstraZeneca's favor. In addition, my Buffett strategy calculates what an investor's likely annual return will be for a stock. For AstraZeneca, it's a very desirable 20.1% when held long term.
Barclays (BCS) is one of the U.K.'s three largest banks. My James P. O'Shaughnessy strategy is cheering for this British economic mainstay. This strategy likes the bank's large market cap of $33 billion, positive cash flow per share, 609 million shares outstanding, and trailing 12-month sales of $33 billion. Among companies that pass these tests, the strategy then picks the top 50 based on dividend yield. Barclays, with a yield of 3.5%, makes it into this group.
Among wireless phone companies, Vodafone (VOD) is second in the world only to China Mobile (CHL). It has operations around the world, including a 45% ownership of Verizon Wireless. Like Barclays, Vodafone gets a nod from my O'Shaughnessy strategy. The company's huge market cap of $145 billion, positive cash flow per share, large number of shares outstanding (5 billion), and trailing 12-month sales of $72.6 billion help make it a contender. What puts Vodafone over the finish line and makes it a winner in the top 50 is its dividend yield of 5%.
If these three major U.K. companies were Olympic contenders, they'd be gold medalists. If you buy any of them, you may come out ahead.