Picks for the Liberal Investor

 | Sep 23, 2012 | 11:00 AM EDT  | Comments
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sbux

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biib

If you are politically oriented, and think your politics are what is needed to lead to a strong economy, you might want to invest in companies headquartered in places with political beliefs that lean strongly in your direction. So, in this column, I will talk about companies headquartered in most liberal U.S. states, based on a February Gallup poll. Next week, I will cover companies in the leading conservative states.

Out of New York we have Interpublic Group (IPG), one of the world's major global advertising agencies. The firm generates revenue of $7 billion, sports an employee count in excess of 42,000 and has offices in more than 100 countries. It operates dozens of advertising agencies under various names, including McCann Erickson and Draftfcb.

As a general rule, for stock-picking I use strategies I've automated based on the writings of well-known Wall Street gurus, and one of these strategies is modeled after Joel Greenblatt's approach to investing. This approach uses two variables: earnings yield and return on total capital. It ranks all publicly traded U.S. stocks, based on these variables, and then comes up with a final ranking. Interpublic's earnings yield is 15.87, giving it a rank of 90, and its return on total capital is 50.59%, for a rank of 141. But, when we combine these two variables, the company's rank jumps to an impressive No. 25 out of thousands of publicly traded companies. So this name is well worth a look.

Moving on to Washington State, one company that calls it home is the ubiquitous Starbucks (SBUX) coffeehouse chain, which operates nearly 18,000 retail stores in 60 countries. The strategy I've based on the thinking of Peter Lynch believes Starbucks smells sweet. Lynch was a proponent of the P/E/G ratio, which is price-to-earnings relative to growth -- a measure of how much the investor is paying for growth. Starbucks' P/E is 28.34 and its growth rate is 30.07, giving it a P/E/G of 0.94. That's good enough to earn a high recommendation from this strategy, as the maximum P/E/G allowed is 1.0. Also in the company's favor is its moderate amount of debt.

The last stock comes from the State of Massachusetts. Biogen (BIIB) is a biotech company that markets drugs for multiple sclerosis and non-Hodgkin's lymphoma, and is working on additional drugs addressing oncology, immunology, hemophilia and neurology diseases. As with Starbucks, Biogen is a Lynch strategy favorite. The company's P/E/G is a solid 0.81, and its debt is moderate.

Even if you are not on the left politically, these companies are worth considering. If you have liberal leanings, well, that should make these three recommendations all the more desirable.

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