Privately owned H. J. Heinz, the powerhouse food-products company and owner of such brands as Heinz Ketchup and Ore-Ida frozen potatoes, has been in the news because of its bid to merge with another powerhouse food-products company, Kraft Foods (KRFT), owner of such name brands as Philadelphia cream cheese, Oscar Mayer and Jell-O.
This merger got me looking at other companies flush with name-brand products that might be worth investing in. Using my guru strategies, which are automated equivalents of the strategies used by noted Wall Street investors, I found two consumer-products powerhouses worth buying, though I am not suggesting I know of or expect any merger or acquisition activity involving them.
One is Proctor & Gamble (PG), which, according to Consumer Goods Technology, is second only to Nestle as the largest consumer products company in the world. P&G brands include Pampers diapers, Bounty paper towels, Head & Shoulders shampoo, Gillette shaving products, Tide detergent and Crest toothpaste.
A proven guru strategy I use to analyze stocks is based on the writings of James P. O'Shaughnessy, and this strategy gives P&G its highest rating. The company's market cap ($222 billion), strong cash flow per share ($4.83), large number of outstanding shares (2.7 billion) and very large sales ($81 billion) all help make this company a favorite of the O'Shaughnessy strategy. As a final test, the strategy compiles all companies that passes these tests and picks the top 50 based on dividend yield. P&G makes it into this rarified cohort with its dividend yield of 3.13%.
The second consumer products company that earns high grades from the O'Shaughnessy strategy is Unilever (UL). Headquartered in both Britain and the Netherlands, the company's product portfolio includes Lipton tea, Ben & Jerry's ice cream, Bertolli olive oil and sauces, Hellmann's mayonnaise, and Dove soap. The company has a market cap of $127 billion, strong cash flow per share ($2.52), plenty of shares outstanding (2.9 billion) and $53 billion in sales. These factors, along with a dividend yield of 3.47%, place Unilever among the top 50 companies that are publicly traded.
Buying into P&G or Unilever means making a bet on two of the most sophisticated marketing companies in the world. Both have an enviable stable of brands and long histories of managerial success. They should be considered for the investment portfolios of every investor.
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