By JACK HOUGH
For investors brave enough to buy while the market's falling, below are a handful of stock ideas. The Dow Jones Industrial Average dropped 7% during the five trading days through Thursday. These shares lost at least that much, and they have a few promising attributes.
The first is a reasonable valuation. These stocks sell for 12 to 15 times forecast earnings for their current fiscal year, making them no more expensive than the broad market. There are two related benefits to that for investors. The first is that when the market falls, investors tend to become less hopeful about future earnings, and less willing to pay up for them, stocks with low price-to-earnings ratios usually (but not always) outperform during downturns. The second is that, as I noted last month, value stocks provide better returns in general, because investors tend to judge company flaws too harshly at first.
The second promising sign is a dividend yield that recently topped 3% as a result of share price declines. Dividends will prove valuable to stock investors if prices fall further. Those who receive them can continuously reinvest them at lower share prices, instead of merely hoping for gains.
The third sign might be useful for separating winners from losers if the economy stalls. As I noted in a column Thursday, corporate earnings are so high as to appear unsustainable relative to worker wages right now. Not all companies will suffer earnings declines, of course, but many might. The companies below have demonstrated remarkably stable earnings over the past five years. In ugly statistics jargon, they have a low coefficient of earnings variation. In plain language, they sell gasoline, beer, packaged food, home repair items and garbage collection services--things that tend to continue selling well even when the economy swoons.
Dividend yield: 3.3%
Molson Coors Brewing Company
Dividend yield: 3.0%
Beer isn't entirely recession-proof; the rise in unemployment has hit especially hard among workers in their young 20s, and these are key customers for beer makers. U.S. beer volumes have fallen 2% to 3% in recent months. Molson Coors (TAP)
Dividend yield: 3.2%
Last year was a difficult one for Kellogg (K),
The Home Depot, Inc.
Dividend yield: 3.4%
Home Depot (HD)
Republic Services, Inc.
Dividend yield: 3.4%
Garbage-hauling isn't a fast growth business, or even a moderate-growth one. Republic Services (RSG)