There are two main problems with using these estimates. First, the estimates may not be accurate under the current assumptions about the future. Second, the estimates may be accurate under the current assumptions, but we may experience adverse developments in the future that might render these estimates obsolete.
Rank | Company | Ticker | Forward PE | 5-Year Exp. Growth Rate | 2011 Return |
1 | ALCOA INC | 9.7 | 16.5 | -0.3% | |
2 | CATERPILLAR INC | 10.7 | 16.4 | 7.9% | |
3 | HEWLETT PACKARD | 6.5 | 8.6 | -16.1% | |
4 | INTEL CORP | 9.0 | 11.2 | 3.4% | |
5 | MICROSOFT CORP | 8.7 | 9.6 | -10.6% | |
6 | GENERAL ELECTRIC | 11.1 | 11.9 | 3.0% | |
7 | CISCO SYSTEMS INC | 8.7 | 9.3 | -23.8% | |
8 | JPMORGAN CHASE | 7.2 | 7.6 | -3.4% | |
9 | DISNEY WALT CO | 12.7 | 12.8 | 2.1% | |
10 | IBM | 11.1 | 10.1 | 13.8% | |
11 | AMERICAN EXPRESS | 11.7 | 10.4 | 17.1% | |
12 | WAL MART STORES | 10.8 | 9.4 | -0.4% | |
13 | HOME DEPOT INC | 12.9 | 11.3 | 1.1% | |
14 | BANK OF AMERICA | 6.2 | 5.2 | -19.0% | |
15 | 3M CO | 12.9 | 10.6 | 8.8% | |
16 | 9.5 | 7.7 | 4.2% | ||
17 | DU PONT | 11.3 | 8.9 | 4.4% | |
18 | EXXON MOBIL | 8.7 | 6.2 | 10.4% | |
19 | UNITED TECHNOLOGIES | 13.7 | 9.4 | 9.7% | |
20 | BOEING CO | 14.2 | 9.1 | 11.7% | |
21 | KRAFT FOODS INC | 13.8 | 8.7 | 11.0% | |
22 | MCDONALDS CORP | 14.6 | 9.2 | 9.4% | |
23 | PROCTER & GAMBLE | 15.1 | 8.3 | 1.2% | |
24 | COCA COLA CO | 15.3 | 8.3 | 2.4% | |
25 | VERIZON | 13.5 | 7.3 | 3.1% | |
26 | JOHNSON & JOHNSON | 12.5 | 6.1 | 8.7% | |
27 | MERCK & CO INC | 9.1 | 4.1 | 0.7% | |
28 | PFIZER INC | 8.9 | 2.8 | 18.2% | |
29 | A T & T INC | 12.0 | 3.6 | 8.2% | |
30 | CHEVRON CORP | 7.7 | 1.6 | 12.5% |
According to Thomson's estimates, Alcoa and Caterpillar are the best Dow stocks for the next five years mostly because they are expected to grow at a very high rate. John Paulson had nearly $500 Million in Alcoa at the end of March. He is by far the most bullish hedge fund manager about AA (See John Paulson's other bullish bets here).
Four of the next five stocks are old technology companies: Hewlett Packard, Intel, Microsoft, and Cisco. It isn't coincidence that all PC-related Dow components ranked at or near the top. There isn't enough investor interest in these stocks because of the Apple frenzy. Investors don't think HPQ, INTC, and MSFT can grow at 9-11% annually for the next five years. That's why these stocks have low PE ratios. Several hedge funds don't agree with the market's judgment. Microsoft was owned by 54 hedge funds as a top 10 holding at the end of March. Hedge funds collectively own 2% of the outstanding shares. Jim Simons' Renaissance, David Tepper's Appaloosa, Leon Cooperman's Omega Advisors, and Tom Steyer's Farallon are some of the hedge funds that are bullish about Microsoft. Twenty hedge funds had HPQ among their top 10 holdings. Hedge funds collectively own 4% of the outstanding shares. The stock lost 12% so far this year. John Paulson's Paulson & Co, David Tepper's Appaloosa and Bill Miller's Legg Mason had the largest stake in HPQ among the 300+ funds we are following (Check out David Tepper's favorite holdings here).
At the bottom of the list we have telecom companies and pharmaceuticals. Analysts think that telecom companies can grow barely above the inflation. AT&T is expected to grow by 3.6% per year for the next five years. The estimated growth rates for JNJ, MRK, and PFE are also between 2.8% and 6.1%. Bill Miller has more than $100 in each of these three pharma giants (See Bill Miller's top stock picks).
Interestingly the top 15 stocks Wall Street analysts like the most lost 1.1% so far in 2011. The 15 stocks that are at the bottom of the list gained 7.7% in 2011. Clearly investors don't agree with analysts at the moment. We think extreme optimism and extreme pessimism tend to be wrong on the average. That's why we like the top 5 stocks which are disliked by investors and the bottom 5 stocks which are disliked by Wall Street analysts. source seekingalpha.com... For the latest updates PRESS CTR + D or visit Stock Market news Today
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