Kiplinger’s Top 5 Stocks for Dad

Friday, June 19, 2009
By Faisal Laljee
This post was submitted by Laura Stevens of the Rosen Group.

Dads, you’re probably expecting a tie or a set of power tools this Father’s Day. If you have enough of those already (or even if you don’t), Kiplinger.com has a gift you’ll really appreciate: stock picks in companies that cater to your tastes. Kiplinger’s Top 5 Stocks for Dad are:

Diageo (DEO) This seller of such brands as Johnnie Walker, Smirnoff, Guinness and José Cuervo has held up better than most during the recession—thanks to a balanced portfolio of products, with higher exposure to mid-price, mainstream brands and less exposure to ultra-premium brands. The shares look reasonably priced. At $56.01, Diageo trades at 15 times estimated June 2009 earnings of $3.82 a share. The stock yields 2.8%.

Eli Lilly (LLY) Men can appreciate this stock for its erectile-dysfunction drug Cialis (which accounts for 7% of total sales). But the case for investing in Lilly’s stock rests on a robust pipeline of new drugs. Among the drugs currently awaiting regulatory approval are Effient, a blood thinner that will compete directly with Plavix, as well as drugs for treating Alzheimer’s, cancer and neurological disorders are in various stages of development. The stock, which closed at $32.98, has fallen 18% in 2009. Still, analysts expect Lilly to earn $4.22 a share this year, up from $4.02 in 2008.

CarMax (KMX) “No-Haggle Pricing” is the signature CarMax practice that endears customers. But even that’s not enough to get potential buyers to open their wallets during these tough times. Sales were off 15% for the fiscal year that ended February 28, and earnings plunged 67%. But because earnings are depressed, analysts look for 27 cents a share in the year that ends February 2010. The stock sells for a lofty price-earnings ratio of 47.

JoS. A. Bank Clothiers (JOSB) The purveyor of men’s suit and dress accessories has reacted to the recession strategy by marking down its wares severely. To conserve cash, the clothier has trimmed the number of new-store openings to just ten to 15 this year. In the first fiscal quarter, the retailer posted an 11% gain in revenues and a 17% jump in earnings. Same-store sales (sales at stores open for at least one year) rose 4.3%.

Home Depot (HD) Even the biggest home-improvement retailer is struggling through the housing slump. Compared with the same period a year ago, sales fell 9.7% during the company’s first quarter. But, looking ahead to next year, HD earnings could climb by 10%. At its June 16 close of $23.20, Home Depot sells for 16 times estimated fiscal 2009 earnings. The stock is 67% below its record high of $70, reached in 1999.

“5 Stocks Dad Will Love” is available in its entirety at http://kiplinger.com/columns/picks/archive/2009/pick0616.htm

– Faisal Laljee

Full Disclosure: I do not own any of the stocks mentioned here but my position can change anytime without notice.

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