Investors eye years of profits.
While the expression “older than dirt” can apply to a good many publicly traded companies, the best of the batch could well be described as “older than pay dirt.” After all, there’s a good reason why some companies dating to the colonial era still make a killing today. Yet while old need not equal obsolete, sometimes it means same old, same old. Sometimes a new technology clobbers it, as with the 2012 bankruptcy of photography giant Kodak. And other times, a beloved brand loses steam, such as Pan Am’s final flight in 1991. Here are eight legacy investments that seek to make the leap from rich history to future riches.
Macy’s (M)
Macy’s, which dates to 1858 and went public in 1922, embodies the agony-ecstacy cycle plaguing other behemoth brick-and-mortar retailers. It returned more than 700 percent post-recession to July 2015, but has since tanked 72 percent to $20 per share. Much of that could represent pessimism, says David Clayman of Twelve Points Wealth Management in Concord, Massachusetts. “As a result, Macy’s represents a value play for investors optimistic about the company’s turnaround or the value of Macy’s underlying real estate assets.”
Colgate-Palmolive Co. (CL)
Long before toothpaste, William Colgate began selling soaps and candles in 1806; his company merged with Palmolive in 1928. With sales topping $15 billion, CL stock is up 12 percent this year. It plays its brand and market defensively and thus lacks any headwinds, says Christopher Ma, director of the George Investments Institute at Stetson University in DeLand, Florida. “Since 1950, this boring toothpaste company has returned more than 4,600 percent for shareholders, compared to S&P 500’s 2,400 percent.”
VF Corp. (VFC)
Organized in 1899, this apparel company owns The North Face, Timberland and Vans. “The result is a diversified brand portfolio with exceptional stability and growth potential,” says Steven N. Violin, senior vice president and portfolio manager for F.L. Putnam Investment Management Co. in Wellesley, Massachusetts. “VF has been dramatically more valuable than the sum of its parts.” It’s up 30 percent this year — even as it finalized the planned ascendancy of Steve Rendle as chairman, president and CEO.
3M Co. (MMM)
“If 3M were any stodgier, it’d be first in line for the early-bird dinner at Bob Evans,” says Barry Randall, technology portfolio manager for Boston-based Interactive Brokers Asset Management. Yet the 1902 company wields its 6 percent annual spend on research and development like a hatchet. “3M’s free cash flow margins are impressively high — averaging 16.6 percent over the past three years.” And for the 10 years ending Oct. 1, 3M is up 145 percent, including 28 percent this year.
JPMorgan Chase & Co. (JPM)
Given the headline-grabbing bluster of popular CEO Jamie Dimon, it’s easy to forget JPM dates to 1799. “It’s performed very well these past 12 months, returning a whopping 45.12 percent,” says Bob Johnson, president and CEO of the American College of Financial Services in Bryn Mawr, Pennsylvania. And yet, there’s still room for the bank to grow. “It still sells at a modest price-earnings multiple of 14.5 over past 12 months’ earnings. Additionally JPM investors collect a handsome dividend yield of 2.21 percent.”
Bank of America Corp. (BAC)
Founded as Bank of Italy in 1904, BAC holds more than 10 percent of U.S. deposits. Yet in 2008-’09, BAC took a nearly $50 billion federal bailout. “BAC has become steadfast in its commitment to never again risk corporate solvency for growth initiatives and has committed to focus solely on the prime and super-prime parts of the market,” says Chris Ambruster, an analyst with Kayne, Anderson, Rudnick in Los Angeles. BAC stock is up 40 percent in the last year.
IBM (IBM)
Dating to 1911, International Business Machines Corp., a onetime seller of cheese slicers, has lopped 10 percent off its share price this year and trades at $149. “Revenues have fallen for 22 straight quarters,” says Vahan Janjigian, CIO of Greenwich Wealth Management, and a portfolio manager for Interactive Brokers Asset Management. “Even Warren Buffett’s Berkshire Hathaway has given up on the stock. But in my opinion, it’s a good time to accumulate shares. I believe the company is on the cusp of a turnaround.”
AT&T (T)
This isn’t quite the company Alexander Graham Bell founded in 1874 — former “baby Bell” SBC swallowed its corporate parent in 2006. But fittingly enough, today’s AT&T is the world’s largest telecommunications company. Yet for its might, T’s shares have performed poorly in a time of market riches: up just 3 percent over the last five years and down a fifth for 2017 to $34. AT&T is battling a saturated cell phone market and consumers dumping paid TV services such as DirecTV. It is seeking a merger with Time Warner (TWX), but that is being blocked by federal regulators.
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Why Investors Love Legacy Companies originally appeared on usnews.com
