Every market is replete with short-term traders — they account for the bulk of stock price movement and trading volume. And if you’re a professional trader or otherwise adept at taking advantage of short-term price discrepancies or other mis-pricings, hats off to you.
However, if you’re like most individual investors, you probably won’t fare as well with short-term strategies. For the majority of us, identifying stocks likely to perform well over periods of years — or even decades – represents the rational investment strategy. With that in mind, here are three “old reliable” stocks that every long-term investor should consider.
United Technologies: The Jet Age Has Only Just Begun
Hartford, Conn.-based United Technologies (UTX) will likely continue to benefit from the economic expansion taking place in emerging markets.
A large backlog in commercial aircraft orders at Boeing (BA) and Airbus, to which UTX supplies jet engines via its lead Pratt Whitney unit (24% of revenue) will be a major driver of profits. And while U.S. travel may experience low revenue growth in 2011, international travel growth should remain at adequate rates this year, led by strong emerging market GDP growth — which should generate future engine orders.
In addition, infrastructure spending in the U.S. and key emerging markets such as China bodes well for two of the company’s other units: Otis (elevators, 23% of revenue) and Carrier (air conditioning, heating, and ventilation systems, 25% of revenue). The value-adding dimensions of Otis and Carrier can’t be underscored enough. Otis is the world’s largest elevator and escalator marker, and Carrier is the largest heating/air conditioning/ventilation systems manufacturer, offering products that are intrinsic to the modern world. Those products will play an even larger role in the development of Asia and Latin America, than they did in U.S. development.
UTX’s Sikorsky unit (9% of revenue) and its Fire and Security division (11% of revenue) round-out the impressive, industrial business model.
In short, United Technologies is a company operating on all cylinders that’s well-positioned for the global economic recovery. Reuters expects UTX to earn $5.36 and $6.08 per share in 2011 and 2012, respectively.
United Technologies’ stock chart has formed a short-term double-top at/near $86 — a bearish technical pattern, but if you’re willing to hold UTX more than two years, you should do fine — assuming the price of oil tops out in the range of $110 to $120 per barrel.
GE: The Mutual Fund in One Company
Political and social upheaval in the Middle East has rattled the oil market — and pushed crude above $100 per barrel — but the calculation here argues that when conditions on the ground stabilize, the global economic growth story will be intact. That’s a good reason to own diversified industrial giant General Electric (GE).
GE’s stock vectored above $20 during the winter, pushed $22 before pulling back slightly, and is currently jockeying with that $20 support/resistance level.
Look for GE’s energy infrastructure, consumer/industrial, and technology units to post revenue increases in 2011, boosted by increasing demand from both emerging markets and the developed world. GE should record impressive gains in oil and gas products, health care imaging, and airplane engines. There’s also a chance that GE Capital Finance — hit hard after the housing bubble burst — could contribute to profits in 2011. If it does, a $26 stock price for GE would not be unreasonable by the end of 2012.
Overall, 2011 revenue will likely rise 2% to 3%, followed by a probable 2% to 4% rise in 2012. Reuters expects GE to earn $1.34 and $1.62 per share in 2011 and 2012, respectively.
Coca-Cola: ‘No One Ever Went Broke Holding Coke’
Venerable Coca-Cola (KO) stock has roughly doubled in price since 2009 to about $67, but don’t fret that you’ve missed the boat: Coke appears to be headed to $80 and beyond during the current economic expansion.
Fundamentally, Coca-Cola’s operation remains strong. Coke will likely post 2011 revenue growth of 20% to 25%, including acquisition revenue, after a 3.5% gain in 2010. KO’s top-line results will be aided by good international sales, and strong growth in non-carbonated beverages. Efficiency improvements, adequate cost containment, and stronger growth in emerging markets should offset higher commodity costs — round out the story of Coke leading the soft drink pack in another recovery.
In addition, Coke has successfully re-positioned itself amid the consumer trend toward health and sports drinks (POWERade, vitaminwater) and away from carbonated drinks. That said, the “big 4 carbs” — Coca-Cola, Diet Coke, Fanta, and Sprite — are doing nicely internationally, which will more than offset sluggish U.S. volume in the signature cola brands. A $1.88 annual dividend rounds-out the positive story. Reuters expects KO to earn $3.87 and $4.25 per share in 2011 and 2012, respectively.
Safest Pick: Coca-Cola (KO).
Best Pick: (higher risk) United Technologies (UTX).
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.