by Jamie Dlugosch | September 6, 2011 9:41 am
It might be a bit old-fashioned, but from time to time finding good investment ideas is really all about businesses that are working right in your own backyard. Popularized by Peter Lynch of Fidelity Magellan fame, investing in what you know can help you identify stocks that are undervalued and potentially very profitable.
In this crazy world, I’m going to take Lynch’s philosophy and apply it to stocks of companies that offer convenience. A corollary to this theme is to include convenience at a discount. As the world economies struggle in the current environment, businesses offering real value in the form of easy access and low price are likely to do well no matter what the stock market does.
I’ve identified 10 stocks that I think would be appropriate for any portfolio looking to capitalize on this simple, and likely effective, idea of investing in what you know:
I love this corner drugstore. Over the last few years, Walgreen (NYSE:WAG) has been quietly implementing an expansion plan. I see new locations going up in several neighborhoods in my community. The coffee shop where I do much of my writing is next to a Walgreens. The place is always packed and does brisk business. How can you not like the specials they offer from time to time? I find myself stopping in to buy two Red Baron Pizzas for $6 whenever my freezer is empty. This is a company offering convenience that I know and like. I would buy the stock too.
If you are looking for bargain prices, bulk discount retailer Costco (NASDAQ:COST) is the place to go. For families with kids or packrats who love to stock up on household goods, there is no more convenient place to shop than Costco. The membership-only platform might be a turnoff to some, but the bargains more than make up for the annual fee to join. Shares of Costco are one of few stocks to be trading higher this year. It is no coincidence that such performance comes at a time of great economic challenge. I expect the outperformance trend to continue for many years. Costco is a convenience stock to own.
This newly minted publicly traded company is all about convenience. Zipcar (NASDAQ:ZIP), which rents cars on an hourly basis to busy customers in heavily populated urban cores, has a business model that is likely to succeed for many years to come. If you like the product, buy the stock. The added benefit of this approach, in light of the energy crisis, is that fewer cars end up on the road. Use it when you need it will be the wave of the future. Like many IPOs, Zipcar was off to the races right out of the gate. In the trading days that followed, shares settled lower as investors fretted about competition from giant rental car companies. Use the fear and discount to acquire shares of Zipcar today.
The stock market correction this summer should make it perfectly clear that any investor looking for gains needs to trade stocks and to do so frequently. Buy-and-hold investing is like the vampire that never dies. Well, I’m going to put a stake through its heart and declare traders the victors. Once the rest of the world catches on, trading stocks will become the norm. All that volume is going to be a windfall for discount stockbroker TD Ameritrade (NASDAQ:AMTD). The knee-jerk reaction is that a bear market will hurt TD as investors simply move to the sidelines. Traders know better. They are making a killing on the volatility. Buy-and-hold investors, not so much. TD Ameritrade is cheap and convenient. Buy the stock as trading explodes.
Fast food defines convenience in the restaurant category and the king of fast-food restaurants is McDonald’s (NYSE:MCD). There is no secret here. Investors should be very familiar with the Golden Arches. The company has been reinvigorated by the recession and the economy’s tepid recovery. Family budgets are tight and McDonald’s can feed a family of four quite cheaply. In addition, the company went toe to toe with expensive gourmet coffee and, surprisingly, won the battle. Its quality product is cheap and convenient – you can buy a cup at the drive-through window. The stock is a winner too, paying a solid dividend and likely to grow irrespective of tough times in the economy. I would buy the stock.
If you want convenience, Apple (NASDAQ:AAPL) has an app for that. The leader in smartphone innovation, Apple has an app for pretty much anything you could ever want or need. The device is truly a life enhancer. It can increase productivity, making everything from shopping, planning, scheduling, calculating, and playing more convenient. The only thing it won’t do is brush your teeth. The single most important stock to own should be very familiar to everyone by now. Apple is truly taking over the world and, in this case, that takeover is a good thing. Steve Jobs may no longer be at the helm, but don’t fret. Apple is positioned for long-term growth. The company will make money for investors for a long time to come.
When times are good we give little thought to making wasteful trips in our vehicle, running errands hither and yon. When times are tough we think twice about spending money on a trip that may not be necessary. We think even harder about the trips we take when gas prices are sky high. It makes sense, then, that Casey’s General Stores (NASDAQ:CASY) will do well when budgets are tight and gas prices are as high as they are today. If you need to fill up the gas tank, why not pick up a loaf of bread and a gallon of milk while you’re at it? Given that the gas station is closer to your home than the grocery store, all the better. Gas stations are wise to the changes in behavior. They will stock shelves with more items that help customers eliminate that extra trip to the grocery, drug or video store. Casey’s is a growth story that is right down the street. It is a perfect convenience stock to own today.
News Corp. (NASDAQ:NWSA) and its Fox News Network may be loved by some and loathed by others, but for certain the company is well-known. It has been said that the best way to get attention is to have an opinion no matter what that opinion may be. Say what you will about News Corp., the company is capable of spewing opinions in mass quantity. In addition to its attention-grabbing news delivery, the company tailors its offerings for consumers with fading attention spans. We live in a sound-bite world. Nobody has time to sit through a 30-minute newscast at dinner. Give me the news in three minutes or less and I’m off doing other things. News Corp. has recently experienced a bit of a crisis as the phone hacking scandal in England has unfolded. Shares are now priced to allow investors to buy today at a discount. I would do just that as the thirst for news the way News Corp. delivers it grows.
Netflix’s (NASDAQ:NFLX) home delivery of entertainment works well for the busy consumer who doesn’t have time or money for trips to the video rental store. The monthly fee model is wonderful for generating cash flow. The company is truly a game changer and its stock has been one of the best-performing in this challenging market. Will that trend continue? It would seem so. The next step for Netflix is video streaming direct to your computer or television. It may be a tricky maneuver, but given the brand equity of the company, success is likely to follow. Shares of Netflix may be volatile in the short run as it negotiates contracts with owners of content, but for the long term this convenience stock is to be owned for future profits.
Is there anything more convenient than paying for goods and services with a credit card? The explosion of plastic is something every investor should be very familiar with. Even with the financial crisis, MasterCard (NYSE:MA) is cleaning up. The company makes money every time a card is used. Today, as credit is tight, MasterCard is focusing on debit cards. Given the deteriorating faith in the dollar, the role of gold in the economy is on the rise. Look for MasterCard to figure out a way to capitalize on the popularity of bullion. Perhaps we will see the very first true gold card! Whatever the form of payment, MasterCard is sure to be there. It is a convenient stock that investors can safely own no matter what happens in the economy.
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