3 Well-Known Stocks to Skip for Now

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There is something very comforting about owning shares of well-known brands.

3 Well-Known Stocks to Skip for Now (KO, WMT, TAP)

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We know them pretty well, use their products on a regular basis and are highly confident that they will be around tomorrow. Most of them are well-established, financially strong companies, and it just feels comfortable owning them.

However investors need to keep in mind that no matter how comfortable and well-known a company may be, this does not mean the stock is a screaming buy. You can pay too much for anything, and that includes well-known stocks with sold brands.

I have always preferred to buy these brand names in the midst of a really bad market, when you can buy the brand at a discounted price. Today, after six years of rising prices, we need to exercise some caution when buying even the best-known companies.

Well-Known Stocks to Skip: Coca-Cola (KO)

 Well-Known Stocks to Skip: Coca-Cola (KO)Coca-Cola (KO) is a great example of a well-known brand that is just too expensive right now.

This is one of the best-known companies and most valuable brands in the world today, and that is part of the problem for KO stock. There simply are not many markets where they do not have a presence, which kind of limits growth opportunities.

The soda backlash in parts of the world is not helping very much either, nor is the strong dollar, which makes it difficult to turn overseas profits back into dollars.

KO stock faces a lot of headwinds, and the analysts expect average annual earnings growth of less than 3% over the next five years. For these cheery conditions and outlook you pay 27 times this year’s earnings and 21 times the projected earnings next year.

It is a great company, but the stock price is too high to buy right now.

Well-Known Stocks to Skip: Walmart (WMT)

 Well-Known Stocks to Skip: Walmart (WMT)In most of the United States it is hard to drive very far without seeing a Walmart (WMT) sign.

WMT stock is one of the great growth stories of the 20th century, but unfortunately we are now in the 21st century. Today, Walmart is a stable company that is not only facing competition from brick-and-mortar retailers like Target (TGT) but strong competition from Amazon (AMZN).

The consensus analyst opinion is for the company grow by less than 2% over the next five years, and I would have to have a heavily discounted price to even consider buying WMT stock.

Walmart is not grossly overvalued at about 13 times earnings, but it’s not cheap either. The company is buying back a lot of stock to reduce the share count and grow earnings and I think that will turn out to be a mistake on the part of management.

If you have owned since 1990 and have huge gains I would not be a seller, but I see no reason to buy it now.

Well-Known Stocks to Skip: Molson Coors (TAP)

  Well-Known Stocks to Skip: Molson Coors (TAP)I don’t drink beer too much anymore — I prefer wine. When I do drink beer, I am usually at a baseball game or out on a boat somewhere, so I have some great metal images that involve my beer of choice, Coors Light.

Coors, of course, is owned by Molson Coors (TAP), one of the world’s leading brewers. TAP stock’s brands also include Molson Canadian, Carling, Blue Moon and Staropramen. It was recently announced that they are buying the rest of their joint venture with SABMiller (SBMRY) that gives them all the Miller beer brands as well, including top seller Miller Light.

It is a great company that is getting even better, and TAP stock is near the top of my “buy in a crash” list, but I see no reason to pay 41 times this year’s earnings and 24 times next year’s for the stock today.

As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities. He is the author of the Banking on Profits newsletter covering the community bank stock opportunity and the Deep Value Report that seeks out undervalued stocks that are likely to survive until they thrive and capture the value effect that has been proven to beat the market over time.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/well-known-stocks-ko-wmt-tap/.

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