Recently, IBM (NYSE:IBM) celebrated its 100-year birthday. No doubt, the IBM centennial was a huge milestone, which few companies have achieved.
In fact, IBM has been beating out some of its younger tech brethren like Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT) and Cisco (NASDAQ:CSCO). Over the last five years, Big Blue has generated an average annual return of 17.4%.
Despite this, I think there are other century-old companies that actually have better prospects for investors. Which ones? Let’s take a look:
JPMorgan Chase & Co. (NYSE:JPM), founded 1823: The stock price has suffered from the recent correction in the sector. Since mid-February, JPMorgan’s shares have gone from $48 to $40.83. Yes, it’s ugly. But to me, this represents a great opportunity to get a bargain. The P/E ratio of JPMorgan is a mere 9 and the dividend yield is at a respectable 2.50%. The balance sheet is also rock solid. Oh and JPMorgan’s CEO, Jamie Dimon, is perhaps the world’s most savvy banker. If anything, he may be one of the best for the past century.
Darling International (NYSE:DAR), founded 1882: There’s something that won’t stop growing; that is, food waste. For Darling, it’s a good thing since it helps to clean and dispose it. But the company goes beyond this. It has clever techniques to turn food waste into valuable products like fertilizer and even renewable diesel biofuel. Basically, Darling gets paid to make products! With its scale, Darling has been aggressive with its acquisitions. A key deal was for Griffin Industries, which focuses on animal and bakery by-products. Since 2007, earnings momentum has increased nicely, going from an average of $0.17 per share to $0.63 per share. In light of the increased volumes and new market opportunities, the growth should continue.
Johnson & Johnson (NYSE:JNJ), founded 1886: After experiencing a wide array of product recalls in past decades, it looks like the JNJ is refocused again on quality. At the same time, it appears that J&J is at the early stages of a growth spurt, driven by a promising line of new drugs. But J&J has other strong businesses, such as its diagnostic and medical device segment. To boost things, the company spent $21.3 billion to acquire Synthes, which is a high-margin player in surgical devices for orthopedic trauma. Then there is the consumer business, which includes offerings for baby care, skin care and oral care. It’s a big-time cash cow.
Dana Holding (NYSE:DAN), founded 1904: The company is a top supplier of axles, transmissions and sealing products. Brands include Spicer, Victor Reinz and Long. Of its $6.1 billion in revenues, about 25% comes from Europe, 14% from South America and 12% from Asia. No doubt, this global footprint should help provide for long-term growth. Dana has gotten aggressive in places like China, Brazil and India. Although, the company may not remain independent for long. In light of its attractive assets and strong cash flows, it looks like a prime buyout target.
Cummins (NYSE:CMI), founded 1919: Ok, this stock is only 92 years old… but I think it has been around enough to be a company that’s “built to last.” Cummins is a top manufacturer of diesel, natural gas and electric engines and power generation systems. A key part of its advantage is a global network of distributors, which span more than 190 countries. As should be no surprise, Cummins is seeing lots of growth from emerging markets. After all, they need the kind of infrastructure products that the company provides. I think Cummins looks like a scrappy start-up, not a century-old operator. In the latest quarter, revenues spiked 56% to $3.9 billion. EBITDA was also strong, coming to $532 million. At a margin of 13.8%, it is at the highest point since the mid-1980s.
As of this writing, Hilary Kramer did not own a position in any of the stocks named here.
