Women-Led Companies: The Top 3 Stocks to Buy Now

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A total of 20 women run S&P 500 companies, or just 4% of the overall total. Organizations such as Catalyst Inc. have been pushing for years to get these types of numbers higher, and perhaps some day, corporate America will do what’s necessary to ensure more women are making it to the top rung of their corporate ladder.

Women-Led Companies: The Top 3 Stocks to Buy Now

It’s not just what’s morally right, it makes good business sense.

Canadian Prime Minister Justin Trudeau saw the wisdom in this appointing 15 women to his cabinet in November out of a total of 31 positions. If a prime minister can act with such social fairness when a country’s very future is at stake, it seems sensible that businesses can do the same — large or small.

Alas, common sense doesn’t always prevail inside male-dominated corporate boardrooms despite evidence suggesting the inclusion of women delivers better corporate results –considerably so.

For now, investors can make a difference by backing the top stocks of companies led by other women. It’s not unlike the earliest socially responsible investors, who faced intense criticism for investing for reasons other than financial ones — they were ultimately proven to be wise beyond their years. A 2012 study by Deutsche Bank provided more than enough firepower to shoot down the naysayers.

A couple broad ways to play this is the Pax Elevate Global Women’s Index Fund (PXWEX) which seeks to invest in the top stocks of companies advancing women’s leadership, or the SPDR Gender Diversity Index ETF (SHE), which invests in companies that have women in “CEO, board or senior leadership” positions.

But if you want to make a concentrated investment in women-led companies, here are the top three stocks to buy now.

Women-Led Stocks to Buy Now: Reynolds American, Inc. (RAI)

Women-Led Stocks to Buy Now: Reynolds American, Inc. (RAI)CEO: Susan Cameron

Susan Cameron rode into the sunset back in 2011 after seven years running Reynolds American, Inc. (RAI). At the time, it was thought she’d enjoy retirement — and for three years she did exactly that.

But then the company saw an opportunity to buy Lorillard Inc., and Cameron was the perfect person to make the deal happen given her previous experience running RAI, and so she was enticed out of retirement.

More importantly, the $27.4 billion deal by Cameron is the largest ever completed by a woman and puts the company in a better position to compete with Altria Group Inc (MO), its biggest rival in the U.S. cigarette market. While cigarette stocks have delivered some of the best performance over the past 52 weeks, lowering those juicy yields they’re known for, RAI remains one of the best defensive stocks to own in a downturn economy.

And it looks even better with a quality CEO at the helm.

Women-Led Stocks to Buy Now: Campbell Soup Company (CPB)

Campbell Soup Co. (NYSE: CPB)CEO: Denise Morrison

Campbell Soup Company (CPB) CEO Denise Morrison has been in the top job since Aug 1, 2011.

Coming up on five years this summer, Morrison is not the only female executive in the family. Her sister, Maggie Wilderotter, ran Frontier Communications Corp (FTR) for more than a decade until her move into the role of Executive Chairman in April 2015.

Before Wilderotter gave up the CEO title, she and her sister combined to oversee 37,000 employees and $13 billion in revenue.

Since Morrison took over, CPB stock has posted a total return of 121%, compared to 72% for the S&P 500 over the same period.

Campbell delivered significant gains in its gross margins in the second quarter, and as a result earnings notched a significant increase despite the fact organic sales were flat while overall revenue actually declined. CPB is in the middle of a three-year cost-cutting program that expects to cut $300 million in annual savings from its budget. In Q2 alone, it increased gross margins by almost 400 basis points to 37.2%.

That’s great to hear, but cost-cutting only gets you part of the way. The top line also has to grow, and to help with that, CPB has created a $125 million venture capital fund that invests in food companies looking for growth capital. Outside managers will find the companies to invest in, but more than seeking out growth companies, the venture suggests Morrison and the rest of her executives recognize that Campbell needs to innovate at a faster pace — and this venture certainly can help with that.

If you’re unsure about the markets and where they’re headed, CPB stock is a good place to play it safe.

Women-Led Stocks to Buy Now: Ross Stores, Inc. (ROST)

Women-Led Stocks to Buy Now: Ross Stores, Inc. (ROST)CEO: Barbara Rentler

Discount retail is the place to be these days, and up until recently you had a choice of two women-led stocks to pick from: Barbara Rentler at Ross Stores, Inc. (ROST) and Carol Meyrowitz, who stepped down Jan. 31 from the top job at TJX Companies Inc (TJX).

Now that Meyrowitz has moved aside, the choice is automatic.

Rentler has been at Ross Stores for 30 years, but took the top job in June 2014. Prior to that, she served in a number of senior merchandising roles as she moved up the corporate ladder. At age 59, Rentler likely has a few years of service left in the tank should she wish to continue working. Certainly there’s no obvious black clouds on the horizon to knock her out of the top job.

What’s to like about Ross Stores aside from it being led by a woman? Lots.

Over the past 15 years, ROST has achieved an annualized return of 23%, which is about 600 basis points better than TJX. With the exception of the past year, Ross Stores has easily outperformed its discount rival.

A lot of that has to do with its ability to generate abnormally large returns on retained earnings — one of the big valuation metrics Warren Buffett uses to assess a company’s strength or weakness. According to Forbes contributor John Reese, Ross Stores has a 10-year average return on retained earnings of 19.8%. Not only that, but its annual EPS has grown in each of the last 10 years, and its annual earnings are more than 2.5 times its long-term debt.

Something tells me shoppers aren’t going to abandon discount retail anytime soon.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2016/03/women-led-sp-500-companies-the-top-3-stocks-to-buy-now/.

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