Super Picks From the Super Bowl
With playoff season in full swing, many sports fans have football -- and upcoming Super Bowl parties -- on their minds. But can all the snacks, sodas and big-screen TVs associated with the big game inspire investing ideas?
Yes, says Brent Wilsey, president of Wilsey Asset Management, in San Diego. You may want to draft the stocks of some Super Bowl plays for your portfolio, he says.
Consider Wal-Mart, which will supply plenty of the goodies consumed on Super Bowl Sunday. Wilsey says that Wal-Mart has a lot of star qualities -- heft, smart leadership, and a winning game plan. Its increasingly broad range of products, he adds, means that people have even more reason to go in its stores -- and often end up buying more than what's on their shopping lists.
But the stock (symbol WMT) has not performed well over the past year -- it's down 15% since January 2005. The company's labor practices and its impact on small-town retailers have attracted well-publicized opposition. And high energy costs have depressed sales somewhat. But Wilsey thinks the company can ultimately overcome its setbacks to run up a good score for long-term investors. He points to plenty of growth opportunities abroad, in addition to what he sees as a smart expansion strategy at home.
Plus, at $45, you can buy the shares of this high-quality company at what looks like a bargain price: only 15 times estimated earnings of $2.98 per share for the fiscal year that ends in January 2007, according to Thomson First Call.
Another stock on Wilsey's roster of prospects is Diageo (DEO), owner of several of the world's top premium-spirits brands, including Johnnie Walker and Smirnoff. Wilsey says that this market leader is taking advantage of Americans' increasing preference for wine and spirits over beer -- the same trend that has been hurting brewers such as Anheuser-Busch. And the stock -- which yields 4% -- looks appealing at $59, or 15 times estimated earnings for the fiscal year that ends this June. Diageo should be a steady player no matter what happens with the overall economy, says Wilsey, because "one of the last things people do when the economy slows is to stop drinking."
As for Anheuser-Busch (BUD), Wilsey likes this veteran's strong brand names and its dominance of the U.S. beer market -- but he suggests that investors hold out until its stock price, recently $41, falls a bit more. Then he would reexamine the company's prospects. "There will be a good time" to buy this stock, but not right now, he says.
Headed to the Sidelines
Not all Super Bowl plays are winners, in Wilsey's view. For example, he would bench PepsiCo (PEP, $57). He says the maker of Pepsi and Gatorade "has done a better job than Coke with its overall business" because of its food brands, which include Lay's potato chips and Rold Gold pretzels. But he says this blue-chip stock, which has gained more than 20% since October 2004, looks pricey at 20 times estimated 2006 earnings of $2.93 per share.
Wilsey would also punt on Domino's Pizza (DPZ, $24), which has a lot of debt, and more liabilities than assets. He says that Domino's may look like a good stock at first glance, but "a stronger balance sheet is needed" to make it a buy.