Back in August, I did something I rarely do here in Money and Markets … I profiled a specific stock, one that was currently in the Dividend Superstars portfolio.
The company was Colgate-Palmolive, and I'm happy to report that it remains in the portfolio today. After all, it continues to go higher and higher — I'm currently tracking an open gain of 35 percent based on my initial recommendation to buy the shares back in March, not including the dividend payments.
Today, I want to give you an update on what's been happening with the stock, and to use it as an example of why I rely on basic technical analysis measures to forecast a stock's near-term price movements.
But I'm getting ahead of myself …
Let's Start with Four Fundamental Reasons
for Investing in Stocks Like Colgate-Palmolive
Before I recommend a stock, especially for an income-oriented portfolio, there are some basic things I look for:
First, a business that is clearly defined and easy to understand. Colgate-Palmolive makes toothpaste, soap, and other goods that consumers pile into their shopping carts on a weekly basis. Pretty straightforward, right?
Sure, we're talking about a multinational corporation with complex financial statements. Its businesses are impacted by foreign exchange rates, commodity costs, competitor's pricing and advertising efforts, etc. But at its core, it's fairly easy to grasp what the firm does. And its business is focused.
That's what I like to see!
Second, a business or brand that is defensible and long-lasting. Again, I like companies that sell products (or services) that the world wants through thick and thin. Especially if those markets are hard for other competitors to enter … either because of established brands or massive upfront investment.
Nobody will deny the massive appeal of a brand like Colgate. It's been around forever, and is recognized universally!
Third, operations around the world. I won't completely rule out a company that operates in only one very targeted market or country. But nowadays, I feel far better about firms that sell their products and services in a number of different places. By doing so, they are less exposed to economic problems in one region. Plus, at a time when the U.S. dollar is getting hammered, they can actually benefit investors by translating their foreign sales back into a weaker home currency.
Colgate, for example, derives about 70 percent of its sales of oral, personal and home care products outside the U.S.
Fourth, a management team that spreads the wealth! I say it a lot, but it bears repeating again — as a shareholder, you are an owner of a company.
