Following up on our 2014 stocks to watch.

Last July we examined two industry leaders in two very different cyclical industries: Oracle Corporation —a stock I own — and International Paper.

ORCL is a leader in enterprise software and IP is a leader in paper and packaging (think: corrugated boxes and paper cups). At that time the two companies traded at comparable valuations of approximately 13 times estimated earnings. Both stocks paid a dividend. ORCL yielded 1.2 percent, while IP yielded a more substantial 2.9 percent. Both stocks were cheap as measured by their respective p/e’s, and, in particular, when compared withtheir peer group companies and the S&P 500.

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Despite their similar valuations in July 2014 both stocks had very different earnings histories. ORCL’s five-year earnings registered in the mid-double digits, and was expected to slow to the low double digits in the subsequent five year period. IP’s five-year earnings growth, on the other hand, was flat due largely to a restructuring; five-year estimated earnings growth was expected to grow in the mid-single digits.

Read more here:  The Arizona Republic

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Two Very Different Companies with Very Similar Valuations–Which One Should You Own?

Investing is like an essay exam rather than a multiple-choice quiz. Essay answers are more nuanced than multiple-choice — more like an informed judgment call than the unassailably right answer. As a professor, I give my students essay questions because they create a complete picture of what young scholars know and don’t know.

Similarly, investing, like real life, rarely presents us with questions that are as straightforward as those on a multiple-choice test. That is why I am interested in investing in the stocks of well-managed, industry-leading companies; I don’t have to know “the answer.” I simply need the confidence that management is moving the company in the right direction no matter the short-term trends of the market. These companies won’t always generate positive returns, but the dominant ones in each industry have a much better chance of succeeding than the second- and third-tier companies. I also know I increase my odds of success if I select the most attractively priced stocks with the greatest potential for total shareholder return.

Let’s examine two leaders in two very different industries with similar price-to-earnings (p/e) valuations.  Click here to read my column in its entirety: The Arizona Republic

Why Oracle Will Soar Once More

Over twenty years ago, I acquired an initial position in Oracle Corporation (NYSE: ORCL).  I didn’t know much about the company then but I spent an evening seated next to CEO, Larry Ellison at a private dinner in San Francisco and found him to be one of the most compelling, arrogant, driven and hard-as-nails individuals I had ever met.  When the market opened the following day, I bought the stock.  Since then I have learned a great deal more about the company and have continued to add to my holdings when market perception about the company’s prospects pressure the stock price.  We are once again in one of those periods, and for long-term investors, it may be time to take a hard look at the stock…

Please  read the remainder of my blog post in The Motley Fool.