Yesterday, we added telephone giant Verizon Communications (VZ) to the Under Loved, and Under Appreciated Stock List (Value) portfolio, with a buy limit of $29.

We added Verizon through the Flash Alert area in the "Newsletter" portion of the website. If you want to get these timely ideas, go to the "Newsletter" link at the top of the page, sign up by establishing your own username and password.

Verizon is a classic Under Loved, and Under Appreciated Stock that you hope one day will fall into your lap. Like any stock, you have to wait on the right entry price.

Verizon has all the characteristics I look for in a great investment. Also, I've found that companies who dominate their industries, or at least compete aggressively year in and year out, have a higher predictability rate for earnings growth and success. Verizon has a dominate business that is very predictable.

The company is a dominant provider for wire-line, wireless, and broadband communications. Formerly known as one of seven Baby Bells, Bell Atlantic changed its name to Verizon after it acquired GTE in June 2000. The company made other strategic moves by acquiring MCI and Alltel, and forming alliances with Vodafone's AirTouch.

When you look at the numbers, the company is even more impressive.

Verizon has over 91 million wireless customers, and picked up 13 million of those subscribers after the Alltel merger closed in January. The just company added more than 2.2 million new net subscribers in the fourth quarter of 2009 by taking market share from its competitors.

Taking about a cash cow, the company generates on average $52 per user, which translates into a quarterly cash generation of $4.732 billion per month. With this cash, Verizon increased its dividend by 3%, bringing the current dividend per share to $1.90 per share, or 6.51%.

Despite a terrible recession, the company has managed to grow their dividend. In fact, since the economy began to weaken in 2007, Verizon has managed to raise their dividend from $1.65 in 2007, to $1.90, an increase of 15.1%.

Stop and think for a moment. Everywhere you go you see someone using a cell phone. In the past, cell phones were a luxury item. Today, they are part of our everyday lives. The younger generations, teens, and young adults, would rather do without food, than do without a cell phone.

The dominance of cell phones is so wide spread that city, state, and federal governments are trying to pass laws to limit their use while consumers drive. What does that tell you?

Wireless phones are not only an extremely popular item in the US, but around the globe. Many US household now have cell phones for everyone in the family. Corporations now require cell phones for all their employees. Since time is money, cell phones have allowed corporate America to become more efficient. They will never have to worry about missing an important call, or making a timely call to an important client.

In short, the time is now right to buy Verizon !

We are adding another beaten down blue chip to the Under Loved, and Under Appreciated Stock List (Value) portfolio today. The stock currently sports a 6.51% dividend, and shares a monopoly status with another royal blue chip.

For further details, go to the "Newsletter" link at the top of the page and sign in by establishing your own username and password.

Predicting the potential rebound of a quality Blue Chip stock is pretty easy to do. You don’t need to be an analyst with a CFA designation to figure them out. In fact, all you really need to look at is the company’s track record, and have a boatload of common sense. This is why I Like GE.

Let’s take a look at the company through the eyes of someone with common sense. Track record will tell you a lot since great companies almost always seem to find their way out of a tough situation. The advantage that a major Blue Chip has is…Predictability!

When you look at a company’s track record is you can see how they have performed in good economic times, bad economic times, and how they have rebounded or languished after a recession.

When Warren Buffett evaluates a company, he looks at the big picture. As an example, are earnings, dividends, and return on equity “generally” rising, or falling. It’s only natural to assume a company’s numbers will contract during recessionary periods, but it’s the general trend overtime tells the real quality of a company.

GE’s problems have been well documented, but I feel they have addressed the key issues, and are managing them effectively.

Recently, the company announced quarterly earnings of 0.28 per share, 7.3% above the consensus estimate of.26. As the recession continues into 2010, the company will continue to work its way through the issues at GE Finance, but we feel these problems are only temporary.

While earnings could be flat to slightly up for 2010, we are taking a longer term view of 3-5 years. With the problems of NBC Universal off its back, the company can now focus on its key businesses.

1998-2009 Earnings per Share

Earnings: .93, 1.07 1.29 1.41 1.51 1.55 1.61 1.72 1.99, 2.20, 1.78, .95

The average Earnings per Share over the past 12 years = $1.31

My 3-5 year Prediction: GE earnings will once again reach $1.31/ share, or possibly higher. The last time GE had earnings of around $1.31/ share, the stock was trading in a range of $28 to $60.

Continue reading "General Electric: A Common Sense Look, at a Common Sense Stock, for the Common Sense Investor" »