stingy companies, so we opted for a 2% dividend as the limit in our search.
We also set the bottom of our long-term growth expectations at a 5% average annual earnings increase or greater over the next five years. All of our picks except one–Paccar Inc. (Nasdaq: PCAR), with a growth estimate of 6.5%–are pegged to grow earnings in the double digits for the next five years.
Our value screen didn’t disappoint us. It handed us a mix of solid, stable companies. In an uncertain stretch for the market, you couldn’t ask for better rock-solid defensive plays than the likes of Clorox (NYSE: CLX), Merck & Co. (NYSE: MRK), and SBC Communications Inc. (NYSE: SBC). No matter how tough it gets, consumers still rely on Clorox’s stable of household products. That’s one reason why management at the company has increased its stake in the company almost 12% over the last quarter. Pharmaceutical companies are another Wall Street favorite when questions over long-term prospects abound. Medicines enjoy huge profit margins, and Merck’s current pipeline of treatments, such as the arthritis drug Vioxx and the cholesterol-buster Zocor, are the envy of the industry. Baby Bells like SBC Corp. have always provided shelter for investors; they pay steady, solid dividends and manage to keep earnings afloat.
A few lesser-known names popped up as well. Alliance Capital (NYSE: AC) is a New York money management firm that offers an array of mutual funds, and as of this writing paid a dividend yield of nearly 6%. Vornado Realty Trust (NYSE: VNO), a real estate investment trust that operates office buildings in the Northeast, could benefit from the post-World Trade Center crunch for Manhattan buildings.
Our growth list came up with some interesting possibilities. SCI Systems Inc. (NYSE: SCI) is an outsourcer for the electronics industry. It builds the gadgets that computer, cell phone, and video game makers design. Look for SCI, which may merge with rival Sanmina Corp.
(Nasdaq: SANM), to take off; Wall Street pegs the company to grow earnings more than 22% annually over the next five years, according to Zacks. We like SCI, should it remain on its own; we also think Sanmina–a 20% grower in its own right–is worth a look should the merger go through.
Don’t cringe at the fact that Ambac Financial (NYSE: ABK) is an insurance outfit. It happens to be a leading player in the municipal bond market, where defaults are exceedingly rare. Insiders like their chances: Ambac’s management has boosted its stake in the company almost 40% in the last quarter.
At first glance, Boeing Co. (NYSE: BA), the biggest commercial jet plane maker around, could be in for rough times, unless you overlook one important thing: diversification. In spite of its recent employee layoffs, Boeing is still one of the biggest military contractors around. In fact, Standard & Poor’s looks for the company to boost revenues from battle aircraft, satellites, and rockets in 2002.
Energy companies are also a big part of our growth chart. Oil prices are still high enough