Financial adviser Lazetta Rainey Braxton prefers companies whose products improve one’s quality of life–whether it’s one’s travel plans or health–as well as potentially bolster investment portfolios. Braxton is a registered investment adviser and founder and CEO of Financial Fountains L.L.C., a fee-only financial planning firm in Chicago. FF offers educational seminars in addition to investment management and financial planning consultations. Before opening her business in 2008, Braxton spent 12 years in accounting and financial services; she served as a vice president at Diversified Trust and a financial analyst at Wachovia. She also worked for Brown Capital Management.
Braxton, who has an M.B.A. from Wake Forest University, says FF primarily uses no-load (no commission or sales charge) mutual funds and exchange-traded funds as low-cost, tax-efficient ways to create diversified portfolios.
Braxton believes that the U.S. economy will continue to grow slowly as the lingering housing crisis and the looming student loan debt bubble dampen consumer spending and check small business owners’ access to credit. “Many companies maintain market positions by keeping hiring and other costs down. These factors contribute to reduced job opportunities and capital investment, lowering the tax base and crimping the ability to meet federal and state liabilities,†she says. The global impact also remains uncertain in the eurozone, where the European housing crisis continues. And despite the severity of the global credit crisis, an appetite for risky credit structures has begun to re-emerge, she adds. Braxton talked to Black Enterprise about three of her top stock picks.
ABBOTT LABORATORIES (ABT) The $38 billion healthcare giant is an innovator. This spring, Abbott announced its intention to split into two companies. The research-based pharmaceuticals business, led by the widely used AIDS drug Kaletra and the rheumatoid arthritis drug Humira, will be called AbbVie. The company’s
diversified medical product operations will continue selling generic drugs, heart stents, and other products under the name Abbott. By year’s end, shareholders could win big. Braxton says the new entities have projected revenues of $22 billion for Abbott and $18 billion for AbbVie. “The separated companies may attract more investors who appreciate the intrinsic value of each distinctive business model,†she says. Braxton also commends Abbott’s focus on widening gross margins through efficiency efforts and(Continued on next page)
a better product mix, innovative drug research, and profitable patents. Abbott’s historical, seemingly sustainable dividend translates to an annual dividend yield of 3.24%. Other pluses, she says, include that the patented Humira faces no generic competition for at least four years. The heart stent, Xience, is ranked high in use. Abbott nutritional offerings are in demand, as are its diagnostics, devices, and generic drug products. Full disclosure: Braxton has a long position in Abbott.
STOCK PRICE: $63.06Â -Â P/E: 19.51
JOHNSON CONTROLS INC. (JCI) As the U.S. leader in automotive interiors and batteries and a global player in controls systems manufacturing, $40.8 billion Johnson Controls of Milwaukee is a large-cap company with a great dividend yield of 2.19%. Responding to global economic weakness and rising material and energy prices, Johnson Controls has reduced restructuring costs and positioned its automotive manufacturing supply chain and building infrastructure divisions to expand in Japan and China, Braxton says. At home, Johnson Controls stockholders may benefit from the demand for greater energy and operational efficiencies in commercial buildings. In addition, the company’s dividend yield diversified revenue stream may increase, says Braxton.
STOCK PRICE: $32.85Â -Â P/E: 13.56
STEVEN MADDEN LTD. (SHOO) This small-cap company is a leader in the footwear space under its namesake brand and private labels. Steve Madden attracts consumers with its creative designs at affordable price points. Trendy, quality-conscious consumers can find its merchandise everywhere from department and specialty stores and luxury retailers to company-operated retail and online stores. Trademark licenses include Steve Madden, Steven by Steve Madden, Betsey Johnson, and Betseyville for retail items such as apparel, accessories, outerwear, and jewelry. It projects 2012 net sales will increase 21% to 23% compared with sales in 2011, meeting analyst expectations. Since 2009, the company has experienced steady sales growth. But Braxton says with a family-owned company there is “a risk if family dynamics and perks place a drag on the company’s financials. Steve Madden’s market growth in the midst of an economic downturn is worth noting, however. The company secured consumer confidence even when everything else suggested decline.†Full disclosure: Braxton has a long position in Steven Madden.
STOCK PRICE: $43.09Â -Â P/E: 19.16