JNJ, OGE, PFE, ALU, GE, INTC, MCD Tell me about these stocks? Etc?
It really depends on your timeframe. There is a lot to consider when investing in stocks longterm. You asked about a 10 year timeframe and the conventional wisdom will say that since economies are more likely to expand over tme, then ANYTHING you invest in over a 10 year period should be more valuable over time than less valuable. But, then you look at the past decade, which included two pronounced bear markets, and the broader market has actually contracted by .2% in the 10 year time span. So, you never can really tell.
A general rule about investing is to consider something called a Price to Earning ratio. The P/E ratio will help you to determine whether a stock is over-valued or undervalued. In order to figure this out, you need to take the value of a stock’s share price (let’s say $63, which is roughly what MCD’s price is as we speak, for exmaple). Then, you need to find out how much the company earned per share in the previous year. A company’s earnings is basically it’s assets (profits) minus its liabilities (that would be its expenses, which counts as anything from costs of product development, to employees’ salaries, to how much it paid in legal fees; basically anything that it spend money on). For example, for the 3rd quarter of 2009, McDonald’s reported earnings of $1.15 per share, which projected over a year would be $4.60 per share. On that same day, the price per share of MCD settled at about $59.50. That means the P/E ratio for MCD would be about 13.
So, does this make for a good investment opportunity? Technically speaking, YES. In general an average stock P/E ratio is between 14 and 16. If a stock price per share is 10x or less per earnings, then the stock price is considered undervalued, which would theoretically represent an EXCELLENT buying opportunity. As you get prices that are more than 20x earnings, then the stock may be considered overvalued and would NOT be considered a good investment because by any indication, that stock should be due for a pullback. For example, many of the tech stocks that crashed around the beginning of this decade had huge P/E ratios, perhaps trading at 100x earnings. In fact, a lot of these tech companies never earned ANYTHING or might not have even existed!
But as with the example used above, MCD had a fairly low P/E ratio and since Oct. 22, the stock earned as much as $5 per share, and is still up almost $3 per share! Not a bad R.o.I.!
Basically the stocks you mention are all pretty stable and are industry bellweathers. Those are the ones that provide steady returns, if not rapid returns; but over a 10-year period, steady is what you want.
Still, in order to decide whether these or any stocks are a good investment, be it for the short term or the long term, ou should keep abreast of the P/E ratio for each one. Then, instead of necessarily having a timeframe, you should have a profit goal. So, suppose you want to earn 25% on your investment. Then, whenever the price of your protfolio rises by 25%, you should take some profits off the table. Obvously over a 10 year period you want a greater return than 25%. Perhaps your portfolio can increase by 100′s% over that much time (although it’s not likely, in all honesty). You also need to keep track of how much your portfolio devalues. Perhaps you can only tolerate losing 10% of your initial investment. In that case, you need to be aware of the market in order to see whether or not your portfolio has lost value and if so, you might want to pull money out with the intention of reinvesting at a later date.
Although the stocks you mention are solid gainers, you might be disappointed if you just buy shares in them and then ignore them for 10 years. But, if you find stocks with low P/E ratios and set profit goals and loss limits, rather than strictly focus on timeframes, then you stand to reap more active returns on your investments, and perhaps greater returns as well.
Good luck and remember, you CAN make money in the markets.