• 10 Reasons You Should Buy This Stock Today
• A Fool Looks Back
• An Unprecedented Investment Opportunity
• It's Finally Time to Buy These Stocks
• Stocks That Keep Paying You Back
• The Fool's Look Ahead
• What to Do When the Dow Hits 7,500 Again

10 Reasons You Should Buy This Stock Today

There are two things I've got to tell you up front. One, I'm not David Letterman, so I hope you're not expecting comedy in this list. Two, this company is not the most popular one around, so if you invest in it, you might get some dirty looks. But investing is about making money, and this one should help you accomplish that. In spades.

The company I have in mind is cigarette maker Philip Morris International (NYSE: PM). And here are 10 reasons why you should consider owning shares.

No. 10: One product
Unlike conglomerates such as General Electric (NYSE: GE) with business interests in many different segments, Philip Morris focuses on one: tobacco. This keeps management's attention on growing the business without distractions. Altria (NYSE: MO), Philip Morris' former parent, used to be in the food business when it owned Kraft Foods , and it's still in the wine business. Not exactly core competencies.

No. 9: Long-term management
The current management team has an average tenure of more than 15 years. CEO Louis Camilleri has been with Philip Morris for 31 years. Such experience gives the company a big leg up.

No. 8: Repeat customers
Many companies, such as Procter & Gamble (NYSE: PG), can rely on customers buying their products consistently, over long periods of time. Cigarette smokers do the same thing and provide the same predictability.

No. 7: Market domination
Outside of China and the U.S., Philip Morris controls one-quarter of the world cigarette market, more than any competitor. It has seven of the top 15 brands worldwide, including the leading brand (Marlboro), which has nearly three times the market share of the runner-up. That kind of dominance is rare.

No. 6: Tons of cash flow
Over the past 12 months, Philip Morris has generated more than $6.5 billion in free cash flow. Over the nearly six years for which financial information is available, it has averaged more than $5.4 billion annually.

No. 5: High return on equity
Not only does Phillip Morris throw off cash, but it’s highly profitable; the company has a return on equity (ROE) very well in excess of 40%, which it's maintained ever since separating from Altria. Only 24 companies trading on major U.S. exchanges manage to throw off that much cash and have an ROE greater than 20%. Many of these are familiar names, such as Microsoft (Nasdaq: MSFT) and PepsiCo (NYSE: PEP). A select group indeed.

No. 4: Hedge against a weak dollar
With 100% of its revenue generated outside of the United States, but its reporting in U.S. dollars, the company’s revenue and earnings will look even better when translated, thanks to weakness in the dollar. That protects you as an investor should the dollar continue to decline.

No. 3: In top 100 yielding stocks
Wharton professor Jeremy Siegel has shown that high-yielding, dividend-paying stocks have a significant advantage over the rest of the market. Specifically, he showed in one study that the S&P's 100 highest-yielding stocks outperformed the overall index by three percentage points annually from 1957 to 2003. That may not seem like much, but it's really a big deal. Philip Morris is currently in the top 50 yielding S&P 500 companies.

No. 2: Commitment to pay the dividend
Management has often said that they plan to return value to shareholders, which they primarily do through the dividend. In the last earnings conference call, Hermann Waldemer, the chief financial officer, said, "Our commitment to enhance shareholder returns remains as strong as ever." Last summer, Waldemer stated that the company is committed to a target payout ratio of at least 65%. That is, the company is committed to paying investors $0.65 of every dollar it makes in net income.

No. 1: A large, secure dividend
You would think that payout ratio means a hefty dividend, and you'd be right. Right now, the company is yielding 4.6%. While that's not the biggest yield out there, it's probably one of the most secure, because of the company’s strong financial position and stable business. Compare it to previous high payers that had weak financial positions and unstable businesses, such as Bank of America (NYSE: BAC), which slashed its dividend early this year. I expect Philip Morris to still be paying its hefty dividend 100 yearsfrom now.

While Philip Morris is not a Motley Fool Income Investor newsletter pick, it would not surprise me to see it become one. That's because it fits many of the criteria advisor James Early looks for – namely, a growing dividend, a commitment to pay it, and the financial stability to continue doing just that.

If you want to get paid by more of your companies, consider taking a free 30-day trial of Income Investor. There, you'll receive a new stock idea every month and be able to pick from all the past ones, as well. In fact, the recommended companies have an average dividend yield of 4.3% right now, and are beating the S&P 500 by 7 percentage points on average. There's no obligation -- simply click hereto give it a try.

Jim Mueller owns shares of Philip Morris and Pepsi, and has a beneficial interest in Microsoft and GE. Pepsi and Procter & Gamble areIncome Investor selections, and the Fool owns shares of P&G. Microsoft is anInside Value pick, and Philip Morris has been chosen byGlobal Gains .Motley Fool Options has recommended a diagonal call on Microsoft. The Fool's disclosure policy doesn't like smoking cigarettes, but does like smokin' dividends.

This article was originally published as 10 Reasons You Should Buy This Stock Todayon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

A Fool Looks Back

There have been mixed signals on the state of the economy, but there are at least two interesting tidbits that hint that the consumer is back.

Cynics will argue that Microsoft's new operating system was going to be a hit, given the nasty aftertaste of Vista. Skeptics will argue that franchise video game titles have sold well during economic downturns. However, the one-two punch of record-setting good news this week can't be ignored.

The economy still has a way to go, but the upbeat signs are there if you look for them.

Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.

Until next week, I remain,

Rick Munarriz

This article was originally published as A Fool Looks Backon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

An Unprecedented Investment Opportunity

Here's reality: Hundreds of hotshot money managers and analysts convened at the Marriott Marquis in New York last fall to attend J.P. Morgan's annual Asia Pacific and Emerging Markets Equity Conference. My guarantee to you is that they weren't there because they're scared of investing in emerging-markets stocks.

But you very well might be ... and I can't necessarily blame you.

Some very scary numbers
China, India, Indonesia, Brazil ... what do these emerging markets have in common? They were all absolutely crushed last year. China was underwater to the tune of 60%, Indonesia and India 50%, and Brazil 40%.

It's been a tough and volatile year for emerging-markets investors, and those who naively came to believe (thanks to the 2003 to 2007 period) that emerging-markets investing was all about outsized gains are scurrying away with their tails between their legs.

This, however, is precisely the wrong time for that kind of reaction.

Take China, for example
The first session at the closed-door conference came courtesy of famed author, investor, and Princeton economist Burton Malkiel. His presentation, titled "Investment Strategies for the China Century," can be summarized as follows:

Those are his words, not mine, though I do agree. The question, of course, is how does the individual American investor take advantage of this unprecedented opportunity?

Your four options
If you're an American investor looking for maximum returns and minimum hassle, then you have four ways to buy China:

Each one of these approaches comes with its own set of pluses and minuses. Though the index fund is low-cost, for example, it will condemn your portfolio to holding nothing but enormous, bureaucratic, state-owned enterprises such as China Telecom . The actively managed fund might make more discerning stock picks, but it's also expensive -- and Malkiel's research showed that most actively managed China funds substantially underperform the index.

Can you pick your own stocks?
That leaves two options: Picking your own multinationals or picking your own Chinese stocks. In fact, Malkiel recommends you do both.

Of course, you'll probably feel more comfortable researching U.S. stocks that have a CEO who speaks your language (literally), that sell products familiar to you, and that release financials you're more likely to trust.

That's particularly so since Malkiel recommends that when you're picking Chinese stocks, you avoid the big state-owned enterprises and instead focus on small caps that are run by passionate entrepreneurs, rather than the cautious (and Communist) Chinese government. These stocks have more potential and more upside, and they're more likely to have been heretofore overlooked by institutional money -- so you might get a screaming bargain.

To do so, however, you need to know a thing or two about China. And at Motley Fool Global Gains , we'd like to help you with that.

Here's why
We've traveled to China twice over the past year, established a network of contacts, and specialize in finding and vetting promising Chinese small caps that we believe have the potential to be multibaggers many times over for many years. And we're hitting the road for India at the end of the month and plan to compare that country's top stocks with what we've found in China.

If you'd like to get the results of those comparisons, sign up to receive all of our insights from the field. They're free and all you have to do is tell us where to send them. Click hereto do just that.

This article was first published Sept. 12, 2008. It has been updated.

Tim Hanson does not own shares of any company mentioned. Wal-Mart is aMotley Fool Inside Value recommendation. The Fool has a disclosure policy .

This article was originally published as An Unprecedented Investment Opportunityon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

It's Finally Time to Buy These Stocks

Stay away from small-cap bank stocks.

It was nearly two years ago now that Tim first dished out that advice. Though they looked cheap at the time, writedowns were happening across the industry, making financial institutions nearly impossible to value. On top of that, the economy was showing signs of sputtering, with no resolution in sight.

What's changed
It's hard to believe, but the current economic downturn is two years old now -- and it's gone from bad to worse to (now) slightly less bad. Notwithstanding the rising tide in the market, stocks have gotten "cheaper" since then, writedowns have gotten bigger, and the federal government has thrown Hail Mary passes in the hopes of averting further crisis.

And while big financials such as Lehman, AIG (NYSE: AIG), Fannie and Freddie , and Citigroup (NYSE: C) have dominated the headlines, smaller financials have been hit just as hard. In fact, KeyCorp (NYSE: KEY) and Comerica (NYSE: CMA) have lost 83% and 48% of their value since this crisis began in late 2007!

All of this is to say, it's still not time to start buying small-cap banks.

It may, however, be time to start looking hard at something a little off the beaten path: small-cap value.

What's the difference?
Small-cap value and small-cap banks often get conflated -- and for good reason. As Brian noted last year, the Vanguard Small-Cap Value ETF (VBR), like most small-cap value indexes, has substantial exposure to small banks. For the quarter ended Sept. 30, small financial services companies accounted for 34% of VBR's holdings.

So while you don't want to buy small-cap banks, you do want to buy small-cap value net of banks because, as Mark Hulbert noted in a New York Timesarticle at the end of 2008, these historical outperformers"produce their most explosive gains right at the start of a bull market."

Indeed, Russell Investments recently released a report suggesting that "they could emerge as the frontrunners if the economy stages a recovery." True to form, over the past year, small-cap value has outperformed the S&P 500 by 10 percentage points.

Let us be clear
Nonetheless, neither we nor Mr. Hulbert are predicting that we're at the start of a prolonged bull market. Rather, we're noting that:

And thus: Now is a good time to start buying small-cap exposure for the long term.

After all, a little exposure to this market segment gives you the chance to take advantage of this historical trend and puts you in the position for significant outperformance whenever this bear market turns for good.

What next?
Mr. Hulbert's recommended small-cap value investment vehicle, while low-cost, is imperfect -- because he advised investors to "buy and hold an index fund benchmarked to the sector and to ride out the market's turbulence."

We see two main issues with that approach. First, as we mentioned previously, your run-of-the-mill small-cap value index has nearly one-third of its assets in financial companies -- a sector that has been and will continue to be rocked by government intervention, regulatory changes, and low interest rates.

Second, just as the SPDRs S&P-tracking fund is skewed toward the largest of companies, like $350 billion energy giant ExxonMobil (NYSE: XOM), small-cap value indexes are heavily weighted toward the larger likes of $3.5 billion SL Green Realty (NYSE: SLG), limiting the ability of smaller -- but perhaps better -- companies to have an effect on your returns.

Here's what we'd do
If you want to take advantage of this sector -- and we think you should -- then you ought to build your own diversified collection of superior small-cap value stocks that don't carry dangerous financial liabilities on their books.

That way, you can weight your portfolio toward high-quality businesses with entrepreneurial managers who treat their shareholders with respect rather than to either small-cap banks or the small-cap value stocks with the largest market caps, as passive index funds will do.

If that sounds appealing and you'd like some stock ideas and additional guidance on how to unearth the best in small-cap value, join our Motley Fool Hidden Gems service, which recently started building a new real-money small-cap portfolio.

You can see the team's real-money picks and position your portfolio to ride those "explosive gains" in small-cap value. We offer a free 30-day trial without obligation to subscribe -- just click hereto get on board today.

Already subscribed toHidden Gems ? Log in at the top of this page .

This article was first published June 6, 2009. It has been updated.

Neither Tim Hanson nor Brian Richards owns shares of any companies mentioned. The Motley Fool owns shares of the Vanguard Small-Cap Value ETF. The Motley Fool has a disclosure policy that has 19 minutes to spare before midnight.

This article was originally published as It's Finally Time to Buy These Stockson Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

Stocks That Keep Paying You Back

Before the market crash last year, investors were woefully underexposed to bonds. A 2008 survey from the Investment Company Institute revealed the scary truth:

Bond Portfolio Share

Investors < 40 years

Investors 40 to 60

Investors > 65 years

More than 50%

3%

4%

7%

31% to 50%

7%

7%

12%

11% to 30%

20%

28%

22%

1% to 10%

31%

25%

25%

0%

38%

35%

34%

Source: ICI.org.

Based on this data, then, it's no surprise that it's been a very rocky year for investors of all ages. To put this in some perspective, despite the eight month rally we've had, the S&P 500 still remains 30% off its October 2007 highs. Meanwhile, the aggregate U.S. bond market stayed positive -- and a lot less volatile.

Indeed, over the past 10 years, the S&P has posted negative returns while major bond indexes have delivered steadier -- not to mention positive-- growth.

Don't all jump at once
Data such as this makes it clear that investors need more fixed income in their portfolios -- and the nauseating stock market volatility, as well as a renewed hunger for income, seems to have been a wake-up call. Despite the recent market rally, the shift in investor funds toward bonds in 2009 has been nothing short of biblical:

Metric

Equity Funds

Bond Funds

Year-to-date inflows

($21.9 billion)

$306.0 billion

Source: ICI.org as of Nov. 19, 2009.

No, that's not a misprint.

But these new bond investors are taking on more risk than they might think.

"Junk" bond funds, which have a higher chance of default and thus have higher yields to compensate for the extra risk, saw $346 million of inflows the week ended Nov. 12 alone -- and $28.6 billion year-to-date, already surpassing the previous record set in 2003. Companies with junk bond ratings include Hovnanian Enterprises (NYSE: HOV) and Sprint Nextel (NYSE: S).

Sure, junk bonds deserve attention, but because they are issued by less stable companies, they aren't the safe haven investors imagine bonds to be.

Know the rules before you play
Jumping into bonds isn't a bad thing, of course, but investors do need to keep a few things in mind.

Consider another sandbox
All that being said, bonds are an essential part of any portfolio. But as with any investment, "price is what you pay, value is what you get."

The potential for higher interest rates and inflation down the road, together with tightening yield spreads, means bonds are less attractive today than they once were.

Instead, now's a great time to double down on dividend-paying stocks. While dividends are never guaranteed, dividend payouts can grow at a rate faster than inflation and have the added bonus of capital appreciation from the stock price.

But why now?
Right now, there are plenty of high-quality dividend-paying stocks, not only sporting yields near 10-year Treasuries, but also with plenty of cash to fund and grow their payouts. Here are just a few:

Company

Dividend Yield

Free Cash Flow
Payout Ratio

5-Year Dividend Growth Rate

Kraft Foods (NYSE: KFT)

4.2%

47%

9.3%

Honeywell (NYSE: HON)

3.1%

28%

9.5%

Nucor Corporation (NYSE: NUE)

3.3%

31%

44.8%

Paychex (Nasdaq: PAYX)

3.9%

74%

20.9%

Exelon (NYSE: EXC)

4.5%

37%

13.6%

Source: Capital IQ.

Each of these stocks has a long track record of rewarding shareholders with consistent and growing dividends and appears poised to keep doing so for some time.

While a 10-year Treasury will pay you a fixed 3.3% yield per year on your investment, the same investment in one of these stocks will likely have a larger annual payout by the end of those 10 years. That's why now is an intriguing time to consider dividend-paying stocks.

Finding the right mix
If the market volatility of the past year has made you reassess your risk tolerance and become a more conservative investor, that's great. It's important to remember, however, that bonds -- like any investment -- come with their own set of risks. Like stocks, they can fluctuate in price up to maturity. Balancing high-quality bonds with dividend stocks that keep paying you back is a solid approach to investing in an uncertain market.

Good companies with well-covered dividend payouts are exactly what James Early looks for at our Motley Fool Income Investor service -- and he's finding plenty these days. If you'd like to see what the team is recommending now, consider a 30-day free trial. You'll also see all of the past recommendations and the best bets for new money now. Just click hereto get started. There's no obligation to subscribe.

Already a member ofIncome Investor ? Log in at the top of this page .

This article was originally published on September 18, 2009. It has been updated.

Motley Fool Pro analyst Todd Wenning would like to recognize "The Bar-BQ Ranch" in Harrisonburg, Virginia, for its excellent hush puppies. He does not own shares of any company mentioned. Paychex and Sprint Nextel areMotley Fool Inside Value selections. Paychex is also anIncome Investor recommendation. The Fool has a disclosure policy .

This article was originally published as Stocks That Keep Paying You Backon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

The Fool's Look Ahead

Monday
It may be a short trading week, but plenty of big companies will deliver their quarterly results. Hewlett-Packard (NYSE: HPQ), Tyson Foods (NYSE: TSN), and Campbell Soup (NYSE: CPB) all report on Monday. Two of those three giants may very well have products on your Thanksgiving table.

Come to think of it, nothing goes down with a hearty feast like an HP laptop on the table.

Tuesday
We may as well stick to the Thanksgiving dining feast. Hormel (NYSE: HRL) and Heinz (NYSE: HNZ) report on Tuesday. Spam for Thanksgiving? Well, Hormel certainly does make the oft-lampooned canned meat product, but it's also the company behind deli hams and Jennie-O turkey products.

Analysts see Hormel and Heinz going in different directions. Wall Street expects Heinz's profit to slip to $0.70 a share, after the company posted net income of $0.87 a share a year earlier. For Hormel, the pros see earnings climbing 36% to $0.68 a share.

If the Thanksgiving meal happens to take place during one of the three NFL games, there's no need to get cranberry sauce on your shirt as you run from the dining room to the living room. TiVo (Nasdaq: TIVO) is there to save the day.

TiVo also will post its third-quarter financials Tuesday. Analysts see a small deficit for the quarter, though it would be the company's widest loss in nearly two years.

Wednesday
Heaven help you if you ever decide to serve a bejeweled turkey, but it's the best segue I can think of to get to Wednesday's earnings release from Tiffany (NYSE: TIF). The upscale jeweler should provide some healthy insight into the luxury shopping trends for the holiday season.

Thursday
Happy Thanksgiving! The market is closed in observation of the holiday. You would probably be too full to trade anyway.

Friday
Black Friday kicks off the start of the holiday shopping season. Between shoppers getting up at the crack of dawn to land door-buster deals and the inevitable numbers about how shoppers are spending this year, the circus begins.

Until next week, I remain,

Rick Munarriz

This article was originally published as The Fool's Look Aheadon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

What to Do When the Dow Hits 7,500 Again

Talk about ironic. I originally submitted this article to my editor more than a year ago, after the Dow had fallen "all the way" to 11,500 -- but it didn't get published. And now, here we are, happy to be "all the way" back to 10,000 ...

My original plan was to take you back to 1996 -- when the Dow surpassed the 6,000 mark for the first time ever -- to a Charlie Rose roundtablethat included Jim Cramer and Motley Fool co-founders David and Tom Gardner.

Another crazy call by Cramer
Back then, Cramer argued that the Dow would soar all the way to 7,500 -- despite the fact that it had already more than doubled in just five years and shares of behemoths like American Express (NYSE: AXP) and Alcoa (NYSE: AA) had risen more than 100% from their 1991 lows.

Meanwhile, David and Tom took a much different approach, telling viewers, "We don't care where the market is headed." They explained that they were focused on finding the best eight or nine stocks to grow your wealth over the long haul. Basically, they searched for stocks that:

My article went on to show how, early on, this approach led them to America Online, Amazon.com , and eBay , among others -- and landed them on the covers of everything from Fortuneto Newsweek. But I also thought it fair to point out that it was hard notto get rich in that market.

After all, Cramer was right on the money. The Dow soared to far more than 9,000 in 1998, and reached a whopping 11,500 less than two years after that -- which is exactly where it stood on Aug. 29, 2008, when I submitted my article.

Could my timing be any worse?
Sure, we were in the middle of a fierce bear market -- but I pointed out that of the 24 stocks that David and Tom recommended to their Motley Fool Stock Advisor subscribers during the last bear market ...

I even added, "I bring this up merely to illustrate that despite what all the talking heads on TV are telling you, you absolutely should be buying great companies right now -- while they are still selling at massive discounts."

I'd almost jokingly insinuated that the Dow could drop to 7,500 ... and then, within six weeks, we were a mere 200 points from seeing it do just that.

How quickly we forget
Since March, we have seen one of the most historic rebounds in market history, and witnessed shares of everything from Genworth Financial (NYSE: GNW) to Human Genome Sciences (Nasdaq: HGSI) to Freeport-McMoRan (NYSE: FCX) soar along an almost unprecedented trajectory.

Now -- just like back in 1996 -- most investors are spending their time debating whether the next thousand-point move will be up or down.

While that's certainly an interesting topic of conversation, I'm going to instead suggest that you think about some advice that Tom Gardner recently gave us at a companywide "huddle."

How you can turn losses into a huge win
Tom pointed out that when things are going well, most of us spend all of our time high-fiving and celebrating. When things go sour, we turn to sulking, worrying, and even panicking.

Meanwhile, when the going gets tough for the toughest, smartest, and most successful people out there ... they learn from it. And that's what sets them apart.

Case in point: Benjamin Graham
He went bankrupt three times as an investor. But each time, he documented and studied his failures, and he was eventually able to impart this investment wisdom to countless others -- including Warren Buffett, who in turn learned from his own mistakes and failures.

Early in Buffett's career, he mistakenly believed he could save a failing textile mill. After being forced to liquidate its textile operations, Buffett learned to pay up for quality. He turned that failing company into a $140 billion legend.

Another great example is Pixar's John Lasseter. After he graduated from college, Disney (NYSE: DIS) hired him to captain its Jungle Cruise ride at Disneyland. Later, the company gave him a shot at being an animator, and he quickly recognized the ability of new computer technologies to revolutionize animation.

But Disney was so unimpressed with his first feature that it fired him on the spot. So Lasseter went back to the drawing board. After fine-tuning his process, he moved on to the company that would become Pixar, where he's won two Academy Awards and churned out a string of blockbuster hits that included Toy Story, A Bug's Life, and Cars.

Oh, and let's not forget -- he and Steve Jobs later sold Pixar to Disney for a cool $7.4 billion.

Now it's your turn
At the end of last August, I never would have imagined that we would really see the Dow hit 7,500 -- much less almost hit 6,500. Similarly, in March, I never would have imagined we'd be back to 10,000 so quickly.

But now I know that anything is possible. And I think that rather than celebrating the market's recent run-up, or trying to guess where it's going next, the best thing we can do is focus on learning from our past mistakes, so that we can make better investments going forward.

I've already learned that companies like wireless broadband provider Clearwire (Nasdaq: CLWR) -- which bleed cash quarter after quarter, and are years away from profitability -- may not be the best places for my money, no matter how intriguing their stories are.

I've also learned that I should avoid investing in companies with business models that are a bit too complex for me to fully understand. That's why I probably won't be buying shares of any financials anytime soon -- no matter how intriguing they look.

Now, I challenge you to use the comments function below to tell all of us what you've learned over the past year, and how you will use that information to make yourself a better investor. Feel free to chime in with stocks you think we should take a look at -- or avoid altogether -- as well.

And if you're interested in discovering which stocks longtime investors like Tom and David Gardner are recommending, you can always take a free 30-day trial of their Motley Fool Stock Advisor service.

You'll get in-depth analysis of every stock they've recommended, including their two top stocks for new money now.

Click herefor more information. There is no obligation to subscribe.

Already aStock Advisor member? Log in at the top of this page .

This article was first published Oct. 27, 2008. It has been updated.

Austin Edwards owns shares of Freeport-McMoRan and Clearwire. Amazon.com, eBay, and Disney areStock Advisor picks. Disney is also anInside Value recommendation, along with American Express.Motley Fool Options has recommended a bull call spread on eBay. The Motley Fool has a disclosure policy .

This article was originally published as What to Do When the Dow Hits 7,500 Againon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.