2006-05-11

Stock Analysis of Multiple Companies

In an attempt to better understand the behaviors of companies and markets. I have analyzed four different companies over the past twelve months (June 2005 – July 2006). Those companies are Google (GOOG), Walt Disney (DIS), Altria Group (MO), and Anheuser-Busch (BUD).

To better level the playing field, I have put these companies through two different tests: (1) should they receive a large loan, (2) should they receive stock purchases at the current time (May 2006). I was surprised by many of the results and for the most part, enjoyed watching these companies and analyzing their decisions over the past year. So, without further introduction I give you our first contestant: Google!

Google - GOOG
http://sec.gov/Archives/edgar/data/1288776/000119312505225524/d10q.htm

Google (GOOG) is a fascinating company. Over the past year, Google has made significant market ventures and acquisitions. Their reputation for inventing, purchasing, or simply supporting innovative ideas within the field of information technology is fast becoming legend. Since it first went public, Google has out performed many of its competitors on many levels.

Google reached its peak performance over the course of the last twelve months in January of this calendar year (2006). At that time it was predicted by some analysts that it would continue to rise to around $600. Instead, Google’s stock fell dramatically to $340. It has slowly been making the rise again, but has exhibited some fluctuation. However, it has been holding slightly stable over the past month around $380.

Google has a very low debt to equity ratio and absolutely NO long term debt. In fact, the last time it reported having long term debt was in 2002 at $6.5 million. The facts make it a very good choice as a recipient of a large loan. Although as far as Google is concerned, if they were to want more cash they need only to sell more stock.

On that note, Google’s stock price is pretty high right now, so stock buyers should wait for a drop before buying. Present owners of stock are recommended to hold for now until the stock reaches about $500. It would NOT be wise to sell any owned Google stock at the present time, unless of course it was purchased at a significantly lower price.

Overall, Google is a very strong company. It has a firm and confident following and an unusually high reputation as far as internet companies go. Personally, I enjoy following Google’s actions – both in financial accounts and IT ideas – but my enjoyment remains solely as curiosity. I would not feel comfortable holding stock or loaning money to Google, mainly because when you ride the “cutting edge” you’re bound to get sliced at some point. While I may do that with IT, I do not do it with my finances.

Disney - DIS
http://sec.gov/Archives/edgar/data/1001039/000095012905008038/v11637e10vq.htm

The Walt Disney Company (DIS) is another great company, although the past year has not been the best for Disney. It hit a “major” dip in stock price in November of 2005. I put quotation marks around “major” because when you look closely at their chart you realize that the dip is only a few dollars. In terms of Disney, though, that is pretty big drop in terms of how stable they normally are.

Right now, Disney is on the rise and most market analysts are calling it “bullish”, meaning it’s charging forward with power. I think their rise is due entirely to the heavy push they are putting into new stores and restaurants. The media business is very risky these days and – as we’re about to see – capital is always good to have when you’re a company like Disney.

Disney has significantly higher assets than liabilities and seems to keep that ratio reasonably stable. Its return on equity is only about 9%, which makes it somewhat less enticing to loan to than a company like Google, but you have to take its stability and longevity into account as well when considering a loan.

As far as stock investment goes, Disney is on the rise and its twelve month target price is about $35. This makes it a perfect time to buy stock in Disney. Especially since it is such a safe investment with how stable it is. If you own Disney, keep it that way. Just remember this advice: “As long as, Mickey Mouse still has ears and a tail, you’ll be riding that California based stock wave for a while.”

Disney is not very entertaining to watch and learn about. The company has had a very long and healthy life and it’s easy to say that they’ll keep on living. Personally, I found it to be on the opposite side of the scale from Google. Rather than being overly cutting edge, Disney is rather drab. Watching its financials is like watching paint dry. I might like to buy stock in Disney, but that would only be if I wanted to have some balance and easy predictability in my portfolio.

Altria - MO
http://sec.gov/Archives/edgar/data/764180/000119312505221528/d10q.htm

Now it’s time to talk about Altria Group (MO)! By far, Altria is my favorite company listed here. I’ve been watching Altria since High School (over 5 years ago). At that time it was called Phillip Morris and was well known as the cigarette juggernaut of the nation. For the sake of this discussion, we’ll stay focused on the past year.

Altria is a very stable company. It has had very consistent growth over the past twelve months. Its return on equity is a very high 32.1%. This company would definitely be a good company to loan money to. Just hope that they ask you because they definitely don’t need the loan!

As far as stock goes, Altria has a very reasonable price. It’s recommended by analysts that you buy stock in this company. You can expect very stable and gradual growth. If owned, hold your stock. Altria is a great long term investment.

I decided to save the best parts of Altria for last. Altria Group is of course a reformed name for a reformed company. Too many people had a negative view of this cigarette pushing gorilla, so Phillip Morris changed its name and its image. When the lawsuits started coming in, Altria not only paid out the money required, but they made a great decision social and fiscally… Altria began products and services to aid the unfortunates who had succumbed to the addiction associated with their main cash cow. Now, not only does Altria get them on the way in, it gets them on the way out. As far as business goes, this was genius. Other cigarette companies have began to wither and die, Altria is still going strong. As long as nicotine is addictive, Altria’s stock will be on the rise.

ANHEUSER-BUSCH – BUD
http://sec.gov/Archives/edgar/data/310569/000106880005000647/0001068800-05-000647-index.htm

Anheuser-Busch (BUD) caught me by surprise. I expected Bud’s financials to look like a hybrid of Altria and Disney. Instead I found that they are much more impressive. Bud doesn’t have much fluctuation in its stock. Not at all surprising, it generally hits its highs in the summer.

Bud’s return on equity is an unbelievable 61.2% – literally unbelievable, I checked four different sources because I didn’t believe what I saw. This would be an excellent company to loan to. It is very predictable and the interest off a loan to them would be very comfortable.

Stock prices are high right now, as it is starting summer. Wait until after summer to buy this stock. Hold Bud stock if you own it through summer and sell at its summer peak.

Bud was like having a stealth fighter land behind me on the highway at night, I never saw it coming. They’re very stable yet have a predictable rise and fall that one could ride gaining a great profit. I’m looking to buy Bud very soon after the fall month drop and will be watching it for a while into the future.

CONCLUDING REMARKS

These stocks were varied and impressive. I’ve always liked Altria mainly because there’s just something comforting about knowing that a company’s customers are almost physically incapable of abandoning their product. And since Altria now owns the largest number of anti-tobacco arrangements as well, that makes them all the more powerful. Ah yes, and don’t forget about their cheese too! (Altria owns Kraft as well.)

Bud was definitely a surprise. A very welcomed one though. I’m hoping to tweak my portfolio enough over the summer to ride Bud’s 2007 wave to some nice financial profit. Disney is dull, but stable. If I were to buy Google, I’d want a company like Disney to offset the risk.

As far as the battle of the loans goes, give it to Altria if they’ll take it. Ask for a high interest rate too! It’s unlikely they’ll bite, so you may have to solicit my second choice of Google. Perhaps you can tell Google to use your loan for the purchase of an up and coming IT idea that would make a nice trophy for their lab wall.

When it comes to stock purchases, I’m looking to grab the addictive substances companies. Especially since I neither smoke nor drink, so it’s all income and no expenses! As a general recommendation though, I’d say the fastest profit is in Google, however its stock price is far too high. The easiest buy would be Bud, since even the most amateur investor could discern the buy and sell cycles.

I hope this article has been both entertaining and informative. Now, if you’ll excuse me, I have some stock to buy! BUD-WEI-SER!

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