Investment ideas are all around us, not just in the news or the results from a screener. For example, let’s assume companies that can afford to have their name and logo decaled on cars from the top teams in NASCAR would have to be stable, financially sound companies. Here’s what a portfolio made up of sponsors from the 10 teams at the top of NASCAR’s Sprint Cup series might look like.
| Standing | Team No. and Driver | Sponsor* |
|---|---|---|
| 1 | 48 Jimmie Johnson | Lowe’s Companies, Inc. (NYSE:LOW) |
| 2 | 15 Clint Bowyer | 5-Hour Energy (privately held) |
| 3 | 99 Carl Edwards | Fastenal |
| 4 | 29 Kevin Harvick | Budweiser, an Anheuser-Busch InBev NV (ADR) (NYSE:BUD) brand |
| 5 | 18 Kyle Busch | M&Ms, a Mars (privately held) brand |
| 6 | 20 Matt Kenseth | Dollar General |
| 7 | 88 Dale Earnhardt Jr. | Diet Mountain Dew, a PepsiCo, Inc. (NYSE:PEP) brand |
| 8 | 5 Kasey Kahne | Farmers Insurance, a Zurich Insurance Group company |
| 9 | 16 Greg Biffle | 3M Co (NYSE:MMM) |
| 10 | 22 Joey Logano | Pennzoil, a Royal Dutch Shell brand |
Sources: NASCAR.com and driver or team websites.
*Some teams have multiple sponsorship deals over the course of the season.
That’s seven investment candidates that trade on major exchanges in the United States. Here are key valuation stats and summaries for the seven.
| Stock | Sector | PE (TTM) | Estimated 5-Year Growth Rate | CAPS Rating (out of Five Stars) |
|---|---|---|---|---|
| Lowe’s | Consumer Discretionary | 23.8 | 17.6% | **** |
| Fastenal | Industrials | 30.2 | 16% | **** |
| Anheuser-Busch | Consumer Staples | 11.7 | 7.1% | **** |
| Dollar General | Consumer Discretionary | 18.8 | 15.2% | *** |
| PepsiCo | Consumer Staples | 18.7 | 8.3% | **** |
| 3M | Industrials | 17.7 | 10.7% | ***** |
| Royal Dutch Shell | Energy | 8.7 | 0.7% | ***** |
Source: Yahoo! Financial and The Motley Fool. PE(ttm) = trailing 12 months price-to-earnings ratio.
Lowe’s Companies, Inc. (NYSE:LOW) stock price has been on a tear over the past year, climbing more than 60%. The current price is a little rich, but it’s justified if the company meets or beats analyst growth estimates. Rising interest rates are making it more expensive to buy or renovate homes, and that makes for some headwinds going forward.
Fastenal is probably the least known of the companies on the list. As you may have guessed, it makes fasteners and other industrial supplies. It’s been a bit of a roller coaster ride for investors over the past year and is only up a percent or two. At 30 times earnings, it’s valued at about a 50% premium to the S&P 500 index. The pick-up in the economy will need to gather some more steam to boost Fastenal’s earnings enough to justify that price.
Sportw fans are a natural market for beer companies, and Anheuser-Busch InBev NV (ADR) (NYSE:BUD) is no stranger to sponsorship deals or advertising in sports. The stock is up about 12% over the past year, underperforming the broad market by a few points. It sells at a nice discount to the market and has decent growth estimates. It’s also a safe bet that lots of its products will be consumed by fans watching a NASCAR race or [insert your favorite sport here].
The struggling upturn in the economy hasn’t been enough to move Dollar General’s customers to upscale stores. The stock is up about 12% over the past year, and the company has solid growth rate estimates and is valued in line with the broad market.
PepsiCo, Inc. (NYSE:PEP) is up about 16% over the past year, just edging out the S&P 500 index’s growth. Nearly 19 times earnings for a moderate growth rate strikes me as at least fully valued. Dividend hounds would argue that Pepsi’s long history of raising its payout every year justifies a premium price. And since I’m a dividend hound, I’d agree.
3M Co (NYSE:MMM) stock is up more than 20% the past 12 months, smoking the broad market. An improving economy, even a sluggish one, should offer opportunities for 3M Co (NYSE:MMM). This is another company with a long history of annual dividend growth, and it looks fairly valued at a slight discount to the market.
