Household-Name Stocks Get Day in Sun
The stock market is starting to perk up, and for a good reason: Stocks are more reasonably priced than at any time in several years, especially shares of some of the economy's leading companies. And this comes at a time when alternatives such as real estate, commodities and riskier types of bonds appear increasingly expensive.</br></br>The best bargains in the stock market, according to some analysts and investors: High-quality, household names such as J.P. Morgan Chase, McDonald's, General Electric, Wal-Mart Stores, Procter & Gamble, J.C. Penney, Dow Chemical and Lockheed Martin.</br></br>These companies, all with commanding market shares, have traditionally fetched higher stock prices in relation to their earnings than many smaller rivals. Not any more. All these stocks are relative bargains, say the bulls, who suggest it may be time for investors to boost their allocation to the bluest of the blue-chip stocks -- some of them titans of industry, others with familiar names that may be found in your pantry, refrigerator, closet, checkbook or medicine cabinet. Of course, these inexpensive stocks could get even cheaper if the economy hits a wall next year.</br></br>"The highest-quality stocks will do the best" in the months ahead, since they are the least expensive and should grow earnings at a better clip as the economy slows and the dollar weakens, says Jack Ablin, chief investment officer at Harris Private Bank in Chicago. He has been buying shares of GE and Procter & Gamble for his firm's account. He also recommends an exchange-traded iShares fund that tracks 100 large companies and trades under the symbol OEF.</br></br>One piece of evidence cited by Mr. Ablin: the Standard & Poor's 500- stock index, which tracks the largest 500 stocks, trades at a price just above 15 times next year's expected earnings. The S&P 100, which contains the largest companies, trades a tad lower. While those figures are about in line with historical averages, they're down sharply from price/earnings ratios of more than 30 in the late 1990s. And they look quite reasonable if interest rates and inflation don't rise too much from current levels.