If you’re trying to pick a stock to purchase in February, just throw a dart at a list of the S&P 100 and you’ll likely do well. More than 50 of the companies on the index are currently trading at more than 20% off their 52 week high and another 40 or so are at least 10% off that mark. If capital growth is your goal, it’s hard to go wrong. But we want more. While it might sound like a broken record, we are, for the third month in a row, recommending International Business Machines Corp. (NYSE: IBM). Before we get to the reasons, let’s look at three other front-runners.
When all the scores had been assigned, Potash Corporation of Saskatchewan Inc. was in our top 3. It’s 55% off the 52 week high with a low P/E of 10.05 and they’re still profitable despite the collapse of potash prices. That collapse, however brings with it some uncertainty about their future price and we’d rather buy them on their way up than down. There are also some rumors about them cutting their jaw-dropping 10% dividend. Mind you, even if they slashed it by half you’d still earn a respectable 5%. If that dividend outweighs the price risk for you, buy them!
National Oilwell Varco (NYSE: NOV) is also a good-looking stock. They are 49% off the 52 week high with P/E of 10.57 and EPS of 3.29. This company designs and builds equipment for oil and gas drilling so they enjoy some protection from the oil price market. Still, the current uncertainty in oil prices makes this stock a little uncertain also. Of course, we all know that oil prices will recover and that means drilling will continue and eventually expand also. Their 6.2% dividend certainly makes them rewarding in the meantime.
Finally, Caterpillar (NYSE: CAT). This company was on our radar back in December but was nudged out by IBM. Well, they still look good. At 35% off the 52 week high, and with a P/E of 14.39 and EPS of 4.82 they continue to offer a juicy dividend of 5.3%. Caterpillar has its work cut out for it as low oil prices and sagging commodity prices mean less demand for their equipment. Nevertheless, they are a profitable company at a good price. Again, we prefer to buy on the way up but that dividend might make them attractive for some investors in the meantime.
To be honest, we’d be happy buying and holding any of these three, but we’re settling on IBM again. There are some mixed reviews about the near future of the company and time will undoubtedly prove half of those analysts right. For us, we want a solid company at a good price that pays a nice dividend. This month, that’s IBM. They are 31% below the 52 week high and, while they are still losing ground, we’re willing to ignore that and increase our position because the P/E and EPS are both so great at 9.5 and 14.8, respectively. They have a long history of rewarding investors with a steady (and growing) dividend which is currently at 4.3%.
Seems like the current market has something for every investor so you should find it relatively easy to pick a stock this month. We thought we’d give you a few options because, while the scores say one thing, it never hurts to consider some outside factors that influence prices. Remember, the name of the game here is buy and hold so no matter which of the four you go with, a few years from now you won’t have any regrets.
CAT is trading 32% below its 52 week high and the dividend is 4.3%, significantly higher than IBM’s 3.8%, making it another attractive choice.