6 Stocks that Outperformed the Dow in 2011
This Baby Boomer Stock Even Beat McDonald's
My parents, Jerry and Darlene, have been married for over 40 years.
They both recently retired in 2009.
My father was a union carpenter for over 30 years. My mother spent nearly two decades working for the Boy Scouts of America.
When they retired, they were given lump sum payouts from their retirement plans.
It wasn’t a fortune, but if properly structured, it would comfortably last them for the rest of their lives.
Having been through two financial crises in 2008 and 2009, I didn’t want their retirement funds in just anybody’s hands. So I helped them.
Prior to 2008 and 2009, I had the bulk of their money out of the market and into cash.
But in 2011, we started looking for yield...
The first stock they purchased was Pfizer.
Pfizer is was one of the largest pharmaceutical companies in the world, with some of the best drugs on the market in Lipitor and Viagra. Both of these drugs target a significant market: the baby boomers.
The baby boomer generation is going to have a major impact on the economy — especially health care.
Nearly 80 million strong, baby boomers are retiring at a rate of 10,000 per day. And that will be 10,000 per day for the next 20 years.
Pfizer has a market cap of about $170 million. It does $68 billion in annual sales, has $29 billion in cash in the bank, and its stock is cheap. Its current forward P/E ratio is 9.
Maybe more importantly, its current dividend yield is 3.7% with a trailing five-year dividend yield of 4.7%.
This was a great investment. Pfizer’s stock finished 2011 up 22%.
The next stock they purchased was Verizon.
Peter Lynch says to buy stocks that you know. Both my parents have smartphones and use Verizon as their service provider.
Verizon is one of the largest communication providers in the world with almost 300 million customers. That’s nearly the population of the United States.
This stock is the epitome of safety.
Verizon’s market cap is roughly $115 billion with over $108 billion in annual sales. The stock pays about a 5% dividend. So every quarter, my folks received a decent dividend check in the mail.
But it gets better...
Verizon finished 2011 up 11%.
So not only did my parents receive a steady income stream in the form of dividend checks, but they also enjoyed capital appreciation.
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They also purchased Home Depot.
Home Depot was tough to stomach during the summer months as it crashed in late July/early August. But the stock rebounded strongly.
We chose Home Depot because it’s still larger than its nearest competitor, Lowe’s. And as a result, it has a better safety profile.
Home Depot currently trades at a market cap of $65 billion on annual sales of $69 billion.
HD finished the year up 19% and paid a 2% dividend in 2011.
The last stock my folks bought was Intel.
The tech giant was coming off a lackluster 2010. It was a bit of a gamble, but we wanted to lock in the yield — which, at the time, was 4%.
Intel finished the year up 19%.
All four of these stocks dramatically outperformed the Dow for the year, which ended 2011 up just shy of 6%.
But that’s nothing compared to what McDonald’s and GNC achieved in 2011...
McDonald’s was the best-performing stock in the Dow for 2011, posting a gain of 31% for the year:
In fact, while the broader markets were experiencing gut-wrenching volatility, McDonald’s stock was rallying to new record highs.
But even mighty McDonald’s took a backseat to supplement retailer GNC.
GNC finished the year up 83%!
GNC IPO’d in April, and they never looked back...
And this performance underscores a major trend that will be here for the next two decades.
GNC reported strong supplement sales to the baby boomer demographic. GNC stores are popping up everywhere to cater to millions of customers looking for better health.
To make money in 2012, you have to go where the market is...
Right now, it’s baby boomers and energy.
The original bull on America,
Brian is a founding member and President of Angel Publishing and investment director for the income and dividend newsletter The Wealth Advisory. He writes about general investment strategies for Wealth Daily and Energy & Capital. Known as the "original bull on America," Brian is also the author of the 2008 book, Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century. In addition to writing about the economy, investments and politics, Brian is also a frequent guest on CNBC, Bloomberg, Fox and countless radio shows. For more on Brian, take a look at his editor's page.