Boring Stocks

Peter Lynch often talked about finding boring stocks in boring sectors with unsexy names. The reason was these tended to be overlooked stocks and therefore were value plays. However, boring stocks often produce products that, while boring, are essential in many different parts of the economy. Things like parts manufacturers and distributors are one great example.
You want these boring stocks for your retirement portfolio, because they are also likely to have solid cash flow. That not only means the company is stable, but likely to pay a dividend. I came across three names recently while talking to, of all people, my own father. He mentioned three stocks that he holds, or has held, and all of them are names I’ve known since I was a boy.
They’re still around. That says something.
The first selection is Abbott Laboratories (NYSE:ABT), and Dad has held this for as long as I can remember. The company has paid a dividend since it went public some 33 years ago and has increased it 7% to 10% every year without fail. The stock’s forward P/E is about 17, and it has a projected long-term growth rate of 10.6%. Frankly, the premium is deserved considering the billions in free cash flow the company generates, its never-ending slate of drugs coming to the market, and the 2.1% yield factored in. It’s a classic stock that deserves a place in the core portfolio. Yeah, it’s a bit pricey here, but for a retirement portfolio with a 20 year time horizon, relative value is not as important to me.
I remember that my first digital watch was made by Texas Instruments (NYSE:TXN). Its red digital numbers would glow off its black face. I even remember buying the stock as part of our sixth-grade stock-buying competition in math class. Would that I’d actually purchased the stock then — I’d be sitting on a 24-bagger.
I’m still happy to scoop it up today. Texas Instruments just keeps plugging along, with EPS growth of 25% this year and 14% next year. Long term EPS growth is pegged at 10% but I think that’s low. That’s because TXN is more than it ever was before. It handles high volume analog and logic products for cars, high performance analog products for all kinds of tech uses, and makes embedded processors across a range of sectors. It just does so much in the area of what I call ‘technology infrastructure”. Tech continues to evolve, and TXN not only evolves with it, but remains to serve the analog market.
Although its long-term growth prospects only fit that of a stalwart at 7.5%, it again has a rich dividend history and one that includes an increase year after year. Free cash flow is remarkably consistent, with TXN generating almost $2.9 billion each and every year.
Readers of my column know I harp on energy all the time as a forever hold, and that isn’t going to change…ever. There are so many great plays in energy — from oil producers to pipeline LPs to infrastructure plays to explorers — that it’s hard to choose just one company. Frankly, this area is a toss-up. However, since we’re talking about dividends for retirement, I’m going to go with the 3.6% yield of Conoco-Philips (NYSE:COP). There’s nothing wrong with its competitors, but Conoco has the highest and safest yield of the big producers.
Lawrence Meyers does not presently own any of the stocks mentioned.

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