Monday, February 14, 2011

Barron's: ...And the Award Goes to Apple!

From Barron's latest ranking of the The World's Most Respected Companies.

Here's the top 10:
1 Apple (AAPL)
2 Amazon (AMZN)
3 Berkshire Hathaway (BRKa)
4 IBM (IBM)
5 McDonald's (MCD)
6 Google (GOOG)
7 3M (MMM)
8 Coca-Cola (KO)
9 Pepsi (PEP)
10 Procter & Gamble (PG)

The list of all 100 companies is here.

Among the companies that had the biggest drop in the rankings over the past year was Johnson & Johnson (JNJ).

With all the quality control issues at Johnson & Johnson the stock has remained inexpensive (some would say for good reason). There's no question the problems have done some reputation damage to the franchise.

It may not be completely clear just how extensive that damage will become but, in order to buy a very good franchise at a discount, you rarely have the luxury of waiting for the dust to settle. At current prices, unless the problems become materially worse I still like Johnson & Johnson for the long run even if I have to deal with some ugly headlines (and prices quoted by Mr. Market) for a few years. 

"The best thing that happens to us is when a great company gets into temporary trouble... We want to buy them when they're on the operating table." - Warren Buffett in Businessweek

Among the top 10, only Amazon stands out as a business that is not at all cheap at 75x trailing earnings and 59x forward earnings. The other 9 may not be cheap but at least don't seem plainly overvalued at current market prices.

Check out the full Barron's article.

Adam

Long positions in AAPL, BRKb, GOOG, KO, PEP, PG, and JNJ
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