Where to Find the Cheapest, Safest Stocks

Now is the time to buy blue chips.

 

The volatility of the last three months has made trading a real challenge. Today, the S&P 500 is roughly at the same level as it was in the middle of May. However, between then and now, it's been a real roller coaster.
 

 

This is not a market for trading. This is a market for investing – for taking advantage of the market volatility to buy high-quality, profitable businesses on the cheap. And the bigger, the better.

 

That's because, typically, blue chips are more stable during market volatility. In fact, several members of the Dow Jones Industrial Average recently hit new highs: Proctor & Gamble, AT&T, and Coke. These three are getting expensive... but there are still plenty of cheap blue chips to choose from.

 

Large-cap insiders have taken note and are gobbling up stock. For the week ended September 10, large-cap insiders accounted for more than 70% of insider buying. The following week, they accounted for 66% of the total insider purchases.

 

And the Dow Jones Industrial Average is still trading for only 10 times cash flow: wonderfully low. Have a look at the Dow's 10 cheapest companies...

 

Company	Symbol	P/E	Yield
AIG	AIG	11	1.2%
Citigroup	C	11	4.7%
JPMorgan	JPM	10	3.3%
General Motors	GM	12	2.9%
ExxonMobil	XOM	13	1.5%
Home Depot	HD	13	2.7%
Alcoa	AA	15	1.8%
DuPont	DD	14	3.0%
Pfizer	PFE	10	4.8%
Wal-Mart	WMT	15	2.0%

 

Many of these companies are in the holdings of the greatest investors on earth. Eddie Lampert owns Citigroup. Warren Buffett owns Home Depot and Wal-Mart. George Soros owns AIG, Home Depot, and ExxonMobil.

 

To some degree, these investors have to buy large companies. They manage massive amounts of money. However, they only put their money in undervalued, extremely profitable firms.

 

So, if you've been sitting on your cash since the market started going bipolar, now may be a great time to buy big. And these companies are an excellent place to start. Not only are they owned by some of the world's best investors, but they're cheap, too.

 

Good trading,

 

Graham

• Two Reasons to Be Cautious
  By Jeff Clark Thursday, September 27, 2007
  
• A Flood of Money is Headed Toward Oil Investors
  By Matt Badiali Wednesday, September 26, 2007
  
• Buyer Beware
  By Jeff Clark Tuesday, September 25, 2007
  
• The Best Ways to Invest in Austin Real Estate, Part II
  By Graham Summers Monday, September 24, 2007
  
• Weekend Edition
  By Porter Stansberry Saturday, September 22, 2007