The Long Run: Four Candidates for New Stalwarts

Roget's Thesaurus defines "stalwart" as "capable of exerting considerable effort or of withstanding considerable stress or hardship." According to Webster's, its Old English precedent translates to serviceable, and probably originally meant "worth stealing."

Peter Lynch didn't have etymology in mind when he discussed "stalwart stocks" in the 1980s, but his phrase is apt in all its meanings. Given the current market, individual investors might want to get associated with stalwart stocks as well.

Stalwarts, according to the former Fidelity Magellan skipper, are bigger companies that are still able to post annual growth rates around 10% to 12%. These stocks tend to offer downside protection during recessions. The key to a decent return is buying them when they are cheap -- "worth stealing." They might not double, but you can aim for a double-digit return over a six-month to two-year period.

"These aren't the blow-out stocks," said David Dreman, the value-conscious manager of the (KDHCX)Scudder Dreman High Return Equity fund. "In a market waiting for news, the Iraq overlay drowns out most themes -- it's not much of a value market or a growth market. If you find solid companies with good finances and a decent yield, that's a better place to be than money market funds."

In the 1980s, Lynch included among his stalwarts Coca-Cola(KO), Procter & Gamble(PG), Colgate-Palmolive(CL), McDonald's(MCD) and Bristol-Myers(BMY). Some of the old standards -- McDonald's, especially -- have many red flags these days. Others -- such as Colgate-Palmolive -- aren't that cheap anymore.

What should investors look for when seeking stalwarts for 2003? "You should look for better-than-average businesses at a below-average price," said Donald Yacktman, manager of the (YACKX)Yacktman fund.