BOSTON (TheStreet) -- Cisco (CSCO), Johnson & Johnson (JNJ) and Lowe's (LOW) are stocks that offer investors a triple treat -- they're the best in their industry, carry little debt compared with cash and are trading at discounts, says Russell Croft, a fund manager at Croft Leominster.
"We've been really warming to the quality of the old blue-chip companies where you're not paying any premium for the company in this market," Croft says. "A lot of these companies will be able to increase dividends, buy back stock, and many times buy growth through mergers and acquisitions."
|Russell Croft, manager of the Croft Value Fund|
Based in Baltimore, Croft Leominster has $800 million in assets under management, with $325 million in the Croft Value Fund (CLVFX). Croft has been a co-portfolio manager of the Croft Value Fund since he joined the firm in 1997.
The Croft Value Fund has low turnover. Croft prefers to buy and hold companies for three to five years, sometimes longer."We just want to find a good company and a good investment and hold it for the long term," he says. "We're seeing more of the high-quality growth at a discounted price. The multiples are down with the overall market, and you can get some great companies with a good discount." That style of contrarian investing has paid off for investors. The Croft Value Fund has an annualized return of 4% over 10 years and 4.1% over five. That has earned the fund a four-star rating, the second-highest, from Morningstar. To make money over the next three to five years, investors don't need to take on elevated risk. "You can build a good long-term portfolio right now with a lot of good-quality companies out of favor," he says. As bond yields have sunk to record lows, blue-chip stocks have become even more attractive because of their fat dividends, Croft says. "I'd take a risk buying good-quality stocks right now than reaching to find yield in the bond market," Croft says. Croft says the following five stocks are trading at a discount and have the potential to rebound along with the economy.
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