price to sales ratio

Gold prices have moved down from their peak of $1,918 an ounce in August 2011 to today’s price of $1,595. Gold could move higher in the long term, but it will remain volatile. In addition, a deeper drop is by no means out of the question. We continue to recommend that you focus your gold investing on gold-mining stocks and avoid buying gold bullion, gold coins (unless you collect them as a hobby) or certificates representing an interest in bullion. That’s because these investments have hidden costs, such as insurance and storage, that dramatically cut their value over time. Newmont remains our top choice among gold stocks. Most of its production comes from politically stable areas, such as North America and Australia. As well, its new dividend policy gives investors an opportunity to automatically profit when gold prices rise....

INTEL CORP. $23 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.1 billion; Market cap: $117.3 billion; Price-to-sales ratio: 2.3; Dividend yield: 3.7%; TSINetwork Rating: Above Average; www.intel.com) warned that its revenue in the fourth quarter of 2011 will fall to $13.7 billion, down from its earlier forecast of $14.7 billion. Factories in Thailand produce half of the world’s computer hard drives, and flooding in that country has led to shortages. As a result, computer makers have cut production and are ordering fewer chips from Intel. Chip sales should rise over the next few months as hard-drive production returns to normal. As well, the shortage will not affect demand for Intel’s more-profitable server chips. Moreover, Intel gets 57% of its revenue from fast-growing markets in Asia, and just 13% from Europe....

The three companies below aim to complete corporate breakups in 2012. Breakups generally help unlock hidden value and lead to above-average results in the years after the split. (See two good examples of strong post-split performance — Moody’s and Dun & Bradstreet — also in this issue). Moreover, the new, smaller companies could become attractive takeover candidates. KRAFT FOODS INC. $36 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.8 billion; Market cap: $64.8 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.kraft.com) plans to break itself into two separate, publicly traded companies by the end of 2012. One company will sell snack foods, such as Oreo cookies, Cadbury chocolates, Trident gum and Tang powdered beverages. This business will have annual sales of $32 billion, with 42% of that coming from developing markets, such as China, Brazil and India....

FORD MOTOR CO. $10 (New York symbol F; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 3.8 billion; Market cap: $38.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 2.0%; TSINetwork Rating: Extra Risk; www.ford.com) stopped paying dividends in June 2006 to conserve cash for a major restructuring plan. This plan helped turn the company around, and it is now seeing stronger vehicle sales. As a result, it will resume quarterly dividend payments of $0.05 a share. The $0.20 annual rate yields 2.0%. In light of the new dividend, we’ve upgraded Ford’s TSINetwork Rating from Speculative to Extra Risk....

BAXTER INTERNATIONAL INC. $48 (New York symbol BAX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 563.9 million; Market cap: $27.1 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.8%; TSINetwork Rating: Average; www.baxter.com) has purchased Baxa Corp., which makes products that improve the safety and effectiveness of oral and intravenous drugs. This company’s expertise will Baxter’s drug-delivery devices work better. Baxter paid $380 million for Baxa. That’s equal to 61% of the $624 million that Baxter earned before unusual items in the third quarter of 2011. The latest earnings are up 4.9% from $595 million a year earlier. Earnings per share rose 7.9%, to $1.09 from $1.01, on fewer shares outstanding. In addition, the company raised its quarterly dividend by 8.1%, to $0.335 from $0.31 a share. The new annual rate of $1.34 yields 2.8%....

In September 2000, the old Dun & Bradstreet split into two new companies: Moody’s and the new Dun & Bradstreet. Since then, Moody’s is up 149.2%, and Dun & Bradstreet has gained 247.5%. We feel both still have plenty of growth ahead. MOODY’S CORP. $32 (New York symbol MCO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 222.0 million; Market cap: $7.1 billion; Price-to-sales ratio: 3.2; Dividend yield: 2.0%; TSINetwork Rating: Average; www.moodys.com) provides credit ratings and other information on bonds and other securities. The company gets two-thirds of its revenue from credit ratings. The remaining third comes from its analytics businesses, which mainly sell credit-assessment software. There have been fewer issues of speculative-grade bonds and bonds backed by mortgages due to concerns over high European debt levels. That has hurt demand for the company’s credit ratings....

TEXAS INSTRUMENTS INC. $28 (New York symbol TXN [Switches to Nasdaq on January 1, 2012, symbol TXN]; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.1 billion; Market cap: $30.8 billion; Price-to-sales ratio: 2.4; Dividend yield: 2.4%; TSINetwork Rating: Average; www.ti.com) is seeing weaker demand for its analog chips, which convert sound and images into digital signals that computers can understand. As a result, earnings per share will probably fall to $1.85 in 2011 from $2.62 in 2010. The stock trades at 15.1 times the new estimate. That’s still a reasonable p/e, particularly as chip sales should rebound in 2012 as manufacturers use up their inventories. Texas Instruments is a buy.

Rising raw material costs are a growing challenge for these two beverage makers. However, their well-known brands give them strong customer loyalty. That makes it easier for them to raise prices without hurting sales volumes. Their growing overseas operations also enhance their long-term prospects. PEPSICO INC. $64 (New York symbol PEP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $102.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.pepsico.com) is the world’s second-largest soft-drink maker after Coca-Cola. It also makes other products, such as Frito-Lay snack foods, Tropicana fruit juices and Quaker Oats. PepsiCo recently raised its selling prices in response to rising ingredient costs. That’s the main reason why its sales rose 13.3% in the quarter ended September 3, 2011, to $17.6 billion from $15.5 billion a year earlier. In June 2011, PepsiCo paid $3.8 billion for Wimm-Bill-Dann, Russia’s largest dairy and juice company. This accounted for a third of the sales gain. Without unusual items, mainly costs to integrate recent acquisitions, earnings per share rose rose 7.4%, to $1.31 from $1.22....

CHEVRON CORP. $100 (New York symbol CVX; Conservative Growth Portfolio, Resources sector; Shares outstanding: 2.0 billion; Market cap: $200.0 billion; Price-to-sales ratio: 0.8; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.chevron.com) plans to spend $32.7 billion on capital upgrades in 2012. That’s up 25.8% from the $26.0 billion it will probably spend in 2011. About 87% of the 2012 spending will go toward oil and gas exploration and upgrades of existing projects and new developments. For example, Chevron’s new liquefied natural gas plants in Australia will increase its daily production by 13% by 2016. Chevron is a buy.

WINDSTREAM CORP. $12 (Nasdaq symbol WIN; Income Portfolio, Utilities sector; Shares outstanding: 515.8 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.5; Dividend yield: 8.3%; TSINetwork Rating: Average; www.windstream.com) has completed its purchase of PAETEC Holding Corp., which sells telecommunication services to businesses in 46 states. Windstream paid $891 million in stock and assumed $1.4 billion of PAETEC’s debt. That gives the deal a total value of $2.3 billion. This is the latest in a series of acquisitions for Windstream. Its recent purchases pushed up its revenue by 6.0% in the third quarter of 2011, to $1.0 billion from $965.8 million a year earlier. However, the costs of integrating these new operations cut its earnings by 16.1%, to $71.5 million, or $0.14 a share, from $85.2 million, or $0.18 a share. As a result of the PAETEC purchase, Windstream will now get 70% of its revenue from selling highspeed Internet and business services. That cuts its reliance on its slow-growing home phone business. As well, the company can use PAETEC’s losses to lower its tax bill over the next five years. That should let its keep paying quarterly dividends of $0.25 a share, for an 8.3% annualized yield....