The Next Stock I'm Going to Buy

Last month, I admitted that I have a problem. I have a tendency to be a little flighty when it comes to researching new stocks. That is, just as I start to dig my teeth into a new stock, I often get distracted and start chasing another shiny stock that catches my eye. So my pledge was to share my research on five promising stocks and determine which stock would get boosted to the top of my personal buy list.

It's now time for me to tap one of the five stocks to go to the head of the class and take the seat at the top of my buy list.

PepsiCo (NYS: PEP)
This is a great company and one that could be a good addition to any portfolio. It, of course, has the whole battle-for-Olympus thing going on with Coca-Cola (NYS: KO) for dominance in the fizzy beverage world, but it also has a giant snack-food arm that has been the source of significant growth. However, the quality of the company hasn't escaped many investors and the stock's current valuation suggests pretty middle-of-the-road returns ahead. For investors playing defense, that could be just fine, but it's not enough to make PepsiCo my next buy.

Home Depot (NYS: HD)
It's easy to be a Home Depot hater. Maybe a little too easy. The economy is sluggish, the housing market is still pretty much in shambles, and chief competitor Lowe's (NYS: LOW) has made up significant ground on it in recent years. However, the company's CEO Frank Blake has been at the helm for a little over four years now, and I think he's moving the company in a good direction. And with few investors particularly bullish on a home improvement retailer during a prolonged housing slump, the stock also has a pretty attractive valuation. That said, retailing is a tough, tough business, and I'm not sure I'm sold on the durability of Home Depot's competitive advantage.

Exelon (NYS: EXC)
There's a lot to like about Exelon, and high on the list is the stock's 5% dividend yield. The power company also has a very significant amount of nuclear generation assets. Though nuclear took a hit on the PR front this year after the disaster in Japan, most reasonable people still consider it a very viable solution when it comes to shifting to lower-emission energy generation. But as I noted in my write-up, I'm not crazy about the offer that the company made for Constellation Energy and so that knocked the stock down on my list.

Aflac (NYS: AFL)
It was very tough for me to not put Aflac in the top spot. I think there's the potential for very significant returns from the stock going forward. I like the dividend, I like the management, I like the business, and even without Gilbert Godfrey (or maybe especially without Godfrey?), I like the duck. Above all, I like the future potential. There are some big question marks for the health care systems in both the U.S. and Japan, which could mean more business for a supplemental insurance provider like Aflac. So why didn't it get the top spot? Because I liked another stock just a bit more.

ArcelorMittal (NYS: MT)
How did ArcelorMittal make it all the way to the top of my list? In four simple words: It's ... so ... darn ... cheap. As I noted last month, its price-to-earnings ratio based on average 10-year earnings -- a measure that value investor Ben Graham was a fan of -- was a mere 7.3. A commenter on one of my articles also pointed out that the stock trades at just a hair above half of the company's reported book value. But it's not just a "this is really cheap" thesis. This is also a really great company and a global leader in the steel business. Better still, it was built, is run, and is 41% owned by Lakshmi Mittal, a fellow who I think is a very savvy steel man (not to be confused with Iron Man). Finally, I should also point out that my personal portfolio is light on materials companies, so ArcelorMittal also got a boost because it would increase my portfolio's diversification.

Wait for it...
Thanks to The Motley Fool's (wise) disclosure policy, I have to sit on my hands before actually buying shares of ArcelorMittal, but my sights have been set.

But what if you're not sold on any of the five stocks I've looked at? Fortunately, there are plenty of other fish in the sea when it comes to the stock market. My fellow Fools poked and prodded five of those other fish in the special report "5 Stocks The Motley Fool Owns -- And You Should Too." To see what they found out, click here and claim a free copy of that report.

At the time thisarticle was published Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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