Mature Investments: How to Put Some 'Peyton' in Your Portfolio

Peyton Manning
Peyton Manning

It happens to investors all the time. Sell a stock. Watch it go higher. Initiate the self-kicking process.

The Indianapolis Colts did exactly that in releasing future Hall of Fame quarterback Peyton Manning a few weeks ago. He signed a five-year, $96 million contract with the Denver Broncos on Tuesday.

Football analysts aren't necessarily faulting the Colts. The team owns the first overall pick in the draft in a year when Andrew Luck -- the Stanford quarterback that many call the best prospect out of college since Manning himself -- is available. Given Manning's age, recent injuries, and expensive contract, moving on to the younger and cheaper Luck makes sense. As investors, how often have we sold a stock simply because a better opportunity presented itself?

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However, several teams showed heightened interest in Manning -- with four of them going as far as publicly courting the older and more expensive pigskin hurler over their own younger and cheaper starting quarterbacks.

The jury's still out on Indy's decision to go younger, but analysts now have heightened expectations for Denver this upcoming season.

Manning up your Portfolio

You'll find plenty of Peyton Manning stocks. There is no shortage of mature companies that investors have largely abandoned -- even though they still have intellectual and talent advantages over the younger and nimbler stocks that the market's bidding up these days.

Let's take a closer look at a few companies that may have been superstars in their prime but are sorely underestimated at this point in their growth cycles.

  • Microsoft (MSFT): The world's largest software company has been a bit of a dud on this side of the millennium. Mr. Softy is the poster child for "the lost decade" for investors, with its stock languishing since the burst of the dot-com bubble. It's not fair. Yes, PC sales have stalled over the past year, but Microsoft is still finding ways to grow through its Office productivity suite and its server software business. Android and IOS are the mobile operating systems of choice, but Microsoft is paying Nokia (NOK) billions to champion its Windows Phone platform. There's also the surprising success that Microsoft has had with the Xbox, surpassing the PS3 and Wii to become the country's top console in recent months.

  • eBay (EBAY): It's easy to dismiss eBay. The website that launched cottage industries a decade ago feels stale these days. We live in an age of free Craigslist ads and Facebook referrals. Do we really need eBay? Well, the surprising nugget here is that eBay's online marketplace is in fact growing. This is truly a global business these days. We also can't dismiss that eBay owns PayPal, the wildly popular Web-based transaction platform that is starting to pop up at some brick-and-mortar chains.

  • Cisco (CSCO): If Microsoft and eBay have had it bad, Cisco has had it worse. The networking gear behemoth's stock may be hitting new 52-week highs this week, but the shares are still trading 73% off their all-time highs. A lot has changed since Cisco's stock peaked a dozen years ago. Cisco has had its recent consumer market misses, including the Flip camera and Umi videoconferencing system. However, Cisco finally began shelling out a quarterly dividend a year ago. Analysts see revenue and earnings growing 7% and 14%, respectively, in its current fiscal year, and things will get even better if the global economy bounces back and companies begin ramping up their IT budgets again.

  • IBM (IBM): There was a time when IBM was such a big player in the PC space that early personal systems not made by the company were simply called IBM-compatible machines. IBM retreated from PC hardware when the market became too cutthroat, but investors have been rewarded by the company's outside-of-the-box thinking. IBM may have been the original tech stock, but it hasn't gone away. It has been excelling in the higher-margin business services realm for years. IBM has rarely disappointed investors. You have to go all the way back to 2007 to find the last time it didn't beat Wall Street's quarterly profit target.

Winning the Game

These were winning tech stocks a generation ago. Like Manning, these companies may not have the same zip on the ball that they used to, but they're finding new and smarter ways to score.

Don't abandon stocks just because they seem to have exhausted the scintillating part of their growth cycles. Under the right circumstances and investing climates, they can still win plenty of big games in your portfolio's future.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Cisco Systems and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, eBay, and Nokia. Motley Fool newsletter services have recommended writing puts on eBay and creating a bull call spread position in Microsoft.


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