Is LKQ Corp a Buy, & More: Invest In Stocks With A Margin of Safety To Reduce Risk And Enhance Returns

Finding A Margin Of Safety In Today’s Strong Market

At this point, I would like to address what I believe to be a very important misconception held by many investors.  Instead of predicating their stock investing decisions based on their view of the relative merits of individual companies, investors will often allow their biased view of the overall market deter them.  The refrain goes something like – after such a strong run, the stock market is now too high for me to invest in stocks.

My experience has taught me that the fallacy behind this line of thinking is that it is not a stock market; instead it is a market of stocks.  Moreover, whether we are in a bull market or a bear market, there will always be examples of overvalued, fairly valued or undervalued individual selections to be found.  Accordingly, I believe portfolios should be built one company at a time, based on the specific merits of each individual company under consideration.

Consequently, I present Deere & Company (NYSE:DE), as a current example of a quality common stock that provides a high margin of safety even in today’s supposedly overheated market.  Deere & Company (NYSE:DE) is a dividend contender on David Fish’s CCC lists found here with a streak of ten consecutive years of dividend increases.  Its current single-digit P/E ratio and above-market dividend yield provides a long-term opportunity with a strong margin of safety, in my opinion.

I also offer two additional examples, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), and Chevron Corporation (NYSE:CVX), two companies whose current low valuations also provide a strong long-term margin of safety.  Note that both of these companies can be bought at single-digit P/E ratios, which I believe mitigates any potential future weaker earnings growth.

Teva Pharmaceutical Industries

Chevron Corp