One of the best things for a top portfolio manager to see is one of the stocks on the watch list have a temporary hiccup and get sold off to a level where a position can be added. It’s not unusual for good companies to have either a one-off bad quarter for earnings, or a headline incident that creates selling pressure. Whatever the reason, when quality is put on sale, the top portfolio managers are usually buyers.

At 24/7 Wall St., we are impressed when we see consistent positive results from a money management team year after year. One of the top portfolios we cover is the UBS Quality Growth at a Reasonable Price, or Q-GARP. It is slightly ahead of the S&P 500 this year and has trounced the index since inception in 2007.

In a recent UBS report, the Q-GARP managers added an outstanding blue chip, Walt Disney Co. (NYSE: DIS), to the portfolio and removed Illinois Tool Works Inc. (NYSE: ITW).

The entertainment giant has suffered this year, as many have worried about subscriber losses at ESPN, so the Q-GARP team think the time is good to add Disney to the portfolio. It operates broadcast and cable television networks, domestic television stations and radio networks and stations, and it is involved in the television production and television distribution operations. Its cable networks include ESPN, Disney Channels, and ABC Family, as well as UTV/Bindass and Hungama. The company owns eight domestic television stations.

It also owns and operates the Walt Disney World Resort in Florida that includes theme parks; hotels; vacation club properties; a retail, dining and entertainment complex; a sports complex; conference centers; campgrounds; golf courses; water parks; and other recreational facilities.

The company also operates Disneyland Resort in California; Disney Resort & Spa in Hawaii; Disney Vacation Club, Disney Cruise Line and Adventures by Disney; and Disneyland Paris, Hong Kong Disneyland Resort and Shanghai Disney Resort. It also licenses its intellectual property to a third party for the operations of the Tokyo Disney Resort in Japan.

In addition to opening a brand new $3 billion theme park in Shanghai China, Disney also recently announced that Netflix had reached an exclusive deal with Disney giving it streaming rights to Disney films, a win-win for both of the companies.

The UBS team cites strong performance at its theme parks and film business should drive solid earnings growth over the next few years as they add the company back to the portfolio.

Disney shareholders receive a 1.4% dividend. The Thomson/First Call consensus price target is $109.11. The stock closed Thursday at $98.38.
The analysts cite a higher multiple among the reasons for removal of Illinois Tool Works from the Q-GARP portfolio. The company manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products. Investors receive a 2.1% dividend. The shares closed Thursday at $105.31.

Below we also highlight the three of the safer stocks for investors to consider in the Q-GARP portfolio.

Colgate-Palmolive

This top dividend payer is also a very safe play for investors. Colgate-Palmolive Co. (NYSE: CL) is the stock to buy in consumer staples. The company continues to deliver solid execution and is one of the best-positioned companies in the consumer staples sector, given its strong brands in attractive categories, particularly oral care.

More than half (52%) of total revenues at Colgate-Palmolive are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across the Brazil, Russia, India, China (BRIC) regions. While those have slowed over the past year, a pickup in growth could be coming.

Colgate-Palmolive recently increased the quarterly common stock cash dividend by 3% to $0.39 per share, or a 2.18% yield. Consistent dividend growth and a degree of safety keep this stock in favor on Wall Street.

Colgate-Palmolive has a consensus price target of $74.06, but note that shares closed near that on Thursday at $72.

Home Depot

This company remains the undisputed leader in the home improvement retail category. Home Depot Inc. (NYSE: HD) is the world’s largest home improvement specialty retailer, with 2,270 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.

Home Depot stores sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance and professional service programs to do-it-yourself (DIY), do-it-for-me (DIFM) and professional customers.

With summer here, some people think that Home Depot and other home improvement companies can benefit from continued lower gas prices still putting extra dollars in consumers’ pockets. Earnings gains have consistently been in the 15% to 20% range, and a consensus of analysts is forecasting earning increases to continue to grow at about 15% annually for another two to three years.

Home Depot investors receive a 2.17% dividend, The consensus price objective is $147.29, and shares closed Friday at $127.36.

Rockwell Automation

This is a top industrial on the Q-GARP list. Rockwell Automation Inc. (NYSE: ROK) provides industrial automation power, control and information solutions. It operates in two segments. The Architecture & Software segment provides control platforms, including controllers, electronic operator interface devices, electronic input/output devices, communication and networking products, and industrial computers that perform multiple control disciplines and monitoring of applications, such as discrete, batch and continuous process, drives control, motion control and machine safety control.

The Control Products & Solutions segment offers low and medium voltage electro-mechanical and electronic motor starters, motor and circuit protection devices, AC/DC variable frequency drives, push buttons, signaling devices, termination and protection devices, relays, and timers, as well as various packaged solutions, such as configured drives and motor control centers to automation and information solutions.

Rockwell investors are paid a 2.52% dividend. The consensus price target is set at $109.68, but the stock closed way above that level on Thursday at $115.89.

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Solid companies dominate the Q-GARP portfolio, and the long-term performance is outstanding. Low turnover and top picks keep this outperforming offering among the best on Wall Street.

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