Monday, February 23, 2015

Recent buy: PX, PH, ABBV ...

The following buys are:


I will be adding CAT later this coming week as more funds arrive. The PRAXAIR buy was a recent decision I made over the weekend. The numbers are very nice:

22 year dividend increases (almost a dividend champion!)
Yield of 2.23% (not too shabby)
Recent year dividend increases of 8.3%, 9.1%, 10.0%, 11.1%, 12.5% (Chowder rule of 12.6 which is very nice)

The credit rating is very good at A. The earnings history is very impressive and consistent. The business does not seem as cyclical as the industrial sector purchases I made this week. The 2008 recession only saw a minor dip in earnings. The PE right now is attractively valued.

S&P fair value: $136.50
Morningstar fair value: $134.00
Today's value: $128.39

Jefferson Research rating:
Earnings ... STRONGEST
Cash flow ... STRONGEST
Efficiency ... STRONGEST
Balance ... STRONG
Valuation ... LOW RISK

From Fastgraphs, S&P, Morningstar, and Jefferson analysis I would say PX is fair value.

Saturday, February 21, 2015

Upcoming buys - Industrials

I have been inactive most of this month so my cash pile has been increasing. I will be making a few buys this week and many small buys. The larger buys will be the following with the highest amount no top. The theme this time is Industrials:


CAT is highly cyclical. However it is a very world renown brand and has been paying dividends for 21 years with a strong dividend increase history. Jefferson research rates the stock as the following:

Earnings - Strongest
Cash flow - Strongest
Efficiency - Strong
Balance - Strongest
Valuation - Low Risk

CAT has a payout of 45%. CAT has a S&P credit rating of A. S&P gives CAT a fair value of $89.8. FastGraph shows it dipping a bit below the 15 year average PE. I do believe it is of fair value and will add it to my 401k once the funds are received later next week.

I will be adding more to my EMR position which I started couple weeks ago. EMR has 58 years of dividend increases although the growth is lower than CAT. EMR payout is moderate at 55%. EMR has a credit rating of A and S&P gives it a fair value of $59.7 which is around what it is today. FastGraphs shows EMR as below fair value. Both EMR and CAT will help me increase my industrial sector exposure. Both EMR and CAT have over 3% yield.

Another stock to note is PH. The yield is around 2% so it's on the lower side. However the stock makes up for that with the growth rate which was 16.3%, 9.9%, 13.3%, 33.6% for the last 3 years. Jefferson gives PH the following ratings:

Earnings - Strongest
Cash flow - Strong
Efficiency - Strongest
Balance - Strongest
Valuation - Low Risk

S&P gives PH a fair value of $146 which is less than what it is today. FastGraphs also shows that the stock is around fair value. PH has a low payout ratio of 28%. The debt/equity is low at 0.52. S&P gives PH a solid A credit rating.

CAT is the most volatile during bad economic conditions compared to EMR and PH. Increasing my exposure to industrials will increase the volatility of my portfolio. However, I have so much invested in consumer staples and blue-chip names that I am open for slightly more volatility.

In addition to the three above, I will dip more into some more healthcare (JNJ and ABBV both dipped recently) and add more to KO with the new dividend increase. I am very happy at the over 8% dividend increase even with the currency headwinds.

Friday, February 13, 2015

Falling sector: Utilities

With the rumor of rate hikes, the utilities sector has taken a beating. I have already identified several names that I will be happy to own. However, they are still overvalued and I am still waiting on the sidelines. Utilities are only 1% in my portfolio so I am looking forward to add if possible.

SRE (way overpriced....), WEC, XEL, AVA, LNT, D, SO, NU, NEE, DUK

A lot of those listed above are still nose bleeding expensive compared to the index. Some like SO and AVA are approaching better values.

Monday, February 9, 2015

Recent buy: EMR

I will be purchasing $520 of EMR tomorrow. I feel that EMR provides a good entry point price right now. I will continue to add on weakness as I am looking to expand my industrials sector. I am also hoping that the utilities and REIT sector will fall further in anticipation of rising rates. I need more exposure to REITs and utilities for diversification and higher yields.

EMR facts:
55.5% payout ratio
3.28% yield
18.21 P/E
14.05 Forward P/E
115,100 employees
1.30 Beta
20% Debt / Cap
A+ Credit Rating (Morningstar)

Jefferson Research Report:
Earnings quality: Strongest
Cash flow quality: Strong
Operating efficiency: Strong
Balance sheet: Strongest
Valuation: Least risk

Thursday, February 5, 2015

Wednesday, February 4, 2015

Watchlist: 2nd week February

I did some research on S&P and Morningstar to compare which companies on my watchlist had prices that were below their recommended fair value. I am willing to pay at fair value or slightly above fair value for a core holding. I will only pay for supporting and speculative positions when they are at a reasonable discount.

These reports were released on 1/27/2015 to 1/31/2015
Ticker Price 2/4/2015 Morningstar Fair Value Morningstar Price/FairValue S&P fair value S&P Price/FairValue
MSFT $41.84 $46.00 90.96% $46.60 89.79%
GE $24.16 $30.00 80.53% $26.80 90.15%
MA $84.18 $88.00 95.66% $98.10 85.81%
EMR $57.33 $69.00 83.09% $59.20 96.84%
CSX $34.57 $35.00 98.77% $36.00 96.03%
IBM $156.96 $196.00 80.08% $208.20 75.39%
UTX $117.79 $116.00 101.54% $126.30 93.26%

Ticker Forward PE PE Yield PEG Beta Debt/Eq Payout
MSFT 14.20 16.87 2.96% 2.02 1.02 0.31 47.20%
GE 13.20 16.00 3.81% 2.16 1.43 2.85 49.20%
MA 23.61 27.15 0.76% 1.62 0.93 0.22 14.20%
EMR 13.70 18.80 3.28% 2.35 1.33 0.60 56.00%
CSX 14.35 17.91 1.85% 1.68 1.33 0.87 27.20%
IBM 9.34 9.97 2.80% 2.21 0.62 3.44 20.30%
UTX 15.24 17.27 2.00% 1.88 1.12 0.59 34.20%
The best Price/FairValue include MSFT, GE, and IBM. I am waiting on IBM to report earnings that show growth before I invest, otherwise I see it as a depressing company to hold. I am considering GE and MSFT since they both offer over 3% yield, but would not consider these holdings to ever be core due to their dividend history.

MA looks like a good growth play here. PE is higher than what I would like but you pay more to hold a growth company. The dividend is small but he dividend growth is very large, like Visa. I like MA for its moat, low debt, low PEG, and impressive growth.

EMR is another good industrial dividend aristocrat currently yielding over 3%.

I consider UTX and CSX to be fair value. Since I am very light on industrials, I am keeping GE, CSX, and EMR on my watchlists.

Tuesday, February 3, 2015

Recent buys: KMB, PG

Nothing exciting this week. Still have spare cash sitting on the sidelines since I don't feel compelled to use it all yet.

KMB: $200
PG: $200

They're both above 3% yield right now. Will add around $12 annual divs.