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.

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