Monday, June 29, 2015

What I'm watching this week

I'll be executing a couple buys this week and I've been looking for some good deals. The worst hit sectors at the moment are REITs and utilities. I prefer to buy stocks when the price of the stock is distressed but the fundamental of the business is still solid. Due to the fear of future interest rate hikes by the Fed, many of these interest rate sensitive equities have taken a hit this year.

Measure of undervalue or overvalue is done using Fast Graphs. This uses Price / FFO data from past years to find the average Price / FFO ratio.

My favorite REIT is O which I still believe is overvalued. however it is approaching its 52 week low. A price of $41 for O will start to get me excited and anything below will be me backing up the truck.

Aside from O, I have other REITs I am eyeing. HCP has taken a beating due to legal issues with its largest tenant. I am on the side that believes that HCP will find a way through this mess and believe in the growing need for medical housing due to the baby boomers hitting old age. I'm not too sure about HCP price point since I see it going lower even more but I would hazard to say the best move here is to dollar cost average down. Compared to historical Price / FFO, HCP is very cheap. HCP and O both have very strong credit rating: BBB+. Not many REITs have BBB+ and I don't know of any on my watchlist that has anything higher than BBB+.

HCN is attractive to me only when it hits $60. I find it still overvalued The credit rating is only BBB so I don't consider it as core as the two names above. VTR is also a stock I like and it has a credit rating of BBB+ and is undervalued at this time. I find VTR attractive to add at this time. OHI is the last REIT I am watching and it sports a high yield compared to the others. OHI's growth in FFO and dividends have been impressive in recent years. The company appears fair valued at the moment; however, their credit rating is not sufficient enough for me so I will only consider it for speculative purposes.

For REITs, I am deciding between HCP or VTR. O and HCN still have to drop more and I will only add to OHI (if I ever decide I needed another spec position) after the fed announced interest rate hikes.

For utilities, I am looking to add another name to my holdings. SO right now has a decent % allocated. Otherwise I would look to add more. I am eyeing WEC, PNY, and XEL at the moment. I wish to add to D but I believe it to be overvalued, however this may be due to their potential growth and decently high dividend growth guidance. D's P/E is 26 at the moment and that is just too high for me to justify for a utility company. I can see a P/E of 26 for high growth like Starbux or Visa but not a boring utility.

Fast graphs indicates that SO is undervalued, PNY and XEL are fairly valued and WEC is overvalued. WEC will have to fall to 42-43$ for me to consider.

All of the utilities listed above have very strong credit ratings and solid dividend histories.

I have been doing some shopping for business casual attire lately so I am envisioning a slight decrease in contributions in the coming month. For once, I'm treating myself this time for July 4th.

Happy investing :)

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