Saturday, June 25, 2016

July Watchlist with Price Targets

Did some research this evening after the drop in the market on what my desirable price targets are for specific stocks in different sectors.

The names in Bold are higher priority companies I want to get first.

Friday, June 24, 2016

My post-Brexit watchlist

The UK has done it. They voted to leave the EU. This creates uncertainty in the market and the market hates uncertainty.

S&P futures are looking bleak at -5%
The pound has crashed by 10% relative to the dollar.

Pound to USD:

Tuesday, June 21, 2016

Recent buy: NKE, ABT, HRL ...

I added several companies this week. Below is a summary of my buys.

Your Plan Investments
SymbolDescription
Total
ABTABBOTT LABORATORIES$3,000.00
APDAIR PRODS & CHEMS INC$2,500.00
HDHOME DEPOT INC$3,000.00
HRLHORMEL FOODS CORP$800.00
NKENIKE INC CL B$1,800.00
PMPHILIP MORRIS INTL INC COM$800.00
TAT&T INC$800.00

Today I also swapped AbbVie (ABBV) in exchange for its parent company Abbott Labs (ABT). Note that Abbott in the past spun off AbbVie so shareholders in Abbott got both shares in AbbVie and Abbott. I prefer Abbott's stable medical device business, nutritional food items, and diagnostics products instead of the more uncertain AbbVie pharma products and AbbVie's high reliance on their one hit wonder drug Humira (and the expiring patent rights). AbbVie has the potential for more capital appreciation but comes with more risk. I don't feel that I need to take such risks to achieve my goals so I am performing this swap. I am not very fond of hoping that AbbVie management is capable of continuously pumping out one hit wonder drugs from their pipelines and prefer straight forward simple boring companies. AbbVie occupied less than 2% of my portfolio and my net return including dividends was around -$3.00 which includes trade commissions, so it was basically flat.

The above chunk of buys averages around 2.54% yield so that is about $312 more per year in dividends.

Saturday, June 18, 2016

What to buy list : My fair value targets

I did some homework today on stocks that I can look to purchase in the coming week. Some of the fair values in my head are now perhaps out dated since earnings have gone up or guidance has changed due to macro factors such as the weakening dollar and lower oil prices.

I have done some research on Morningstar and S&P to get some fair value estimates. I also use the Jefferson Research to analyze the quality of the companies. On top of that I have the Valueline and S&P credit ratings and safety ratings on my Portfolio page. Some of the companies listed here may not have the VL/S&P Financial score or Safety rating since I don't have them in my portfolio, but you can be guaranteed this list will only contain very high quality companies. In today's market with high valuations and uncertainty (Brexit anyone?) I will only purchase the most financially secure blue chips. Speculation is not for me right now.

I like to categorize my picks into dividend paying dates (when I receive the check).
1/4/7/10 months
2/5/8/11 months
3/6/9/12 months

Note that Pepsi (PEP) and Coca Cola (KO) have some strange month paying schedule.

The analysis is quite simple. They will all follow the format.
STOCK_NAME    CURRENT_PRICE
Jefferson Research: Earnings / Cash flow / Operating eff / Balance sheet / Valuation
S&P:  12month Target,   Fair Value
Morningstar: Fair Value

I highlight companies I think that are good deals in Green Bold. Those in just regular Green are so-so buys I might consider. Note that I want to balance high yield buys with low yield buys since I want to average around 3% yield. So I may add high  yield picks into my Green buy list even if they are a bit overvalued.


**********1/4/7/10 Payday Month Watchlist****************************

KO 44
STRONGEST STRONG STRONGEST STRONG LOWRISK
45,31.2
43

PM 100
STRONGEST STRONGEST STRONG STRONG LOWRISK
99,80.9
92

MO 65
STRONGEST STRONGEST STRONGEST STRONGEST LOWRISK
67,56.5
59

ADP 87
WEAKEST STRONG STRONGEST WEAKEST LOWRISK
90,67.3
79

NKE 53
STRONGEST STRONG STRONG STRONGEST LOWRISK
73,51.9
57

**********2/5/8/11 Payday Month Watchlist****************************

HRL 34
STRONGEST STRONGEST STRONG STRONGEST LEASTRISK
38,30
31

PG 83
STRONGEST STRONGEST STRONG STRONG LOWRISK
85,64.3
90

T 40
STRONGEST STRONGEST STRONG STRONG LOWRISK
42,40.1
33

VZ 53
STRONGEST STRONG STRONG STRONGEST LOWRISK
51,51.5
50

SBUX 55
STRONG STRONGEST STRONG WEAK LOWRISK
68,47.4
65

ABT 37
STRONG STRONG STRONG STRONG LEASTRISK
46,43
44

APD 143
STRONGEST STRONGEST STRONGEST STRONGEST LOWRISK
154,138.6
149

CLX 132
STRONGEST STRONGEST STRONG STRONGEST LEASTRISK
119,96.3
115

LOW 78
STRONG STRONGEST STRONGEST STRONG LEASTRISK
82,78.1
83

**********3/6/9/12 Payday Month Watchlist****************************

PEP 103
STRONGEST STRONGEST STRONG STRONG LEASTRISK
118,80.1
100

HD 127
STRONGEST STRONGEST STRONG STRONGEST LEASTRISK
134,128
125

XOM 90
WEAKEST STRONG WEAKEST STRONGEST MEDIUMRISK (note the weakest are earnings and cash flow due to the oil price crash)
97,83.5
79

MMM 168
STRONGEST STRONGEST STRONGEST STRONGEST LOWRISK
175,132.1
160

UTX 101
WEAK WEAK STRONG STRONGEST LOWRISK
124,109.9
120

JNJ 115
STRONGEST STRONGEST STRONG STRONGEST LEASTRISK
133,109.6
109

MCD 122
STRONGEST STRONGEST STRONG WEAKEST LOWRISK
140,106.5
130

CVX 101
WEAKEST STRONGEST WEAKEST STRONG LOWRISK (note the weakest are earnings and cash flow due to the oil price crash)
103,99.9
95

PX 112
STRONGEST STRONGEST STRONGEST STRONGEST LOWRISK
116,94.6
118

BDX 165
WEAK STRONG STRONG STRONGEST LOWRISK
170,180.9
165


In conclusion, there are still some picks that are decently interesting for buys right now. Although the deals are not spectacular, these companies can still provide average entry points into high quality companies that provide consistent earnings and dividend growth. It is very hard to "predict" and time the market. For a person like me in the accumulation phase, I prefer to acquire companies every month continuously. I want to see my monthly income grow and grow. If the share price drops because I overpaid, oh well, I still will get the same annually increasing paycheck every month. Since I am long term I do not really care for temporary drop of 10-30% in share price. As a result, I will average in my contributions when the market is high and when it is low. When the market is high, I will try my best to find the best value. I believe that in the next 30 years, many of these companies will provide spectacular returns in dividends and capital appreciation. One must also be aware that some companies are no longer valued as they once were 3 years ago. For example, Altria (MO) continues to beat and grow earnings. I have bought shares in MO 3 years ago but I am afraid that those past prices are no longer possible unless there is a severe market correction. As a result, it is important to continue to move one's price targets upwards (no matter how difficult it is) when it is appropriate and accept that companies grow and that one must pay more to acquire them.

1/4/7/10 buy list:
I think Nike has taken a severe beating here. It is in correction levels and all of the fair value indicators indicate that this company is now below fair value. Since NKE's yield is low I will likely have to "pair" it up with a higher yielding stock when buying. I am considering dipping some PM, MO or KO to offset this low yield. These latter three are not such good deals but I consider them a bit premium to fair value and I am willing to pay premium for high quality which these 3 are. In terms of quality ratings I will rate these 4 from highest to lowest as KO, NKE, PM, MO. PM and MO are lower due to their higher debts.

2/5/8/11 buy list:
Hormel (HRL) has pulled back a lot! Makes me very happy to see it breathe a little. It's in correction levels and I will be dipping in some more since I think it's below fair value. Starbucks (SBUX) has also pulled back a lot and it is now below fair value indicators. Same with Lowe's (LOW). These 3 all have rather low yields (below 1.7%) so if I were to buy any of them I would pair them up with higher yielders.

For higher yielders I think VZ is a so-so deal now. It yields 4.2% and has a safe dividend. Next one I'm watching is APD, a aristocrat with a 2.4% yield. And also worth mentioning is ABT with 2.78%, another aristocrat (before the spinoff of ABBV) that has corrected quite decently and is way below my fair value target.

In terms of quality rating with best first I say: ABT, APD, HRL, LOW, VZ, SBUX.
I consider SBUX more speculative.

3/6/9/12 buy list:
BDX is my favorite low yield high growth. This company just won't stop performing well. It yields 1.6% and is on my fair value target.

To pair low yield with a higher yield, I am looking at JNJ, UTX, and maybe CVX.  CVX has a risky dividend because of the low oil price so I'm not really comfortable with that. I really want to own Home Depot one day (HD). It's around fair value right now and it yields 2.2%.

For quality ratings with best first I rate it as: JNJ (by and far the winner), UTX, BDX, CVX.
CVX is a high quality business but the cyclical nature and unpredictable price of oil makes me uncomfortable even with its AA S&P credit rating, Value Line A++ financial rating, and Value Line 1 safety rating (the highest). I do feel that CVX and XOM can offer good values in the coming weeks as there is a chance oil may break down below the $40-50 area that it seems to stabilize around nowadays. CVX around 5% and XOM close to 4% make me very happy :)

Tuesday, June 14, 2016

May 2016 Portfolio Summary

I am a bit late to summarize my May portfolio performance. So I will take this post to summarize how my portfolio stands 15 days after the end of May.

May was a rather positive month. The general index has went up a little, however it has been creeping back down. Overall, the market remains expensive and is near its all time highs. In the long term view, the market has been trading sideways for more than a year. Of extreme strength recently are consumer staples and utility stocks. Those are my favorite companies and it's unfortunate they are very high since I can no longer really add to them without overpaying greatly. I have however benefited from the rise in share prices since I am heavily favored in consumer staples.



Oil prices seem to have stabilized around 50 dollar mark. They are no longer as ridiculously low as they were at the start of this year. Higher oil prices has a tendency to make markets go higher nowadays since people seem to think it signals rising growth in the economy. However, I prefer lower oil prices. I have little exposure to oil and many of my companies actual see reduced expenses with lower oil. My portfolio really should benefit from the low cost of oil.

The US dollar has also been weakening. That is a good sign for my portfolio since many of my companies are multinationals like KO, PG, PM, JNJ, MMM, etc. With the weaker dollar, more foreign countries will be able to afford the US products. Those revenues generated outside will also be worth more when converted back into US dollars.

My portfolio as of 6/14/2016 is as follows:
Name Ticker Sector       Value   Weight        Divies      Yield S&P Fin VL Fin VL Safety
Johnson & Johnson JNJ Health $10,504.96 5.07% $287.02 2.7322% AAA A++ 1
Kimberly-Clark KMB Staples $6,871.55 3.31% $190.98 2.7792% A A++ 1
PepsiCo PEP Staples $7,814.64 3.77% $227.86 2.9158% A A++ 1
Visa Inc V Financial $6,312.24 3.04% $44.99 0.7127% A+ A++ 1
The Coca-Cola Co KO Staples $5,383.48 2.60% $167.34 3.1083% AA A++ 1
Exxon Mobil Corp XOM Energy $5,027.83 2.42% $166.80 3.3175% AA+ A++ 1
Procter & Gamble Co PG Staples $4,963.15 2.39% $159.58 3.2154% AA- A++ 1
3M Co MMM Industrial $3,920.08 1.89% $103.84 2.6490% AA- A++ 1
Abbott Laboratories ABT Health $2,874.67 1.39% $79.39 2.7616% A+ A++ 1
Automatic Data Proc, Inc ADP Tech $2,902.92 1.40% $70.34 2.4231% AA A++ 1
Colgate-Palmolive Co CL Staples $2,527.32 1.22% $54.69 2.1640% AA- A++ 1
Nike Inc NKE Discret $2,006.42 0.97% $23.73 1.1826% AA- A++ 1
Altria Group Inc MO Staples $12,461.27 6.01% $431.28 3.4609% BBB+ B+ 2
Realty Income Corp O REIT $10,056.66 4.85% $373.57 3.7146% BBB+ A 2
Philip Morris International Inc PM Staples $9,483.14 4.57% $387.34 4.0845% A B++ 2
General Mills, Inc. GIS Staples $7,633.18 3.68% $215.94 2.8290% BBB+ A+ 1
AT&T Inc T Telecom $7,105.66 3.43% $337.86 4.7548% BBB+ A++ 1
Dominion Resources, Inc D Utilities $6,827.78 3.29% $259.51 3.8007% A- B++ 2
Church & Dwight CHD Staples $5,713.59 2.76% $81.39 1.4244% BBB+ A+ 1
Southern Co SO Utilities $5,565.71 2.68% $242.88 4.3639% A- A 2
Kraft Heinz Co KHC Staples $4,497.66 2.17% $121.87 2.7097% BBB- A 2
McCormick & Company MKC Staples $4,074.81 1.97% $70.52 1.7307% A- A+ 1
Reynolds American Inc RAI Staples $3,964.89 1.91% $131.82 3.3248% BBB- A 2
Becton Dickinson and Co BDX Health $3,139.24 1.51% $49.04 1.5620% BBB+ A++ 1
Hormel Foods Corporation  HRL Staples $2,679.65 1.29% $45.25 1.6885% A A 1
NextEra Energy Inc NEE Utilities $1,846.12 0.89% $51.40 2.7844% A- A 2
Air Products & Chemicals, Inc APD Materials $1,288.70 0.62% $30.81 2.3905% A A+ 1
Verizon Communications Inc VZ Telecom $6,162.92 2.97% $262.85 4.2650% BBB+ A++ 1
Mastercard Inc MA Financial $4,446.10 2.14% $35.91 0.8076% A A++ 2
Chevron Corporation CVX Energy $2,384.00 1.15% $100.75 4.2259% AA A++ 1
AbbVie Inc ABBV Health $1,943.92 0.94% $73.99 3.8063% A A 2
Praxair, Inc PX Materials $1,973.81 0.95% $52.66 2.6679% A A 1
McDonald's Corporation MCD Discret $1,943.27 0.94% $56.47 2.9059% BBB+ A++ 1
United Technologies Co UTX Industrial $1,864.49 0.90% $48.64 2.6090% A- A++ 1
Xcel Energy Inc XEL Utilities $1,825.75 0.88% $58.03 3.1783% A- A 1
Ross Stores Inc ROST Discret $3,455.07 1.67% $34.62 1.0020% A- A 2
TJX Companies Inc TJX Discret $2,358.79 1.14% $32.20 1.3650% A+ A++ 1
Apple Inc AAPL Tech $2,206.08 1.06% $51.61 2.3394% AA+ A++ 2
Starbucks Corporation SBUX Discret $2,151.90 1.04% $30.98 1.4396% A- A++ 1
Misc Type ……….. Partial Totals Weight Yrly Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks $180,163.37 86.88% $5,245.73 2.9117%
Liquid US Dollars $24,892.49 12.00%
Non-Liquid Assets $2,303.20 1.11%
. .. Equity + Misc Weight …..2 ….. …..222 …..2222 …..223
Total $207,359.06 100.00%

I have crossed the $200,000 mark and am now shooting for hitting my next milestone. My first milestone was $100k. My upcoming milestones are 1/4 Million, 1/2 Million, and 3/4 Million. I believe by the end of this year I can have a 1/4 of a million dollars. That will mean I am 1/4 of my way to my $1M goal! Although it will still take several years to hit the lovely $1M, I seem to be on schedule.



Right now this portfolio is pulling in a bit more than $5.2k in dividends per year. From my calculations, the dividends of my companies are growing on average by 8% this year and they average a 2.9% yield. So if I didn't contribute anymore my income from dividends will still be able to at least grow by around 10-11% a year. Not too shabby.

Below is a breakdown showing the weightings and sector of my portfolio. I have started new positions in Nike (NKE) and Hormel (HRL) this last month. I am heavily weighted in US dollars at the moment. I do plan to spend some of these in the coming weeks on higher yielding stocks to boost my dividend income. It is hard to find reasonable priced stocks at this moment in time so my decision making is rather slow.

- My stock in Altria (MO) has performed extraordinarily. It is one of the best performers in my portfolio at the moment. My position sits now at a double sized position of $12,400.
- The stable dividend growth company Johnson and Johnson (JNJ) has also done very well and now sits at $10,500. Their earnings and dividend growth have been excellent so far.
- Realty Income (O) has seen large share price increases and is now severely overpriced, my holding sits at $10,000. I do not recommend adding to it here. It yields far too low for a REIT.
- And lastly of mention, Philip Morris (PM) has risen from its sideways movement from the weakening US dollar and now sits at $9500.


In my earlier post I have listed the dividends I have received in May. They totaled $385 for May 2016. As of now, looking forward, I expect my dividends to be over $400 for each month with the 3/6/9/12 months hitting close to $500. By the end of this year I hope I can reach $500 average for every month in dividends. That is more than enough at this point to cover for my food and utility bills. I, however, take this cash and reinvest the proceeds right back into the companies that produced them. I am of the opinion that one should reinvest the dividends to the same companies instead of picking stocks that one thinks is undervalued. I want to see all of my positions grow and I want my strong positions to get even stronger. Usually the best high quality companies will remain overvalued as they continue to grow. I have no problem paying for quality.

Stay tuned for next month's report.

-YD