Monthly Archives: July 2018

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 21, 2017 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Top five companies did extremely well, gaining 26%, as group despite lack of performance from IBM (IBM). The largest contributor was the retail sector companies Ross Stores (ROST) (+59.4%) and TJX Companies (TJX) (+40.8%). These gains far out strip the market of 13.3%. We thought that Ross Stores was trading at fair value thus wasn't worth the risk. Below is what we said about Ross Stores.

Next stop on the list is Ross Stores (ROST). This discount retail store traded as high as $69.80 late last year but shares have fallen 22%. It should be no secret to anyone that Amazon presence is hurting retailers be it discount or luxury. The brick and mortar model contain high overhead which makes it difficult to compete with online retailer. Our analysis suggest that Ross Store appears to be risky investment at this level. Dividend regression model shows that shares are right at fair value. Applying historical data and produce altimeter suggests shares are overvalued despite fallen 22% from the peak.

We also touched on IBM (IBM) which was virtually flat year-over-year. However, we believed shares would be a good trade at support level of $140 which did so recently (see chart below). The excerpt below was our commentary last year on IBM.

IBM (IBM) closed the week at yearly low. The company reported quarterly result that didn't excite the bull. Revenue continued to decline but revenue beat consensus estimates. Value investor will know by now that Warren Buffett sold majority of his holding in IBM. It wouldn't surprise us that he exit his entire position in the near future. Value Line estimated that IBM will produce cash flow per share of $17.50 in 2018 and believe shares are fairly traded at 9.5 times. This calculation put share price as $166, about 13% higher than current level. Since the peak in March ($182), stock price have fallen 19% and broke technical level at $150. Because of that technical breakdown, our prediction is for shares to find support at $140 range. Anyone looking to find value may want to wait a little longer and establish positions in $140 range.

One stock the market went against us big time was medical equipment supplier Owens & Minor (OMI). Despite hitting all-time low last year and reaching valuation level similar to 2008 low, shares continued to slide more than 50% and reached an extreme low of $15. Since then, shares hare rebounded to $17. The pain is felt to our portfolio as we do own shares of OMI. Blind sided by the issue at hand, we still believe shares are of good value but any hope of sizable profit is highly unlikely based on our purchase price. The important lesson to take away is to always anticipant sizable downside risk even if your assessment shows no sign of it. Then be prepared to either cut your loss if you're trading, realized short-term loss for tax purpose, or purchase more if you have full conviction.

U.S. Dividend Watch List: July 20, 2018

The market is displaying some bullish characteristic with late week rebound and closed above 2,800. The first time this occurred was in January of this year which technically looks like a parabolic move. A well defined pattern of higher-high is a more robust pattern with good support. As we move longer into this bull market, it would be natural to get defensive so we urge our readers to assess the asset allocation and the cash holding. Below is our dividend watch list for the week. Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 7, 2017 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The top five companies didn't do so well with average loss of 5.4%. Biggest drag on this list was General Electric (GE). The biggest gain of 11.9% came from Hormel (HRL). Our team said the following about Hormel.

One company our model offer good risk/reward profile is Hormel Foods (HRL). Dividend payment is the best proxy for share price direction and using our dividend regression model, there is a 21% upside potential in shares of Hormel Foods. Average yield for this company historically has been in range of 1.5% but current yield of 2.2% suggest an undervalue range. Even so, one should take caution and establish a multiple purchases plan.

Another company we mentioned was Genuine Parts (GPC) which we believed to be trading near fair value at the time. Our assessment is fairly close to reality as share rose 4.5% for the year. We said the following about Genuine Parts.

Four companies are trading within 1% of its yearly low. First on the list is auto supplier Genuine Parts (GPC). Shares broke below $90 after Goldman downgraded the stock to sell from neutral rating and reduced its target price to $89 from $104. Our valuation model isn't as bullish on shares of Genuine Parts at current level but would be if shares are trading at $70. Trading at 4x book value is a bit rich and multiple of 3x would be more reasonable.

U.S. Dividend Watch List: July 6, 2018

It was a good week for the bull as the S&P 500 gained 2.2%. The momentum is swinging upward and look to the 2,800 mark to be the key technical level. The sideway trading pattern that began at the beginning of the year could mean an accumulation before the next leg up or down. A break below 2,600 would be very bearish and above 2,900 to be bullish. Our team will explores investment opportunities from the watch list below. Continue reading →