Wednesday, September 30, 2015

Recent Trade: Sell MCD Buy O


On September 30, 2015, I sold 10 shares of MCD at 98.49 and then bought 21 shares of O at $47.39.

I just don't trust MCD anymore. Shrinking cashflow to pay dividends and stock buyback. Unstable EPS and no future goals. Is McDonalds trying to be Panera, Burger King, or Dairy Queen? At $98 and 22 P/E, MCD is overvalued. I might buy MCD in my Loyal3 account at $80-$85 but for now I'm happy with O.    

Forward 12 months dividend stands at $2044.80. 

Monday, September 28, 2015

Recent Buy: T



Ok so I lied about not buying anymore until the government shutdown...

On September 28, 2015, I bought 32 shares of AT&T (T) at 31.99/share. Total cost and fees equal $1030.68. I scanned through my portfolio vs the market and found this gem. My cost basis before this buy was $34.50. Now it’s $33.75. If possible I would like to own 100 shares by the end of the year. This buy increased my 12 months dividend by $60.16.

Fundamentals

  1. T is currently trading at a PE (ttm) of 31.65. This seems outrageous but you have to remember that T just bought DirectTV. All DirectTV owners received shares of T but the profitability of DirectTV was not added to T's balance book. What you have here is earnings not added to T and more shareholders which creates this strange looking PE.
    1. T's forward PE is 11.55 which is less than their historic 14 PE.

  1. Dividend growth rate of 1 cents per share or 1-2% per year.

  1. PEG is 0.2x. I know some of you love your pegs.

  1. Price to book is 1.9x.

  1. Yield of 5.82%.

  1. Fair Value
    1. Simply Wall Street based on future cash flow: $46.80 (32% discount)
    2. Yahoo finance one year price: $37.00 ($5 discount)
    3. S&P capital 4 stars buy fair value: 32.50 ($0.50 discount)
    4. S&P capital one year price: $39 ($7 discount)
    5. Asking the SA crew
      1. $34.00 SA article 1
      2. $37.66 SA article 2
Rationale:

So why on earth would I buy a company during a pricing war with VZ, S, and TMUS...and the whole stock market crashing.

  1. Rational #1: My financial Adviser told me to buy some bonds...so I bought T
    1. That was a joke. T is not a bond. No matter what anyone tells you. T is a common share of a huge corporation but I see this 5.8% cheaper and safer than said...Detroit, Philly, Washington DC, Chicago, or all of California Munibonds. (on a side note some of these munibonds are crazy. I saw one on my Edward Jones account with a 8% yield but BB- by Moody).    

  1. Rational #2: DirectTV.
    1. You probably read a billion articles on the merger. Here's something fun from T's CFO last meeting
      1. 21 million wireless customers that don't have DirecTV.
      2. 15 million DirecTV customers that don't have wireless.
      3. 3 million DirecTV customers that don't have broadband product.
      4. 57 million broadband platform previously without a video offering from AT&T.

  1. Rational #3: AT&T Mexico/South America
    1. T will spend 3 billion dollars in Mexico. The project profit will be
      1. 40 million new customers by end of 2015.
      2. 75 million new customers by 2016.
      3. 100 million new customers by 2018.

  1. Rational #4: The Internet of Things (IOT)
    1. This is a very sophisticated subject. What is IOT? Basically taking anything electronic and shoving it into the cloud or internet or whatever you want to call it. I personally call it the Al Gore machine.
    2. You might have already seen some of T's IOT. Many new Chevy cars have internet in them. This internet is provided to you via T!
    3. The IOT market is currently a $656 billion dollar market and will grow to $1.7 trillion in 2020.

Risk:

Every company has risks. There is no such thing as a risk free stock.

  1. High Debt: I mean really really high debt. T is going on an infrastructure building spree and using debt+ majority of free cash to pay for its expedition. T is the boring-est riskiest telecommunication company.

  1. Forex: T expects a large part of its future revenue to come from mexico. Pesos vs dollars forex.

  1. Competition: S, VZ, TMUS, everyone else in the world.

  1. Technology: Land lines are dead and cell phones are on its way. T still receives a large part of its revenue from cell phone bills. T is diversifying but will it be fast enough?

  1. DirectTV synergy: Will DirectTV produce the income T is expecting? Who knows.

My forward 12 months dividend currently stands at $2,022.60 + FCISX distribution. Portfolio updated.

*Again I’m not an expert and you should not buy based on my opinions. Here is a FAST Graph I stole from SA.


Thursday, September 24, 2015

Loyal3 $500 buy


In the past week I bought the following stocks in my Loyal3 account.

Ticker                 $ invested          Cost         
WalMart              $100.00           $63.03 

Disney                $100.00           $101.87 

Pepsi                  $100.00           $92.19

Unilever              $100.00           $39.28

Starbucks           $100.00           $56.92

My forward dividend increased by $12.00. Forward 12 months dividend stands at $1,962.44 + FCISX distribution

No more buys from me for the rest of the month. Time to save up capital for when the government shuts down. Fun fact: the SPY actually rose when the government shut down in 2013...but i sure hope GIS, MO, JNJ, PEP, UL, and PG don't. 

Thursday, September 17, 2015

Recent Buy: ADM



On September 17, 2015, I bought 25 shares of ADM at $44.49/share + fees for a total of $1119.25.

Nothing changed since my last buy. This is a good low PE company with a long history of dividend increase/stock buy back and steady eps. 

Instead of repeating fundamentals, payout ratio, etc. Let's talk about why I am heavy on ADM over K, GIS, KHC, or any other food company.

1) let's talk about food trends. 

From the Nielsen's 2015 Global Health & Wellness survey:  

  •  88% polled are willing to pay more for healthier food
  • All demographics are willing to pay more for healthier food including GMO-free, no artificial coloring/flavor, and "natural."
  • Consumers want "functional food"
    • 36% want more fiber 
    • 32% want more protein 
    • 30% want whole grains 
    • 30% wants fortified calcium 
    • 30% wants vitamins 
    • 29% wants minerals 



2) Let's talk about food companies.

GIS is rolling out gluten free, fortified vitamin and mineral cereals. 
K is doing the same.
KHC is going the "natural" route. 
UL has gone and is continuing to go the "natural" route.
KO and PEP are both going the natural sugar route.

All are looking for ways to beat their competitors in flavor and secondary benefits. Who will win and who will burn? I don't know. I want to get involved in this food trend but I don't know who to choose. I will eventually own all of these companies but paying for these P/Es is a big risk. So I chose a company that all will need. I basically bet on all the horses.


3) ADM products 



Wild Flavors was bought by ADM in 2014 for $3 billion dollars. According to its website, Wild Flavor is known for 


  • Resolver Technology - A natural functional flavor based on a mix of natural flavors and flavor extracts. It neutralises undesirable off-notes of certain functional ingredients including a bitter, soapy, metallic or burning aftertaste.
  • SaltTrim - Allows food and beverage manufacturers to halve the amount of salt used in their products, making them healthier without impairing the taste.
  • Colors From Nature - A line of natural colors and plant extracts which allow for a wide variety of applications. The products use the authenticity and high quality provided by plant extracts along with the understanding that plant extracts contain original valuable components.

ADM other products 


4) ADM future potential 
  • Mass land grab. ADM main risk is farming. It's their money maker but their bane of existence. Some years yields are great (currently the Midwest and eastern US). Some years yields are bad (currently the western US).
    • to even the yield ADM is investing heavier in South America, Eastern Europe, parts of Africa, large plot lands in asia, some in Australia, and a little bit in New Zealand. 

  • Mass buying. ADM bought Wild Flavors in 2014. ADM just bought AOR NV in Europe for an undisclosed amount. ADM is now in the higher end/margin oil business in Europe; specifically Belgium, Luxembourg, and the Netherlands. 


5) But ADM is not risk free. Risk includes 
  • Forex: A large part of ADM revenue is coming from overseas.

  • Global warming: Let's just assume global warming is real. ADM crop yield will be significantly lower due to global drought.

  • Corruption. So...ADM has a history of corruption (but to be honest who hasn't)...but some of the executives during the corruption scandal are still with the company. The corruption involves bribing foreign officials for land use (Ukraine).

My forward 12 months dividend currently stands at $1,950.50 +FCISX distribution. I'm getting closer to $2000. Portfolio updated. 

*The comments on this blog are my opinion. I am not a financial advisor or anybody you should trust to buy or sell stocks.

Friday, September 4, 2015

August Review

Market went crazy again. Time to recession proof my portfolio but first let’s review August.


August’s Dividend


CORR
$40.37
OHI
$45.10
TIS
$6.30
KMI
$10.78
T
$27.73
FCISX
24.68
SBUX
$3.27
LTC
$3.57
AAPL
$1.56
DE
$10.20


Total: $173.56


Cash flow

Salary*
$4,644.93
Dividend
$173.56
Interest & online
$13.13
Total
$4,831.62


*3x paycheck month 

Deductions

Gas Bill
$36.83
Electric bill
$221.97
Water Bill*
$0
QT
$106.55
Discretionary
$156.77
Car payment
$435.45
Total
$957.57

* Paid last month 

Calculation


% saved
80.18%

Safety Net Total


Bank
$1,479.95
Capital One 360
$2,500.00
Scottrade Tax
$34,736.89
Scottrade ROTH
$1,743.53
Loyal3
$7,123.08
401k
$16,832.00
Edward Jones Roth
$6,583.48
Total
$70,998.93


Summary


  1. I received my first ever raise! An extra $1500 a year! I have worked numerous jobs in my lifetime but this is the first time anyone has ever given me a raise!
  2. I got a part time job as a clerk for a real estate firm. I work 16 hours weekends but I get an extra $300-$400 a month (after tax). It’s a six month position.
  3. I broke my 100 shares of KO goal for this year. I am thinking of finishing off 100 shares of ADM or UL but have not decided which yet. JNJ is currently 12% of my portfolio but I would not mind adding some more.     


Watch list of this month

  1. JNJ $90
  2. UL under $40.00
  3. ADM under $43.00