October 2013 Purchase Discussion

October 2013 Purchase Analysis

As I mentioned in my last post, I need to make about 6 or 7 stock purchases and I feel that timing wise, based on my past experience, October is the best time to buy.  It seems that every year, something happens in the fall to bring the market down and make buying attractive.  This year it seems to be the continued bungling of the US legislators playing their usual political games with little regard for the impact on the economy, and by extension, the stock markets.  The world is getting tired of this as evidenced in this article:

http://www.huffingtonpost.com/2013/10/05/world-us-government_n_4047613.html

I am waiting for some direction to emerge from the school yard antics of those responsible for governing the world’s largest economy.  There will likely be some kind of resolution in the near future that will allow the markets to find direction as always eventually happens.  When that happens I will make my purchases.

That’s my current thoughts on market timing.  I may miss the bottom or I may buy in advance of the bottom as you can never hit it perfectly, but my October purchases have always done OK. Here is my April assessment of my fall purchases in case you haven’t seen it.  The picture today is even rosier.

https://sites.google.com/site/borgfordbos/investing/april-2013-update

Now that I have estimated my timing of purchase, the next challenge is to decide on which purchases to make. Again this is a bit of a timing question as all the stocks I suggest are good stocks to own, but are not always the best stocks to buy at any given time.

When deciding on what individual stocks to buy I look at several factors. First they have to screen in with the A++ rating, good dividend and dividend growth.  That gives us the 39 stocks in my last update.  I then look at things like PE ratio, dividend yield, dividend growth, those two numbers combined, price/sales ratio, price/book ratio, gains in the past year, is the stock off its highs, what does ValueLine think of growth prospects.  I just did a rudimentary scoring of all those factors to try to assess which stocks seem to be best positioned at this time.  Given my unscientific approach, I came up with the following ranking with my simple scoring system:

Company   Name

Ticker

score

Total   ADR

TOT

        87

Intel   Corp.

INTC

        92

Cardinal   Health

CAH

     125

Royal   Dutch Shell ‘A’

RDS/A

     133

Lockheed   Martin

LMT

     136

Wal-Mart   Stores

WMT

     141

Chevron   Corp.

CVX

     141

Deere   & Co.

DE

     146

AT&T   Inc.

T

     155

Gen’l   Dynamics

GD

     156

Northrop   Grumman

NOC

     163

McDonald’s   Corp.

MCD

     165

Exxon   Mobil Corp.

XOM

     173

Occidental   Petroleum

OXY

     173

Verizon   Communic.

VZ

     174

PepsiCo,   Inc.

PEP

     174

Medtronic,   Inc.

MDT

     174

Int’l   Business Mach.

IBM

     179

Novartis   AG ADR

NVS

     179

Texas   Instruments

TXN

     194

Procter   & Gamble

PG

     196

Raytheon   Co.

RTN

     197

Home   Depot

HD

     200

Johnson   & Johnson

JNJ

     200

Smucker   (J.M.)

SJM

     202

Du   Pont

DD

     203

Illinois   Tool Works

ITW

     207

Automatic   Data Proc.

ADP

     210

Coca-Cola

KO

     212

Travelers   Cos.

TRV

     213

Kimberly-Clark

KMB

     214

Pfizer,   Inc.

PFE

     216

Baxter   Int’l Inc.

BAX

     218

Unilever   PLC ADR

UL

     218

Emerson   Electric

EMR

     222

Merck   & Co.

MRK

     222

Colgate-Palmolive

CL

     240

Bristol-Myers   Squibb

BMY

     247

3M   Company

MMM

     256

 

Again, these are all good stocks to own, but I’m trying to assess which ones to buy now.  Using this ranking, I am going to assess the top 10 or so and see if I can weed out any that might be unattractive for any reasons.  Here is where I bring in some of the qualitative assessments that many “experts” might opine on the target stocks. One of my sources is the regular updates I receive from Seeking Alpha, a dividend investor’s website:

http://seekingalpha.com/

Each of the stocks above have their own compelling reasons to buy and to not buy, but I will likely select from the top 10 or so.

 

Here is my pros and cons of the top few stocks:

 

TOT – I already own a considerable position on this stock and it took a long time for it to show any returns for me.  It has a nice high dividend (over 5%) and over 15% dividend growth, a very low PE ratio and considerable appeal on the other factors.  ValuLine estimates an annual capital appreciation of 14% at the low end, but it is trading near its 52 week high.  I will consider increasing my position in TOT

INTC – there are lots of conflicting opinions on Intel.  You will find as many people who say sell as you will who say buy.  But it does have a compelling dividend history.  It is trading down 12% from its 52 week highs and seems to offer considerable upside, while it still may have some downside.  I already own a big position, but am considering increasing my position.

CAH – As I mentioned in my previous report, this one has just surfaced with the inclusion of lower dividend yields in my screening.  At 2.3% it is lower than most of my other dividend yields.  But it seems to offer some upside.  It is in an area of health care that I don’t currently have and it appears that US health care stocks are poised for growth in the next few years according to some “experts”.  If I get this, it is a minor deviation from my current strategy, mainly due to the lower yield and an expectation of capital growth, which usually doesn’t factor into my decisions.

RDS/A – I own a big position in this stock but it carries the same attraction as TOT.  Given my current exposure to the oil industry, I would buy TOT or RDS, but not both.

LMT – has seen a 40% and more increase from its 52 week lows and is trading near all-time highs.  But the high dividend and dividend growth make it attractive.  ValuLine has a low growth estimate on LMT compared to other stocks.

WMT – dividend is a bit low, but it has good dividend growth.  It is over 8% off its highs and ValueLine sees a 13% annual growth at the low end.

T and VZ – I think at least one of these should be in a portfolio. I own a considerable amount of AT&T.  AT&T comes out ahead on most measures and both are well off their 52 week highs.  On the downside, ValueLine doesn’t see big capital growth and both have low dividend growth.

MCD is a great stock with a good dividend and dividend growth.   It is over 8% off its highs and should be a good buy at $95 or less.  As it approaches $100, it becomes less attractive as a current purchase.

 

These are the stocks I’m considering for this month.  Again the others are great stocks, but I’m not sure that they  are good purchases at this time.

I will post my actual purchases when I make them.

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About borgford

Feel free to contact me with questions: brianborgford@hotmail.com
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