Thursday, September 28, 2017

Whitbread - A Quality Company from the UK

I'm following a lot of companies from the US, like Kroger and TEVA, but this time I would like to introduce a quality company from the UK. Whitbread Plc (WTB) is the UK's largest hotel, restaurant and coffee shop operator serving millions of customers every week. They serve their customers through their two businesses: Premier Inn & Restaurants and Costa. Premier Inn has over 760 hotels in the UK, and also has hotels in the Middle East and Germany. Costa operates more than 3,500 coffee shops. It's brand include Premier Inn, Beefeather, Table Table, Taybarns and Costa Coffee.

(Source: Capital Market Day 2016 presentation)

The shares of Whitbread Plc are on the London Stock Exchange. The FTSE 100 and the FTSE 350 contains them.

Whitbread Plc increased it's revenue from 1.411 billion GBP to 3.106 billion GBP over the period spanning fiscal years 2006/2007 to 2016/2017. That's a compound annual growth rate (CAGR) of 8.21%.


Over the same 10-year period, the company's diluted earnings per share grew from 1.22 GBP to 2.31 GBP, which is a CAGR of 6.55%.


I think that it's really impressive from such a large company, so take a look at it's dividend.

The company increased it's dividend in the last 12 years, with a ten year CAGR 12.22%. The dividend yield is 2.59% with the yesterday's closing price. (37.02 GBP) The payout ratio is only 41.49%.


I think, that if I look at these numbers I see a good company, which worth further research.


Disclaimer: Long Kroger and TEVA

Friday, September 22, 2017

Recent Sell – Allianz AG

I bought a few shares of Allianz AG in 2016 after the Brexit referendum. That was a good timing, because of the panic at the stock market. I sold that shares a few days ago, because I think, that the valuation of the company's shares are really high.

When I bought the shares, the P/BV was 0.85 and the P/S was 0.52, but now I calculate P/BV 1.31 and P/S 0.75. If I look at the historical data, I can only see such high values in 2007. So this two ratios show me, that it is better to realize my profit.

But what I would expect from the company if I hold the shares? Allianz increased it's revenue from 92.183 billion to 110.500 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 0.89%.

Over the same 10-year period, the company's diluted earnings per share decreased from €17.71 to €15.00, which is a CAGR of -1.12%.



 I think that it's not so impressive from a company, so take a look at it's dividend.

The company increased it's dividend in the last 4 years, with a ten year CAGR 7.18%. The dividend yield is 4.12% with my selling price. (€184.35) The payout ratio increased in the last 10 years.

These numbers show me, that the company's numbers are stagnating, and I won't expect great long-term returns from it. It was a good value play for me, but at today's prices I think that I will find muh better investment opportunities for my money in the next few months.

Sunday, August 27, 2017

Watch List for September

In the last days I was thinking about what share would I buy in September. I am monitoring a lot of candidates, but I choose four dividend paying companies.

Qualcomm (QCOM) engages in the development, design and provision of digital telecommunications products and services. It operates through the following segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). Qualcomm pays out $2.28 dividend per share, and increased the dividend in the last 15 years, with a ten year CAGR 16.50%. The dividend yield of the company with the last closing price is 4.38%.

W. W. Grainger (GWW) is a distributor of maintance, repair and operating (MRO) supplies and other related products and services. The company raised it's quaterly dividend by 4.92% to $1.28 per share. This marked the 46th consecutive annual increase for W. W. Grainger. Over the past decade GWW has been able to boost annual dividends at a rate of 15.80% per year. This was supported by an increase in earnings from $4.94/share in 2007 to $9.87/share in 2016. The company has a sustainable dividend payment, and is fairly valued at 15.40 times forward earnings, while yielding 3.20%.

Kroger Company (KR) operates supermarkets, multi-department stores, jewelry stores, pharmacies, fuel centers and convenience stores in the United States. The company increased it's dividend in the last 12 years, with a ten year CAGR 16.50%. The dividend yield is 2.30% with the Friday's closing price. ($21.74) The payout ratio is really low, it's only 27.60%.

The Walt Disney Co. (DIS) is a diversified international family entertainment and media enterprise. It operates through four business segments: Media Networks, Parks & Resorts, Studio Entertainment and Consumer Products & Interactive Media. The company increased it's dividend in the last 7 years, and the ten year dividend growth rate is 18.80%. The dividend yield is 1.52% with the Friday's closing price. ($102.41) Generally I like companies which have at least 10 years consecutive dividend increases but DIS is an exception. It has powerful brand what doesn't need explanation if you have a child.

Full disclosure: Long KR.

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Thursday, August 10, 2017

Recent Buy – TEVA - 2

A few days ago I wrote about my purchase of TEVA shares. The share price continued the falling, and I was thinking about the company's prospects. I think that the company's debt is managable on a long term horizont, but the short term financial ratios are not so good. That's why there are so many articles about the company's short term financial problems and the probability of bankrupcy. But I think that they can manage the short term problems and they will get large support from the Israeli Ministry of Economy.

I think that the black clouds will go away, but it needs long time. I bought a few more shares at $18.05. I know that it is a very risky investment, but I believe that the company worth more.


Full disclosure: Long TEVA.
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Friday, August 4, 2017

Recent Buy – TEVA

Teva Pharmaceutical Industries Limited (TEVA) is a pharmaceutical company. The Company is engaged in developing, producing and marketing generic medicines and a portfolio of specialty medicines.

Yesterday TEVA reported second quarter 2017 financial reports, lowered the 2017 business outlook and announced second quarter 2017 dividend of 8.5 cents, down 75% from 34 cents in the first quarter of 2017. Because of the negative news the share price of TEVA presented a huge decline, and it closed on $23.75 (-24.00%).

As I saw this decline of the share price, I decided to buy a few shares of TEVA and I successfully bought it at $23.97.

The company has 224.06 P/E ratio, but the forward P/E ratio is 5.05. TEVA has 0.76 Altman Z-Score, which means that it is in Distress Zone. The Debt/Equity ratio stands at 1.14, but most of them are long-term debt. (LT Debt/Equity: 1.08) I understand that the most of the investors don't like the dividend cut, but I think that the dividend cut will help the company to decrease the debt pile. I know that it is a very risky investment, but I believe that the company worth more.


Full disclosure: Long TEVA.

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Thursday, July 13, 2017

Investing in ETFs to Track the S&P 500 or the Nasdaq 100

Investing in ETFs becomes really popular in the last few years. But, do you know, what are you buying when you are investing in an S&P500 or Nasdaq 100 ETF?

If I want to put $10,000 into S&P 500, I will invest $365 in Apple (AAPL), $260 in Microsoft (MSFT), $190 in Amazon (AMZN), $177 in Facebook (FB), $170 in Johnson & Johnson (JNJ), $164 in ExxonMobil (XOM) and the rest of the sum into another 494 companies. So the S&P 500 index is not equally weighted. The weight of the six largest members are 13.26%.

If you are curious about the full list you can read here: S&P 500 Companies by Weight.

The Nasdaq 100 shows greater concentration than S&P 500, and the weight of the six largest members are 42.01%.

If I want to put $10,000 into it, I will invest $1,160in Apple (AAPL), $826 in Microsoft (MSFT), $727 in Amazon (AMZN), $561 in Facebook (FB) $927 in Alphabet (GOOG and GOOGL) and the rest of the sum into another 94 companies.

You can read the full list of Nasdaq 100 here: Nasdaq 100 Companies.


Disclosure: Long XOM.

Monday, July 10, 2017

A Good Article to Read: Buying Stocks Solely For Dividend Yield Is a Poor Bet

What are the main variables of the return you receive from a stock? The return of a stock depends on three variables: earnings growth, P/E change, and dividends. You need all of them for a good return. If you think that you need only a good dividend yield, I recommend you to read the Marketwatch article: Buying stocks solely for dividend yield is a poor bet.