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.

Friday, June 30, 2017

Nike – Fiscal 2017 Fourth Quarter and Full Year Results

Nike (NKE) reported fiscal 2017 fourth quarter and full year results yesterday. The company presented really good growth.

  • Fourth quarter revenues up 5 percent to $8.7 billion; 7 percent growth on a currency-neutral basis*
  • Fourth quarter diluted earnings per share increased 22 percent to $0.60
  • Fiscal 2017 revenues up 6 percent to $34.4 billion; 8 percent growth on a currency-neutral basis*
  • Fiscal 2017 diluted earnings per share increased 16 percent to $2.51

Nike closed at $53.17 yesterday. If I calculate with the newly reported diluted earnings per share, it has a 21.18 P/E ratio.

As I'm looking at these growth numbers, I'm seeing a wonderful company, so I happily hold my shares and collect my dividends.

Disclosure: Long Nike.

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Thursday, June 29, 2017

Archer Daniels Midland – A Fairly Valued Dividend Growth Stock

The company founded in 1902 as Daniels Linseed Co. in Minneapolis, and changed name to Archer Daniels Midland Company in 1923. Today, they are one of the world's largest agricultural processors and food ingredient providers, with more than 32,000 employees in more than 160 countries. The company's primary business segments are Agricultural Services, Corn Processing, Oilseeds Processing and Wild Flacors and Specialty Ingredients.

Archer Daniels Midland (ADM) is a dividend aristocrat, which increased it's dividend in the last 41 years. So I think it has really good track record to look at it's numbers.

ADM increased it's revenue from $44.018 billion to $62.346 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 3.94%. 

Over the same 10-year period, the company's diluted earnings per share decreased from $3.30 to $2.16, which is a CAGR of -4.60%.

It's not so impressive, but take a look at a little longer period. ADM increased it's diluted EPS from $0.76 to $2.16 over the period spanning fiscal years 2004 to 2016. That's a compound annual growth rate (CAGR) of 9.09%. I saw that the company's EPS showing great changing from one year to another.

Despite of the changing EPS, the company is paying out a much more predictable dividend. As I mentioned earlier the company increased it's dividend in the last 41 years, with a ten year CAGR 12.08%. The dividend yield is 3.11% with the last closing price. ($41.14) It's higher than the ADM's five year average. (2.4%)
The payout ratio is 51.20% now, which is managable.

Because of the decreasing EPS and increasing dividend the payout ratio increased constantly in the last 10 years. (In the fiscal year 2007 the payout ratio was only 13.03%.)

The Debt/Equity ratio is 0.42, which is really good.

ADM has a 17.4 P/E ratio, which is slightly lower than the ADM's five year average (18.1) and it's below the stock market's P/E ratio. The forward P/E ratio is 13.92, so the company is expecting a better financial performance in fiscal year 2017, than in 2016.

What is the value of ADM?

I valued shares using the dividend discount model. I factored in a 10% discount rate and a long-term dividend growth rate of 7%.

That growth rate is roughly on par with the company’s long-term EPS growth rate, and I think it’s reasonable when also looking at the recent dividend growth or payout ratio. The DDM analysis gives me a fair value of $42.67.

Disclosure: I have no position in ADM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Saturday, June 24, 2017

Dividend Increase - Kroger

Kroger (NYSE: KR) announced that its Board approved a dividend increase from 48¢ to 50¢ per year. The next quarterly dividend of 12.5 cents per share will be paid on September 1, 2017, to shareholders of record on the close of business on August 15, 2017.

This means, that my YOC increased from 2.27% to 2.37%.

I think that today's prices offer a great opportunity for the management to repurchase the shares of the company. That's why I'm really satisfied with the announced $1 billion share repurchase program.

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Disclosure: Long KR.