You probably know me for looking for special occasions when buying shares. Well investing is like statistics. Investors don’t want neither buy shares which then goes down, nor want they not buying shares which then goes up. Well, if you are appraised versus benchmark then both cases are negative. If you are long term DGI investor then the main issue is not loosing money!
Recently market went down a little bit and I saw in my valuation spreadsheet that some names are much closer to my investable level (I start looking closer when name is by less than 10% from my investable level, so no it is MCD, TGT, BEN, TROW, GWW, GILD, CAH). Well, I exclude BEN and GILD as I am a shareholder and for now I do not want to invest too much in one stock. Diversification is important.
Let’s look a little bit closer.
MCD – valuation for next year is 18 times earnings and 12 times EBITDA. Dividend yield is 3.7% for next year. Well from dividend perspective it is definitely getting attractive. While looking at recent news at Investopedia or MarketWatch people are rather reluctant and sentiment is bad. Well – generally I like it and I see it as a long term opportunity. Results are to be presented tomorrow, we will see. I keep my fingers crossed for bad results!
TGT – 13 times earnings and 7 times EBITDA, dividend yield 3.7% for next year. Company is traded way below WMT (15.4 and 7.8 respectively), but in my opinion WMT is developing strongly in e-commerce an TGT has not the same power. Long term I definitely prefer WMT to TGT, year-to-date performance is -5% so there is potential for further drop. Sentiment is also bad (which is good), but there is also another issue – I do not want to have too much sector concentration. I will have to think about trade of selling WMT and buying TGT, but for now I prefer to wait for earnings (planned to 16 November).
TROW – I wrote about asset managers few times, still prefer BEN to TROW (+ I do not want to have too much sector concentration)
GWW – tough question whether it is time to buy. You can see that company is traded below my investable level, oil price is going up, but on the other hand I do not feel company so good (although I wrote few posts). Results were above expectations, shares are down… OK, fourth quarter should be weak, but still it is within guidance. And prospects are getting better, don’t they?
CAH – well, I wrote about company not far ago and share price is flat since that time. Risk of elections is reduced in my opinion, so maybe I should increase my investable level. Also what is important in case of CAH – look at volatility. Company is relatively a safe bet (comparing to e.g. BEN which has a higher beta). Well… market please give me some 5% more discount and I will buy!
Summing up, as you can see above there are some potential buys for me. Well, comparing to times when I saw nothing to buy it is definitely a progress. The only problem/risk is that I am looking at 2017 consensus earnings. Maybe consensus is too high?
Disclaimer: long WMT, BEN, GILD