Attractive Stocks For July 2018

I’m back again. This is my first blog post in two weeks, unfortunately. 🙁 I would have loved to write a post earlier in time but had to dedicate most of my spare time on studying for the last exam of my first year of the post-master education IT Audit & Assurance.

The last two weeks I’ve been thinking about my strategy for the upcoming six months, because I have to save a lot of money for the second year of my post-master education. So, I’m inclined to invest half the amount of money I usually invest every month. Another argument for holding back a bit is I’d like to have some extra money to invest in stocks if the financial markets get more turbulent as a reaction to the upcoming trade war between the U.S. and China, Brexit, Italian economy and so forth. Right now, I fully invest all my monthly savings in dividend growth stocks. So I’m shifting a bit towards timing the market instead of the very rewarding principle time-in-market. This shift is actually against my philosophy to monthly invest my savings in order to fully benefit of the compounding effect, but I like to be in a more comfortable position when stock prices go down. This means I’ll probably invest about $700 a month in dividend growth stocks. That’s still a nice amount for the remainder of 2018, but defintely less than my target of a monthly $1.000.

So for the month of July… What am I thinking of? Although stock prices have gone up for consumer staples like Clorox (CLX), PepsiCo (PEP) and Procter & Gamble (PG) the last couple of weeks, companies like General Mills (GIS) and Kimberly-Clark (KMB) are bouncing back to price levels which I think make them attractive again. They’re yielding around 4% and have a low single digit forward growth rate. If GIS gets down to a price of $41 I’m willing to make a deal with this guy Mr. Market. I think the sentiment on GIS will prove to be too negative in two years time. The market was also very negative about two years ago on Target (TGT), T. Rowe Price (TROW) and VF (VFC), remember? And look where they’re trading right now. Earnings, revenues and cash flow are up again in contrary to the headlines and analysts’ consensus. That’s the beauty of investing in companies which have grown their dividend twenty, thirty, or fourty years. They withstood multiple challenges along the way and know how to ride the storm. That’s why they’re able to grow their dividends every year.

Another strong candidate is, off course, AT&T (T). The merger has been approved, but some worries remain about their growth rate, free cash flow and debt levels. Their business model definitely improved by their merger with TWX, so I’m not too worried about their payout ratio. Free cash flow will go up significantly. Besides, their first quarter results are always on the low side as compared to other quarterly numbers. I’m about 15% red on my position with an average price around $36. So by buying T I’m also lowering the average price of my position. That’s a nice side-effect.

Delta Airlines (DAL) is also on my radar. This airline company increased their dividend lately with 15% and trades around 10 times earnings. They’re able to hedge against rising oil prices because of their refinery and will benefit from the growing U.S. economy. Right now I own a half position and would like to buy some extra shares. Southwest Airlines (LUV) was also on my watchlist when they traded for $50. They yield slightly above 1%. This is a company which will never trade for a dividend yield of 2.5% so it’s likely to never be a real candidate judged by this measure. But their dividend growth rate is massive (5-year YoC 10.03%), the dividend payout ratio extremely low (8%), their management is known for their extraordinary customer focus and the stock price has gone up 300% in three to four years.

For me, the finalists are GIS, T, DAL and LUV.

What did you buy, are you going to buy and which company would you advise me to buy in this hot month of July? 😎

In case you’re interested, I passed my exam. There was only one guy with a higher grade. 😊 👊

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15 thoughts on “Attractive Stocks For July 2018

  1. Nice list for consideration!

    I initiated and added on Abbvie and opened up a position in IRM.

    Loving me some more T and GIS maybe as well. I’m bothered by their dividend freeze for 2018/2019.

    Good luck with Mr. Market!

    Like

    • Hey Mr. Robot!

      Nice addition. I forgot about that one. Below a price of $90 this is definitely a good alternative. Their annual rate of return is amazing. Humira is still a cash cow and their pipeline looks very promising. So their future annual return rate remains attractive imho. At the same time, the stock price may come down further because of the pressure of the Trump administration on drug prices.

      Their dividend yield is about 4.2% right now. Man, what a nice comment! 👊

      Good luck with this one

      Like

  2. First of all grats for passing your exams!

    I will be mainly focussed on EUR stocks for the reminder of the year. My share of USD stocks is at almost 60% of my portfolio, because I considered the USD/EUR exchange rate in combination with interest fears on the market a good moment to buy US REIT’s and infrastructure shares.

    On my watch list I have Sanofi, Unilever, Nordea Bank, l’Oreal, LVMH, Bayer, Recordati and Danone.

    Danone and Unilever are favorites at the moment for me, mainly because I want to add some companies producting consumer goods which are owning strong brands.

    Like

    • Such a cool name you’ve chosen!

      Sounds like a good move to invest in EUR stocks for the upcoming months. Just like you I was all over the US Reits in 2017. I think their stock prices will go up significantly when the market sentiment on real estate, fears of the impact of rising interest rates and the Amazon-effect gets more reasonable.

      You have a nice list of European companies over there. LMVH and UL were on my watchlist a while ago. LMVH is a terrific company! Besides, it’s fun to own this company with their luxury products. You’re benefiting from the extraordinary spending habits of the rich and famous. The name of Recordati is new for me, is this an Italian company?

      I think investing in cosumer staples is also a nice hedge against the escalating trade wars if you like your net worth to be stable. With Sanofi and Bayer you also have excellent candidates. I guess Sanofi and a consumer staple would be my finalists.

      Good luck with your pick(s)! 😀

      Like

      • Recordati is a relatively small Italian pharma company (6B market capitalization). Pretty nice growing figures last few years. I don’t have a position in this company yet, but I like it a lot for how it’s growing itself in combination with a much more attractive PE ratio than American healthcare companies.

        Learned about this stock from a italian blog I follow by translating posts with google translate. I enjoy reading local blogs to learn about companies I would never find on Dutch or English language sites.

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  3. nice list compound.

    I dunno about airlines, they arent my thing personally. Oil prices are getting higher and if a recession hit, travel would be the first thing to be cut.

    I own gis and would consider more. Loading up our tfsas atm so got to be canadian stocks. Im torn between bank of nova scotia and manulife financial.

    look forward to seeing what you choose.

    congrats on your exam btw. killing it!
    cheers

    Like

    • I understand you’re not investing in airlines. It used to be an unprofitable business, but I think the business sector has changed by the many takeovers and acquisitions. It’s wise to not put your money in stocks you’re not comfortable with.

      Bank of Nova Scotia is also in my bucket. It has done pretty well for me. They always deliver. Another fine candidate would be TD. I’m not familiair with Manulife Financial so I’m going to read more about that company.

      I was not so sure about GIS before, because of their product portfolio and the price of their takeover of Blue Buffalo. But as I wrote above, they will eventually find a way to get it straight.

      Looking forward to your buy this month. I will check your twitter account for your blog post.

      Thanks for your comment, really appreciated! 👍

      Like

    • Two very interesting candidates indeed if you have a long term view. Hopefully GIS returns to the low 40’s next week. I’m also inclined to add to positions which are down the most in terms of %’s. Looking forward to your pick for July! 🙂

      Like

  4. Similar to Mr. Robot, we recently initiated a 20 share position in ABBV via two purchases. As you mention in your post, T is very attractive right now. But we’ve been looking to diversify across our individual holdings (of which we only now have 2 dividend paying stocks).

    The airlines are an interesting choice as well. However, of the two you mention, those appear to be strong candidate among their respective peers. Then again, it’s not hard to be more liked than United right now – especially in the States.

    Thanks for the post. – Mike

    Like

    • Thanks for stopping by, Mike. T is definitely on my watchlist. Their Q2 earnings report was a mixed bag. I’m still convinced patience will eventually reward us with a nice increase in stock price and a steadily increasing dividend in the low single digits for years to come.

      It’s nice to read that ABBV is on the watchlists of many dividend growth investors these days. They will hit the $100 number again, so we better take advantage of this dip. 💪

      Like

  5. Congrats on the exam news! GIS is an interesting choice right now, so thanks for brining that to my attention. I’m also a fan of CMI at the moment and will buy if the yield gets close to 3.5%. I think that entry point would be $130/share. Happy shopping!

    Bert

    Like

    • Thanks for the kind words. GIS is indeed a good candidate right now. Their yield is very attractive. But you have to take into consideration they need some time to get Blue Buffalo fully incorporated and integrated in their business model. Luckily, as dividend growth investors we’re patient investors.

      CMI is also a terrific company. Their latest dividend increase supports an additional investment. Good choice.

      Good luck with your pick, Bert 👍

      Like

  6. A lot of good names there you can’t go wrong with. I know many of them well having been a long time holder.

    On a different note, I teach a masters class called Auditing and Assurance services. I don’t focus much on the IT side. It’s more the basics of financial statement auditing for accountants/CPAs.

    I see some familiar friends in the comment section above. Mr. Robot is such a good dude. Both of you from the Netherlands I think?

    Tom

    Like

    • Hi Tom, thanks for stopping by.

      How interesting! I’ve worked for one of the Big4 a couple of years so I’m pretty familiair with financial statement audits and audit techniques. This knowledge and experience helps me a lot with this postmaster education as IT Auditing has long been (only) regarded as a tool for auditing financial statements.

      We’re both Dutch indeed. It seems the Dutchies are well presented in the DGI community although we’re a very small country. ☺️

      Like

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