Tuesday, February 20, 2018

One Eye on the Future, the Other on the Crystal Ball

Patient Gremlin here to chat about the stocks I am currently watching.  Its been a hectic month so far, thankfully its almost done.  Little Gremlin has decided that sleep is not always his thing, though clearly it should be.  On top of that are the numerous birthday parties and events that seem to run up until the end of this month.  March will be a welcome reprieve from all of this.  In the meantime, at least the Olympics are happening.  I am always a big fan of them, regardless of the absurdity of the event.  For instance, I like watching ski jump, luge, skeleton, bobsled, but I am curious as to when did people think any of these were reasonable modes of transportation?  Clearly they are not, but they are as always entertaining.

The market has been superbly unpredictable.  I have stated online and to friends that I believe a serious correction (or worse) is knocking on our economic doorstep.  The overall economy, both globally and in the USA, has been rocketing upward.  That cannot continue forever.  Indeed, there are many avenues through which a small meltdown could occur - crypto-currency instability, real estate development (number of issues here), car debt, low savings  rate, etc.  Pick your poison, one of them or something completely unexpected, will throw a wrench in the gears.  History shows these things often surprise the vast majority of people and experts at the time, so my bet is on whatever is farthest out in left field.

Considering all of that, what am I looking at in terms of future investments?  Below are a few stocks from different sectors that I have a strong eye on heading into the end of February and beginning of March:

Basic Materials:

Eastman Chemical (EMN): Current (TTM) PE = 9.90, yield = 2.24%

EMN is a diversified chemical company.  They have an 8 year track record of dividend raises, which are consistently in the double digits.  Despite being an American company, most of their revenue comes from abroad, especially Asia.  This is a novel source of income for US based companies.  The company is unique itself, having started as a spinoff of the now sad Eastman Kodak in 1920.  It produces chemicals, plastics, and fibers in seven countries.

Celanese Corporation (CE): Current PE = 16.75, yield = 1.80%

CE, much like EMN, is a chemical corporation with an 8 year dividend raising track record.  However, it lacks the big name history and is more focused primarily in the coatings and adhesives sub-sector.   CE has a lower yield as EMN, despite similar payout ratios.  Still, CE has managed to put down monstrous 20+% increases over the last 7 years. 

Consumer Staples:

Hormel (HRL): Current PE = 21.55, yield = 2.18%

HRL has managed to increase dividends for 52 years, and averages double digit (mid-teen) raises annually over the last 10 years.  That is just nuts.  Their main products are pork, turkey, and other meats.  Its valuation is indicative of the quality that surrounds this company.

Diageo PLC (DEO): Current PE = 19.67, yield = 2.46%

This London based company has raised its dividend annually for the last 25+ years, paying them semi-annually in GBP.  They make liquor (mostly), wine, and beer.  When times are good people celebrate and drink.  When times are bad its a different emotion with the same outcome.  This is a rain or shine stock, and one I have been watching closely for sometime now.


Bank of Montreal (BMO): Current PE = 12.25, yield = 3.51%

BMO is the least flashy bank of the big 5 in Canada.  It is the least invested and exposed to explosive housing growth there, and its more or less the slowest growing.  However, it is rock solid.  The yield is excellent and growing consistently.  Additionally, it has a significant exposure to the US market allowing it to hedge both nations.

Toronto Dominion Bank (TD): Current PE = 19.67, yield = 2.46%

TD is the most conservative of the Canadian banks, though it is not the largest.  Sure the yield is lower than its neighbors, but the extra serving of growth they have with it covers that up nicely.  It has excellent exposure to the US market too.  However, what I like most is their risk tolerance.  This would probably be the best balance to my more risky Canadian Banks: CIBC (CM) and Bank of Nova Scotia (BNS) at this point.

What stocks are you looking at right now?

- Gremlin
- Long BNS and CM