Is there really going to be a taper around the corner or not? Regardless of the answer, equities are definitely the way to go as long as you are buying smartly. During this past week I have been making capital purchases in Occidental Petroleum (NYSE:OXY), The Walt Disney Company (NYSE:DIS), Eaton (NYSE:ETN) and making a dividend reinvestment in JPMorgan Chase (NYSE:JPM). During this past week the market as measured by the S&P500 was up 1.07% and with that in mind I'd like to see if we can pick up more of each of the four stocks I mentioned using actual capital funds.
While the S&P500 was up 1.07% for the week of July 29, 2013, JPMorgan Chase was up 0.79%. The purchase I made on the stock was not of the additional capital variety, but was of the reinvested dividend kind. This week was a very busy week for the company as it ended up paying $410 million to settle FERC charges of energy market manipulation in California, and the Midwest; this settlement doesn't even put a scratch on the company as it makes that amount in a day practically. The Senate Subcommittee on Investigations has opened a probe on physical commodity market manipulations against JPMorgan Chase and it wouldn't surprise me if the same thing happens in this situation as did the energy market manipulation situation.
Chase is inexpensively valued at the moment based on future earnings (forward P/E of 9.19) but fairly priced based on growth (PEG of 1.59). Personally I like to buy on future earnings of 17 or less and PEG of 2 or less, which makes Chase desirable to me. The last time I wrote about the company on July 3, I said that I may trade out of the stock and move into a regional bank such as M&T Bank (NYSE:MTB) or an investment bank such as BlackRock (NYSE:BLK) but I have yet to make such a move. Looking back on that prognostication Chase was the runner up to BlackRock since the July 3, write date losing out to BlackRock 11.59% to 6.99%. I'm going to continue to practice patience with Chase because the company reported a pretty good quarter back on July 12.
While the S&P500 was up 1.07% for the week of July29, Occidental was down 2.02%. The purchase I made on the stock was of the capital variety, but it wasn't my normal portion that I buy. The small batch that I purchased was done so after earnings. Not much happened at the company during the week other than earnings, but that earnings miss was pretty big. The big speculative news that will drive the price of the stock anywhere in the near future is any talk about a spinoff. But that shouldn't be the lone reason why anyone buys into the stock; you should buy into the stock because it is a great company with a great dividend yield and payout ratio. Occidental is inexpensively valued at the moment based on future earnings (forward P/E of 11.98) but expensively priced based on growth (PEG of 2.84). Personally I like to buy on future earnings of 17 or less and PEG of 2 or less, which is why I didn't buy a whole lot when I made my last purchase. As I stated when I last wrote about the stock, I'd like to see higher short-term earnings growth to make it a bit more attractive or see the price drop for me to make a whole purchase.
The Walt Disney Company
While the S&P500 was up 1.07% for the week of July 29, Disney was up 2.35%. The purchase I made on the stock was of the capital variety, but it wasn't my normal portion that I buy. I only bought a small batch because I knew earnings were coming up on August 6. I try not to buy big lots of a stock right before earnings. Some notable headlines that occurred during the week included Disney's Touchstone releasing news that it will put out a movie about Wikileaks, the popular website that details conspiracies. Senator John McCain is trying to force a bill through the Senate, which would force cable and satellite providers to provide a la carte programming. I for one wouldn't mind paying for an a la carte option with my cable provider because I really don't need all the channels that are provided to me. This option means that companies might lose out on ad revenues and the like, but it definitely benefits the consumer. Disney is fairly valued at the moment based on future earnings (forward P/E of 16.77) and also fairly priced based on growth (PEG of 1.63). Personally I like to buy on future earnings of 17 or less and PEG of 2 or less, but as I stated when I last wrote about the company I'd like to see the price of the stock itself come down a little for it to be more attractive. I ended up practicing patience and buying a small position in the stock at the end of the week. This is a great dividend stock but only pays once a year, which doesn't make it too desirable for dividend growth investors, but it doesn't bother me one bit because I know Disney will be here in the next 20 years as it was here in the past 20 years putting smiles on children of all ages.
While the S&P500 was up 1.07% for the week of July 29, Eaton was down 2.9%. Much like Occidental, Eaton was crushed on earnings. Not only did the company miss on earnings, but it lowered the top end of its earnings guidance for the year. The earnings miss shouldn't take away from this great dividend-yielding company; it yields 2.53% on a payout ratio of 48% of earnings. The company went ex-dividend on August 1, with $0.42 per share. Much like Occidental not much else occurred at Eaton during the week other than earnings. Eaton is inexpensively valued at the moment based on future earnings (forward P/E of 12.79) but fairly priced based on growth (PEG of 1.67). Personally I like to buy on future earnings of 17 or less and PEG of 2 or less, which is why I believe this is a great company. I believe the price of the stock got way ahead of itself and was brought back down to reality after earnings, which is why I believe that I will begin to purchase some more in the stock shortly.
No matter if we get the rug pulled out from underneath us with interest rates or not it is important to invest in the stocks of companies that have excellent dividends, protection of said dividend, and great growth prospects along with excellent fundamentals. Each of the companies I mentioned here exhibit these qualities but Occidental is the one that I would practice more patience with and hope to see a price drop before purchasing a big lot of the company.
Disclosure: I am long OXY, JPM, DIS, ETN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing.