Seeking Alpha
Long only, value, growth, dividend investing
Profile| Send Message|
( followers)

Summary

  • KLA-Tencor won my Dividend Portfolio Super Bowl back in January and has a strong chance of repeating. The stock has performed really well this year.
  • Goodyear is my dark horse pick to beat KLA-Tencor and has performed well since initiating my position.
  • Williams-Sonoma is also another favorite of mine having annihilated the past two earnings reports but I feel the industry it operates in will slow down at year end.

It's that time of year again… The summer solstice has passed, some schools are about to begin their fall semester, and most importantly, football season is upon us! A lot has happened in 2014, we saw an emerging market crisis in January which saw the S&P 500 (NYSEARCA:SPY) drop by about 6% only to rally into March for a 1% gain on the year. Then all of a sudden the market was hit with a growth stock ailment which caused the S&P 500 to drop 2% for the year, then rallying again to go up about 6.45% for 2014. To make things interesting, I'm going to use this time to throw out my Dividend Portfolio Pre-Season Power Rankings and see if people feel the same way I do about some of these stocks. I've divided the power rankings into three parts and this is the first.

1

Apple Inc. (NASDAQ:AAPL)

Apple designs, manufactures, and markets mobile communication and media devices, personal computers, portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

95.22

15.92

13.83

1.32

16.37

9.21%

12.03%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

1.97%

18.0%

30.4%

25.5%

0.14

37.9%

28.6%

21.4%

Performance

1 Yr

YTD

My Return

My Weighting

59.77%

20.18%

32.01%

5.27%

My Take

The stock has gotten expensive during the past year, but it keeps performing on all financial cylinders. Fundamentally the stock is inexpensive on next year's earnings estimates, but I believe it is almost fully valued. From a financial perspective, management definitely knows how to manage its shareholders equity, the company's assets, and investments. Operating and profit margins of the company are evidence that management knows how to manage the company's coffers when compared to revenues. There is a product launch around the corner which can bring in additional revenue, but margins are what will be the key issue to watch. I believe this is an excellent company but won't be surprised if it remains stagnant for the remainder of the year in terms of stock price.

2

Williams-Sonoma Inc. (NYSE:WSM)

Williams-Sonoma is a specialty retailer of products for the home, operating stores under the name of Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

71.77

24.58

19.8

1.78

49.59

13.21%

13.81%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

1.84%

12.9%

23.5%

22.1%

0.00

38.9%

10.6%

6.4%

Performance

1 Yr

YTD

My Return

My Weighting

23.91%

24.51%

28.22%

2.38%

My Take

There is no doubt this company's stock has had a beastly move of late, performing very well the last two times it reported earnings. What was Williams-Sonoma's gain was Bed Bath & Beyond's (NASDAQ:BBBY) loss during that time frame. The one bright spot going for this company right now is on the financial side of things as it has no debt. Otherwise thing keeps chugging along. Of late, I've been seeing analysts upgrading the stock but quite honestly I actually think it can drop from this spot by the end of the year. The housing/remodeling news of late hasn't been too good. Recently, Lumber Liquidators (NYSE:LL) came out and said that remodeling is on the decline and I actually think it won't bode well for the entire space.

3

Walt Disney Co. (NYSE:DIS)

Disney is a diversified worldwide entertainment company which operates in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

86.89

22.28

18.75

1.4

28.16

10.46%

15.87%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

0.99%

8.5%

15.7%

9.9%

0.35

22.9%

23.1%

14.9%

Performance

1 Yr

YTD

My Return

My Weighting

32.11%

13.73%

26.56%

2.21%

My Take

This is another company which has been performing on all cylinders, but isn't one I have had much success with in making it a bigger part of my portfolio. Every time I look into buying this stock, I see it as fairly valued and feel like putting my money elsewhere. I'm sure this is how everybody out there feels about the stock. Nonetheless, it is a great company. I guess the take home idea here is that every day should be a good day to buy this stock because I've never seen it become a value play for as long as I've been owning/watching it.

4

Union Pacific Corporation (NYSE:UNP)

Union Pacific Corporation owns transportation companies, of which its principal operating company, Union Pacific Railroad Company, connects 23 states in the western 66% of the United States.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

100.27

20.55

16.09

1.35

43.57

13.41%

15.17%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

1.82%

9.1%

21.6%

15.5%

0.48

73.5%

34.4%

20.3%

Performance

1 Yr

YTD

My Return

My Weighting

28.34%

20.52%

20.94%

2.03%

My Take

This company is another one of those stocks that I love but never find a good time to buy, just like Disney. The reason I love this company is that from its earnings report it can tell someone how the rest of the economy is doing as it caters to delivering commodities and products to all segments of the American economy. Gross margins is ridiculously high for this freight carrier, and the operating margin shows that management has excellent cost controls, while keeping net profit margins also high. This is one of those stocks where I try to evaluate it more on a technical basis throughout the year to try and catch an oversold condition. I believe if the economy is slowing for the remainder of the year, then Union Pacific will follow along.

5

Wells Fargo & Co. (NYSE:WFC)

Wells Fargo is a bank holding company which operates in three segments: Community Banking, Wholesale Banking and Wealth, Brokerage and Retirement.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

51.49

12.81

12.01

1.27

6.01

4.41%

10.11%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.72%

1.4%

14.1%

9.8%

0.97

-

77.0%

45.8%

Performance

1 Yr

YTD

My Return

My Weighting

26.39%

15.01%

15.72%

2.15%

My Take

Falling in the same category as Disney and Union Pacific, I can never find a great time to buy this stock. The company reported 2Q14 earnings yesterday which were in-line with estimates and the stock price reflect the sentiment, it was down 0.62%. From a fundamental perspective, the stock is inexpensively valued based on 2015 earnings estimates, the trailing twelve month reported earnings, and price to free cash flow. From a financial perspective there is a lot of debt on the balance sheet, but the high operating margins show that management knows how to operate while keeping net profits extremely high. The fact that this bank is trading at an inexpensive valuation with respect to earnings which have already been booked in the last year shows that banks have been out of favor. But of all the banks I own, I believe this is the best one.

6

KLA-Tencor Corporation (NASDAQ:KLAC)

KLAC is engaged in the design, manufacturing and marketing of process control and yield management solutions for the semiconductor and related nano-electronics industries.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

74.61

21.38

17.33

1.35

36.2

18.56%

15.80%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.41%

11.0%

16.6%

13.8%

0.21

58.4%

27.0%

20.2%

Performance

1 Yr

YTD

My Return

My Weighting

28.15%

17.40%

14.81%

7.05%

My Take

This company was the winner of my inaugural Dividend Portfolio Super Bowl that I held back in January and has been performing exceptionally well since winning. From a financial perspective, the company's revenues far exceed the cost of goods as evidenced by the gross margins, while management shows their operation excellence with the high operating margin value and at the tail we see that net profit margins are superior. Since winning the Dividend Portfolio Super Bowl back in January I've been plowing money into the stock almost on a weekly basis and it has definitely paid off for me. The stock was inexpensive at the beginning of the year, but the price has just accelerated higher to the point that it's no longer undervalued.

7

Abbott Laboratories (NYSE:ABT)

Abbott is engaged in the discovery, development, manufacture, and sale of a portfolio of science-based healthcare products, which operates in four segments: Diagnostics, Medical Devices, Nutritionals and Generic Pharmaceuticals.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

41.3

29.71

16.67

2.51

57.82

12.80%

11.86%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.13%

6.9%

12.5%

8.0%

0.31

54.0%

11.9%

13.6%

Performance

1 Yr

YTD

My Return

My Weighting

18.61%

9.00%

12.86%

4.11%

My Take

This is one of those stocks I purchased because I liked that it was unlocking value by spinning off AbbVie (NYSE:ABBV) about eighteen months ago. However, I've been looking to sell it for quite some time, but it's been doing pretty well. The problem with the company is that it is too expensive on its long-term earnings growth expectations and is expensive with respect to its free cash flow. The company offers great gross margins as revenues far exceed the cost of goods sold. The next time this company decides to raise its dividend I don't believe it can be raised by a significant amount as the company has gone on a shopping spree in the past year. The company has spent quite a bit of money to purchase overseas assets to help the growth of its product portfolio. It was just announced yesterday that the company is negotiating with Mylan (NASDAQ:MYL) to sell its established off-patent Europe-based drugs. The company plans to use the proceeds to invest in higher growth opportunities. I believe this stock can increase in the rankings as it does shift towards a growth mindset.

8

Goodyear Tire & Rubber Co. (NASDAQ:GT)

Goodyear Tire & Rubber Co is a manufacturer of tires and rubber products. It also manufactures and markets several lines of power transmission belts, other rubber products and rubber-related chemicals for various applications.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

27.7

15.22

8.52

0.97

-

12.77%

15.73%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

0.72%

3.0%

72.2%

15.4%

6.51

21.7%

7.1%

2.7%

Performance

1 Yr

YTD

My Return

My Weighting

67.17%

16.58%

11.84%

1.57%

My Take

I just initiated my position in this company about a month ago by swapping it in for Pepsi (NYSE:PEP). I took a lot of grief in my Pepsi article for swapping into this name, but Goodyear has given me a better return on my investment thus far when compared to Pepsi. If you're an investor looking for operations excellence, then this might not be the name for you. This is definitely a capital intensive industry and the margins prove it. However, fundamentally, I believe the stock to be inexpensively valued based on 2015 earnings estimates and long-term earnings growth expectations. From a financial perspective, management knows what to do with their shareholder's equity, but as I said previously, this is a capital intensive business as evidenced by the large debt-to-equity ratio. In my humble opinion, I believe this company is a dark horse to win the Dividend Portfolio Super Bowl come January.

9

Cisco Systems, Inc. (NASDAQ:CSCO)

Cisco designs, manufactures and sells internet protocol-based networking and other products related to the communications and information technology industry, and provides services associated with these products and their use.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

25.52

17.36

11.84

2.25

16.9

5.69%

7.70%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.98%

7.8%

13.7%

13.2%

0.37

58.7%

20.8%

16.7%

Performance

1 Yr

YTD

My Return

My Weighting

1.75%

16.53%

11.08%

5.65%

My Take

I stuck by this stock through thick and through thin at the beginning of the year and late last year as it was guiding down on revenues and earnings. I've definitely reaped the benefits during this turnaround. On the fundamental front, I believe this stock to be inexpensively valued based on 2015 earnings estimates but expensive on long-term earnings growth expectations. Financially, the gross margins are excellent, showing that revenues are still coming in at a high clip with respect to cost of goods. Management is turning this ship around, but it's a big boat. As far as the season goes, I believe the stock will end up around this spot at the end of the year, but I don't expect it to win the tournament.

10

MetLife, Inc. (NYSE:MET)

MetLife, Inc. provides insurance, annuities, and employee benefit programs in 50 countries through its subsidiaries and affiliates.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

55.74

17.53

9.07

2.25

4.97

8.59%

7.80%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.51%

0.4%

5.8%

4.1%

0.80

-

10.4%

5.3%

Performance

1 Yr

YTD

My Return

My Weighting

17.59%

4.72%

8.01%

1.57%

My Take

This stock is the only other financial I own which is performing well. Life insurers in particular have been catching a bid the past couple of months as they've been getting analyst upgrades. From a fundamental perspective, the stock is inexpensive based on 2015 earnings estimates, and free cash flow, but is expensive on earnings growth expectations for the long term. Financially there is a lot of debt on the balance sheet but I believe the next time around the company decides to increase the dividend that it will be in the double-digit category. I have a pretty good feeling the company can increase its position in the rankings by the end of the year, but I doubt it will contend in the tournament.

I wouldn't be surprised if KLA-Tencor wins the tournament in consecutive years, but I believe it will get a run for the money with tough opponents in the form of Williams-Sonoma, and my dark horse Goodyear. I'm trying to keep my homework on the stocks I own entertaining for myself, and I hope I've made it a bit entertaining for you. Sometimes it just gets boring reading the same mundane stuff over and over again. Please stay tuned for my rankings of 11 through 20 in part two and 21 through 30 in part three of this series. As always, happy investing, and may you profit much!

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: The author is long ABBV, LL, AAPL, ABT, CSCO, DIS, GT, KLAC, MET, SPY, UNP, WFC, WSM. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Dividend Portfolio Pre-Season Power Rankings: 1-10