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Norman Tweed's  Instablog

Norman Tweed
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Retiree interested in stocks and financial instruments, especially dividend producing stocks. In the 20th century, I was an electrical engineer with Dominion Resources. I use a dividend growth investment style. Quick rules of thumb for complex questions, like fair value p/e using the Gordon... More
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  • Union Pacific: A Play On Economic Recovery

    I have followed Union Pacific (NYSE:UNP) for 10 years, but have never bought any shares, always waiting for a higher yield (around 4%). I have watched it go up in price at 20% per year on average during that time and have definitely missed the boat. With the current downturn in the price, I will forgo the higher yield to capitalize on the growth.

    (click to enlarge)

    The fundamentals on this stock are down temporarily, due to the crash in oil prices, temporary port closing on the West Coast and ending of the last business cycle. The P/E is 18.3. The yield is 2.05% and the 5 yr dividend growth rate is 27.3 for a TweedFactor (2.05+27.3-18.3)=11.05. Earnings per share growth is expected to be 22.1% in 2015 and 13.49% per year for the next 5 years. I like the growth in inter-modal shipments. The following article by Jonathan Weber goes into more detail on share holder return.

    Profit margin is 21.9% with a gross margin of 75.9%. This company was the first to make the intercontinental connection in 1869 and has been a strong performer ever since. As the economy grows, there will be more demand for transportation of goods across the country and railroads have a fuel efficiency compared to other modes of transportation.

    Conclusion: UNP is a buy for me today!

    May 11 10:32 AM | Link | 12 Comments
  • Emerging Markets Index ETF (VWO)

    So far in 2015, the US stock market as measured by the S&P 500 (NYSEARCA:SPY) is only up 3%. After several years of poor returns by the rest of the world, this year developed markets as measured by Vanguard's ETF (NYSEARCA:VEA) is up 10.69% and emerging markets as measured by Vanguard's ETF (NYSEARCA:VWO) is up 11.62%. It appears that there is a country rotation, based on the strength of the US dollar. China appears to be the major driver of emerging markets growth this year and they are stimulating their economy with several financial measures. Their growth seems to be driven by low oil prices and appears to be taking off again after some down time. Demand for oil from China has been strong and other commodities are beginning to see the results of China's reversion to growth. This article goes into the commodities demand that has been unleashed by China.

    It is instructive to see the 5 year charts of the above ETFs:

    (click to enlarge)

    The above charts show the rapid turnaround in the above indexes at the beginning of this year. I believe that China's internal work on corruption and sorting out their relations with foreign companies is partially responsible for this turnaround.

    Conclusion: Now may be the time to start a position in VWO based on its rapid growth and long-term outlook. If only interested in China, FXI would be the ETF to look into. I am leery of Chinese stocks, having been burned by them in the 00s and would rather have the safety of an ETF.

    Apr 27 1:49 PM | Link | 2 Comments
  • Millennial Market Philosophy

    A major shift in the economy started in 2013 with the first Millennial (born 1977-1995) turned 36 years old. At the same time the last Baby Boomer (1943-1960) became 53. These two generations are dominant having greater numbers than the two recessive generations (X & Zippy). Both dominant generations like paper assets (stocks & bonds) and are not as interested in commodities (like oil, metals, and agricultural products). Of the two dominant generations, Baby Boomers are retiring and are less interested in things other than health care. Therefore, the growing demand for goods will come from the Millennials.

    Millennials were born in the age of the computer and have watched the Internet grow with the addition of mobile and smart phones. We are embarking on the Internet of things and other technological innovations which are pushing the growth of stocks like Apple (NASDAQ:AAPL) as well as a financial revolution of payments through scanned smart phones in place of swiped credit cards. The entertainment industry is consolidating with movies, television and on-line streaming coming together under large conglomerates like Comcast (NASDAQ:CMCSA). One other industry is prospering-- defense.

    A distinct market trend of continuous growth in favored sectors is the result of this shift. The entire health care sector (NYSEARCA:VHT) are growing at a rapid pace:

    (click to enlarge)

    The demand for health care will continue to grow rapidly from 2012-2021 as the first wave of the Baby Boomers reach 60 and begin to encounter health problems. The government is helping them to access this health care with Obama care and taxes on the wealthy to pay for it.

    Technology, especially consumer products like smart phones and wearables will make Apple (AAPL) a strong and growing buy:

    (click to enlarge)

    This stock took off in 2010 and has accelerated ever since. The dip in late 2012 was due to uncertainty over the company's future, but that appears to have been resolved. The first wave of Millennials have started buying and should continue through 2023. This company has started a growing dividend and may become a dividend growth stock after it gets 2 more years of dividend growth under its belt.

    CMCSA and DIS should both prosper from the Millennial spending growth through at least 2023:

    (click to enlarge)

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    Finally, Raytheon (NYSE:RTN) is my pick in the defense industry for the next 9 years-with all the turmoil in the world.

    (click to enlarge)

    Millennials are similar to the GI generation in their temperament and the times will be similar to the late 1940s - 1960. There should be much global demand for defense products, like there was in the 1950s missile race.

    After the economy picks up from purchases in these sectors, other supporting sectors will begin to grow similar to growth in the 1960s. However, the largest acceleration will be now through the next 9 years.

    Mar 21 9:17 AM | Link | 10 Comments
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  • Dividends posted from T & VZ. Bought $CMCSA @ $58.41. It may go down from here and I'll buy more.
    May 5, 2015
  • I had a limit order in for $CMCSA at $52. It is on a tear and I raised it to $59.47. Dollar cost averaging into the position.
    Feb 15, 2015
  • Agnc dividend received. Placed limit order for $PSEC @ $8.33 for 12% yield. Dollar cost averaging into position.
    Feb 7, 2015
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