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Business owner for over 30 years now working less and investing more. Our company has grown from $1M in sales to $25M in that time. I have recently sold my shares as part of an exit strategy. My philosophy for success in life and business is based on creativity. As Albert Einstein once said,... More
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Investing to Retire
  • Digging Deep, Trading Up 0 comments
    Mar 19, 2014 6:57 PM | about stocks: TOT, CPG

    Having made some recent changes from mutual funds to individual stocks, it's time to plan my next steps. My style is to find large cap dividend payers and growers that have been mis-priced by the market. I buy for the long term and I don't like to baby-sit my picks. I rarely sell unless the fundamentals of the company or industry have changed.

    Trading Oil Plays

    I begin with my first sell in a while Crescent Point Energy (NYSE:CPG). While the stock has not done poorly, it has not done well either. It's a solid Canadian light sweet play with a high dividend. The problem for me was the fundamentals of the industry. With the volume of oil being produced with fracking technology and the inability of US producers to export their oil, it's become apparent that oil will be stuck in a range for a while (in North America anyways).

    I felt that CPG was priced for perfection with a PE of 298 and gross margin of 3%, there simply wasn't any room for error. That doesn't mean that I'm not interested in the oil industry, I just wanted a company with a higher margin of error. I investigated all the big names from Exxon (NYSE:XOM), Chevron (NYSE:CVX), Suncor (NYSE:SU), Canadian Natural (NYSE:CNQ) through many smaller players like Arsenal (NYSE:AEI), Manitok (NYSE:MEI) and Chinook (CKE). While some of the smaller players looked like better value, the concerns were the same as CPG.

    I finally found Total SA (NYSE:TOT). Because Total SA is based in France, it only trades in North America as an ADR on NYSE. It's very hard for small investors to invest in Europe and this ADR makes it possible for me to participate in a single European company with some great prospects. I found all kinds of information on SA which you can read yourself, but it seemed like a great place to start.. http://seekingalpha.com/article/1899281-total-sa-the-unloved-dividend-of-big-oil

    A quick peak at Fastgraphs shows the dividend history and while up and down, it's generally up. I have traded my CPG for TOT - a 7% dividend with little recent growth for a 5% dividend payer with growth. I especially like that this company is in Europe because oil is much more expensive there than here and will most likely stay that way.

    Digging Deeper

    Next steps after this have proven to be more work than I hoped. I have looked into STX, WDC, KO, PEP, MSFT, NBD, THI, COF, WFC. All great options, but nothing with the margin of error that I like to find. I have investigated dozens of others. I'm trying to maintain my discipline of PEs south of 10, no higher than 12. I'm not that interested in great companies trading at 20x PE, because it takes forever to build that dividend up to a reasonable YoC and I just don't feel that I have that kind of time. Sometimes I break that rule when I see astronomical growth in the future, but I have only done that once or twice.

    I investigated every stock on David Fish's list of Dividend Champions and Challengers and couldn't find anything that was mis-priced. I guess there's a lot of eyes on those stocks and buying opportunities are rare. I continue to monitor his work and hopefully something will pop up in the future.

    Disclosure: I am long TOT.

    Stocks: TOT, CPG
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