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wdchil

wdchil
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  • VNQ: A Great Play On Equity REITs And A Core Holding [View article]
    I have been reducing my holdings in VNQ after some great capital gains. I think it is substantially overvalued as is the entire REIT sector. The overvaluation will probably persist as long as there is little movement in long term interest rates though. VNQ "should" yield more like 5-6% or more to be more in line with historical valuations. The yield is more like 3.5% which is particularly marginal in a taxable account. When you couple that with a possible capital loss due to overvaluation, this is not a compelling investment. I am selling VNQ as needed to maintain my asset allocation between equities and bonds.

    Right now I prefer companies like JNJ, UPS, and T that have solid dividends coupled with dividend growth potential. But even those are fairly valued. I have been buying these as needed to maintain the asset allocation plan.
    Mar 29, 2015. 12:35 PM | 1 Like Like |Link to Comment
  • Dive Into ConocoPhillips After The Oil Crash [View article]
    DKOHLER, Great comment that clarifies the geographic distribution.

    As you say, COP has really turned its emphasis to North America in recent years.

    M* recently downgraded COP's FMV to $65 per share based on reduced capital spending and lower expected oil prices. The sale of assets is a concern as well if they need to do it to support the dividend. If it is to shed non-core assets then that is fine. But clearly the reduced investment means reduced future production assumptions. Coupled with a weaker picture for oil prices the estimated valuation of the company is lower than before and $65 seems reasonable if not a bit conservative.

    I will stay long COP. I expect that the supply/demand imbalance will work itself out by the end of 2016. COP's FCF should be able to exceed the dividend by early 2017 (roughly). But unfortunately it is not a screaming bargain. I actually think that companies like XOM are more undervalued (M* estimates that XOM is 15% undervalued) because they have less need to reduce capital spending and are able to better take advantage of the situation. I am long XOM to a greater extent. Also long DVN to a lesser extent.

    WD
    Mar 29, 2015. 12:26 PM | 1 Like Like |Link to Comment
  • Johnson & Johnson: Buying More Shares [View article]
    As part of a "rebalancing" program I have been adding shares of JNJ, UPS, and T on an ongoing basis because all of these are well below an allocation limit of 3%. These are not expensive relative to a long run historic average.

    Fixed income is actually much more "expensive" than JNJ on a historical basis. Currently I am 80/20 equities to fixed income which is higher than I like to be but a response to the extremely poor valuations of fixed income securities. I have about 5% in relatively high income equities but equities cannot be considered equivalent to fixed income. My fixed income also has a substantial preferred stock portion because I think rates are going to remain depressed for a while.

    This is a challenging time for investors and I am watching the macroeconomic situation closely.
    Mar 28, 2015. 04:04 PM | 6 Likes Like |Link to Comment
  • The Future Of Seeking Alpha [View article]
    I currently pay for the premium version of Morningstar. It is a good value for me. The analysts are pretty solid and unbiased if not a bit on the conservative side. The portfolio features allow me to track my various portfolios and analyze various metrics. I like having bond ratings other parameters at my fingertips. This is important because I am managing large and complex portfolios.

    I don't think I would pay for an SA service because I am not convinced that the overall offering would be of the same quality nor provide equal value. There are certainly some excellent SA authors that I follow, and some provide more specific insight than Morningstar on certain companies.

    What really bothers me though are authors that seem to keep churning out horrible articles. Some have clearly never read any annual reports and don't know the basics of reading balance sheets or assessing credit quality. Some have shorts on a stock and seem ruled by their financial bias. Others have a chip on their shoulder toward certain industries or particular companies.

    I'll keep using SA as long as articles by my favorite authors are available - and I'll keep trying to identify good authors. But the paid service is not likely - I would probably choose to add the paid service of Value Line if I need more paid services.
    Mar 28, 2015. 11:39 AM | 7 Likes Like |Link to Comment
  • Spinoff spotlight hits PepsiCo again [View news story]
    NY Dan - Agreed. I am happy with Pepsi remaining as one company. Much better leverage with US stores. WD
    Mar 25, 2015. 10:54 AM | 2 Likes Like |Link to Comment
  • Exxon Mobil: Grow Income Now As The Sector Takes A Beating [View article]
    RS, In my view M* has become overly conservative concerning petroleum sector valuations. Yet despite this they consider XOM to be 86% of fair value. This seems like a favorable risk/reward tradeoff from a cautious analyst.

    Oil prices are likely to begin a systematic recovery by the end of 2016. The real debate is where they will equilibrate once supply and demand are rebalanced and given the ability of shale oil to rapidly ramp up production in response to favorable economics. CVX indicated that the number is close to $100 but some analysts think it is significantly lower and that is what determines the valuation of these investments - particularly producers like COP. I think the new equilibrium will be in the $80-100 range and slowly rising given global demand and global production well decline rates.

    I'll stay long XOM without being overly concerned. WD
    Mar 24, 2015. 01:54 PM | 5 Likes Like |Link to Comment
  • Berkshire Hathaway: A Gift That Keeps On Giving [View article]
    M* estimates BRK to be 93% of "fair value." For me it is a hold for the time being since I have enough allocated to it already. WD
    Mar 23, 2015. 10:32 AM | Likes Like |Link to Comment
  • ADP: Q2 2015 Earnings Review, Outlook Remains Bullish [View article]
    ADP is a great company, but it is priced at 25.8 X forward earnings and 21.6 times cash flow. This is one of those stocks that is rarely on sale. I did buy some during the great recession because it was on sale then but have since sold.
    Mar 23, 2015. 10:30 AM | Likes Like |Link to Comment
  • REM And The mREITs Still Attractive [View article]
    Lance,

    I agree with the premises of this article. I have been long REM for a while now although it is just under 2% of the entire portfolio. My quintessential investment would be high financial strength "dividend growth" companies like JNJ or UPS. However, I have added some exposure to REM and some individual BDC's (selected based on certain metrics) to push my overall yield to over 3%. All that said, I still cringe when I consider the enormous capital loss REM took entering the financial crisis so I probably will not allow it be more than 2% of any portfolio. I was fortunate to enter this near the bottom of the price curve - but am still very wary.

    WD
    Mar 23, 2015. 10:25 AM | 2 Likes Like |Link to Comment
  • The Vanguard Dividend Appreciation ETF: Higher Returns And Less Risk [View article]
    Ditto. I have been upping both of those names.
    Mar 22, 2015. 02:09 PM | Likes Like |Link to Comment
  • The Vanguard Dividend Appreciation ETF: Higher Returns And Less Risk [View article]
    Michael,

    Your perspective on VIG lines up very closely with mine. Your point about lower volatility risk with above-average long run returns versus the index is my understanding also. I invest in both funds (including VIG) and individual stocks, but my quintessential investment is what I call the "JNJ-like" company that consistently raises its dividend for long periods of time. I also pursue undervalued but financially strong names in order to boost the portfolio's return.

    One comment regarding interest rates and dividend growth stocks. Consider one like UPS which is expected to raise its dividend by 9-13 % per year over the next few years. A 100 basis point interest rate increase on the 10 year treasury (far larger than I expect in the next year) would have roughly a 6% depressing effect on typical stocks and bonds (assuming the equivalent of a weighted average duration of 6 years). But if the dividend rate increases 10% you are still left with a roughly 4% gain assuming a 6% PE compression. Not bad. That is the power of dividend growth.

    WD
    Mar 22, 2015. 01:01 PM | Likes Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    You can probably Google the data on the portfolios of previous Fed chairpersons and find some old articles. I remember being shocked at how small Greenspan's portfolio was as he exited the Fed - when you consider his vast influence. But, of course, T-bills pretty much guarantee portfolio deterioration in the long term whereas a well managed equity portfolio can grow large from a relatively small base. So the time value of money favors the outsiders.
    Mar 21, 2015. 01:23 PM | 1 Like Like |Link to Comment
  • Should Investors Bet On Exxon Mobil In The Prevailing Oil Scenario? [View article]
    Some key premises of this articles seem flawed - for one, the supposedly high debt of XOM is not an issue. XOM has a AAA credit rating and an EBITDA/interest ratio of 242 to 1 even with depressed oil prices (M*). The debt rating is unlikely to change during this oil price swoon which will very likely be in strong recovery mode by the end of 2016 as I expect demand and production to rebalance by then. There is really little need for XOM to reduce the capital budget because even another $10 billion increase in debt is going to have little long term effect. This is because within 2 years the FCF is going to rise dramatically as the CAPEX moderates and numerous projects come on line. The higher FCF will be enough to reduce debt and increase buybacks.

    Also, as pointed out by some comments above, citing rig counts by themselves is a meaningless number. There have been rigs that produce 30,000 barrels a day and others as low as 1 barrel a day. And obviously things like where you are on the production decline curve are important factors so obviously you need a better metric. The metric I have seen is that conventional oil is declining at roughly 3-4% per year without aggressive capital investments - which are not being made now.

    In any event I consider XOM to be modestly undervalued and one of the safest ways to make money in this sector. Very long XOM.
    Mar 19, 2015. 11:20 AM | 6 Likes Like |Link to Comment
  • IBM: Transition Developing Favorably [View article]
    Tom - I have a similar view of IBM regarding potential return. I have done well when I have a basketful of such investments. WD
    Mar 18, 2015. 02:18 PM | Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    "All of those people who are broke or almost broke can take comfort in the fact that the United States can keep on printing money and expanding welfare and entitlement programs."

    For some reason that doesn't give me much comfort. BTW - always enjoy your perspective. WD
    Mar 18, 2015. 02:16 PM | 2 Likes Like |Link to Comment
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