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TMFAleph1 (95.98)

3 'Must-Own' Sectors in This Market

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October 14, 2010 – Comments (2) | RELATED TICKERS: ABT , PM , XOM

My thoughts on the topic. I welcome all informed and/ or respectful feedback.

Alex Dumortier

2 Comments – Post Your Own

#1) On October 14, 2010 at 10:33 PM, SockMarket (63.07) wrote:

I think you are looking for decent characteristics. I am not sure that having emerging market exposure is that much better than simply being exposed to the us, but I would note that it seems that you are after larger, multinational dividend payers.

Given that I would onder whether now is a good time to buy a dividend stock. It seems that the market is scared, and hiding behind income right now. One of my favorite barometers, the SO preferds are all up above their fair value. 

On the whole dividend stocks, especially the best ones, are not within buying range, IMO. I am sure there are exceptions, I just haven't found any yet.

 

My worry with the stocks listed is that none represent good values at this point. XOM may go up, but I am not willing to bet on it, given that their growth is so dependant on oil prices and not on natural growth. And, quite honestly I am not willing to take 2.7% to wait, especially when I could get CVX yielding 3.4%

Similar fear goes for PM, I don't know enough about them to say for sure, but I would really question the ability for a tobacco company to grow naturally. If that is a concern, I would be much happier with a higher yielding utility than a tobacco co. 

ABT strikes me as a good company but a little over what I would like to pay for it. Personally, I would want to see them under $50 before I bought. 

 

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#2) On October 15, 2010 at 12:13 AM, NOTvuffett (< 20) wrote:

Alex,

XOM is a solid company, but if you pay too much for a good company is it still a good deal?  Oil demand is weak and inventories are high.  It wouldn't be a bad buy here but I would scale into it.

PM is almost a textbook example of a mature business without much room to grow.  It is natural that they should return a large portion of gains to investors in the form of dividends.

I won't comment on ABT since I don't enough about it.

Investors have different goals/timeframes/risk profiles.  To put an arbitrary hurdle like- it should beat the rate of a bond seems counterproductive to me.  If somebody really needs dividend income, I think it would be hard to beat utilities.  They are by and large a government regulated monopoly.  AEE comes to mind.  I think they are paying a 5.8% dividend at the moment.  Since stocks like these return a significant portion of profits in dividends, you can't count on too much capital appreciation. 

On the other hand, a young and growing business should probably put their cash to work at expansion. I don't even know if the ideas about P/E and all the other metrics should be applied equally to (viable) businesses throughout their natural cycles.  Would you not buy a new WMT ot GOOG if didn't pay a dividend?

 

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