Thursday, April 9, 2015

My Stock Watch List For April 2015

After a really busy March I’m not sure how much capital I’ll be able to deploy over the course of April, but I nonetheless have a nice list of opportunities for any little dollar worker bees I’m able to put to work.
Most of the stocks I’m going to list below are those that aren’t yet in my Freedom Fund. And that’s really just due to the fact that most of the positions in the portfolio are currently allocated to in fashion that makes a lot of sense to me. There are a few stocks like Walt Disney Co. (DIS)Visa Inc. (V)Medtronic PLC (MDT)Realty Income Corp. (O), and Procter & Gamble Co. (PG) that I could see myself adding to, but most of these stocks currently seem a bit pricey to me, to varying degrees. DIS and PG appear to be the best bargains on that list, however, and I doubt I’d regret buying either one right now when looking out over the next 10 or 20 years.
But I think there are a few other stocks out there that also warrant my attention (and capital) and thus are currently on my watch list for this month.

W.P. Carey Inc. (WPC)

This is a REIT that I’ve had my eye on for a while now. It would really do a great job at filling the gap left by the sale of American Realty Capital Properties Inc. (ARCP) at the end of last year. Though WPC flies under the radar a bit, it’s really an incredible firm. I love the international diversification as well as the diversification across properties and industries. Whereas a REIT like O gives me exposure to a lot of domestic retail, WPC has its fingers in a barrage of international industries from aerospace & defense to government buildings. Their portfolio is high-quality with lengthy lease terms and high occupancy rates. In addition, they provide financing and management services.
The stock is trading for a P/AFFO of 14.28 right now, which is fair. The yield of 5.54% is on par with its five-year average, but would really go a long way toward boosting my dividend income. In addition, they have an18-year streak of boosting dividends, usually on a quarterly basis. There just isn’t much to really dislike here. WPC is high on my watch list for this month.

Emerson Electric Co. (EMR)

This stock is down more than 10% YTD, which appears to have opened up an opportunity. This is one of my oldest holdings, but I haven’t added to the position in quite some time. This company is an industrial titan, offering products and services that really allow a number of other industries to work correctly. Like my recent purchase of Praxair, Inc. (PX), EMR is one of those boring companies that tends to quietly make a lot of money over long stretches of time. Products like valves, switches, and motors are a hallmark of Emerson’s portfolio.
What perhaps showcases their quality more than anything is their incredible streak of increasing its dividend – 58 consecutive years and counting, which is almost unparalleled. The stock actually seems undervalued right now, with a P/E ratio of 17.62 and a yield of 3.38%. I’m very interested in adding to my position in EMR for the first time in years.

Union Pacific Corporation (UNP)

This is another stock that’s down 10% YTD. Us value investors tend to sniff these stocks out, and UNP has thus popped up on my radar recently. It’s a stock that I wrote about at the end of last year as one I’d love to pick up at a better price and that better price has arrived. Equity in this company would give me a fantastic chance to expand my rail exposure beyond just Norfolk Southern Corp. (NSC) as well as a chance to gain exposure to rail in the western half of the US. I’ve written at length about the competitive advantages that are inherent in railroads, and those advantages appear to be about as ironclad as it gets.
The stock appears fairly valued here with a P/E ratio of 18.62, which is slightly higher than the five-year average. However, the yield of 2.05% is about as good as it gets barring a major correction. The dividend growth streak just recently got extended, with the company announcing its ninth consecutive raise in February. I’d love to be a miniature railroad baron, so UNP remains very attractive to me.

Apple Inc. (AAPL)

One could argue I should have invested in this company a few hundred billion dollars in market cap ago, but it just didn’t suit me for a variety of reasons. First, I’m a bit leery when it comes to tech stocks in general. Second, they just started paying (and growing) a dividend somewhat recently. Third, my portfolio is just now starting to mature, which allows me to branch out a little bit. So the time appears ripe here. Apple isn’t first on my list, but I absolutely wouldn’t mind having some equity in the company. I’m a bit concerned about their potential growth moving forward since we are talking about a company with a market cap north of $700 billion, but I love the products, customer loyalty, and ecosystem. In addition, the Apple Watch looks exciting to me.
The stock’s P/E ratio is 16.88 right now, which is lower than the broader market by a rather wide margin. The yield of 1.50% is a bit low by my standards, but a low payout ratio, massive cash on the balance sheet, huge buybacks, and incredible growth seems to indicate that Apple has plenty of room to continue growing its dividend at an attractive rate for the foreseeable future. They didn’t institute a dividend until 2012, so they don’t have the kind of track record I usually look for. But I might be willing to make an exception for a company of Apple’s otherwise distinction and quality.

Conclusion

This month’s list offers a lot to like across multiple industries. I believe all of these stocks are fairly valued or better right now and all are high quality. In addition, there’s a really nice mix there across yield and growth, which I love.
In addition to these companies, I’m still watching stocks from last month’s watch list that didn’t make the cut due to my limited capital. That includes Microsoft Corporation (MSFT)United Parcel Service, Inc. (UPS) and Archer Daniels Midland Company (ADM). I’m particularly excited about ADM, but, as always, my excitement for purchasing stocks is greater than my capital availability. So many stocks, so little capital.
One other stock that’s kind of a dark horse for me right now is Starbucks Corporation (SBUX). It’s not cheap and it’s been on an absolute tear this year, but the brand is about as fantastic as it gets. I think it would complement my other low-yield, higher-growth stocks in DIS and V quite well. But it would be a stretch and I find myself more interested in the stocks discussed above.
Full Disclosure: Long V, DIS, MDT, O, PG, EMR, NSC, and PX.
What do you think of these stocks? What are you watching for April? 
Thanks for reading.

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