Stock Watchlist (February 15, 2015)

by FI Fighter on February 15, 2015

in Stock Watchlist

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The S&P 500 just eclipsed another all-time high and the stock market looks more frothy than ever… I guess the easy thing to do now would be to turn away, find something else to do, and tune back in later after the markets pull back a little…

There’s that option, or perhaps we can dig a little deeper and try to unearth some hidden gems… Or,  just keep buying the “best of breed” stocks that are going to make up the anchors of our portfolios. You know, the type of holdings that we designate as “buy and hold”, that can be purchased at basically any time, rain or shine.

What am I doing? I’m trying to find a balance between all three… Last week, I initiated a position in Johnson and Johnson (JNJ); JNJ is a stock I consider to be “buy and hold” and essentially stable and suitable enough for buying at just about any given day…

Prior to that, I made some moves to pick up Chevron (CVX), which has been an extremely volatile stock thanks to the fluctuation in oil prices… If there’s another sharp spike downward, I’ll need to load up again.

And lastly, on most days when the market is surging upwards, I tend to lose interest and my attention quickly shifts elsewhere (e.g. going to the park for some fresh air and meditation).

As of today, these are the stocks on my watchlist:

Gilead Sciences (GILD): This is a major name in biotech that has been doing exceptionally well as of late. Gilead’s main source of revenue has been from its blockbuster HCV drugs Sovaldi and Harvoni, which brought in $3.8 billion in Q4 2014. GILD beat Q4 earnings at $2.43/share and revenue of $7.32 billion to the street’s expected $2.23/share and revenue of $6.72 billion. Still, GILD shares were punished as investors were spooked by the prospect of diminished margins, as the price for the Hepatitis C treatments may decline as much as 46% in the future. AbbVie (ABBV), with its introduction of the Viekira Pak, launched in December 2014, has engaged with Gilead in a price war for the Hepatitis C business.

GILD’s total revenue for 2014 came in at $24.9 billion compared to $11.2 billion in 2013, which is incredible growth for a large cap company. Further, GILD plans on initiating a dividend later this year at $0.43/share.

Shares are currently priced at $101.90. I missed the opportunity to load up on GILD when shares plummeted after the Q4 earnings announcement and dropped to as low as $95.81. I am a buyer around the $100 range, or below, as I think this company has a lot of upside.

GILD is rated 4 stars on Morningstar.

American Express (AXP): American Express would not typically be a stock on my watchlist, as the dividend is only a paltry 1.33%, and the company is not growing near the rate of main competitor Visa (V). Although I like V a lot, I’m also looking for value as an investor, and I see a much stronger value play in AXP at the moment. Due to the most recent announcement of American Express ending its exclusivity agreement with Costco Wholesale (COST) beginning in March 2016, AXP shares were hammered by the market ~10% over the past few trading sessions. Losing the Costco exclusivity partnership definitely hurts, but the market may be overreacting in the short-term since we are still over a year away from that actually happening! In other words, this bad news won’t have any impact on 2015 numbers, and I’m guessing it won’t be very long before the market gets over it and shares of AXP recover in value. A 10% drop seems excessive to me, and I’ll give AXP’s management the benefit of the doubt that they can figure out a long-term strategy to overcome this potential loss in revenue between now and March 2016.

The P/E of AXP is currently only 14.06. With shares at $78.08, AXP is hovering near its 52 week low. Quite frankly, I’m a buyer at these levels and may initiate a position in the next week. Hope the shares can stay beaten up for slightly longer…

Johnson and Johnson (JNJ): I recently purchased 50 shares of JNJ at just a hair under $100/share. If JNJ continues to hover around this range, I will be a buyer. With the cash out refi on Rental Property #1 now completed, I have a lot more investment capital at my disposal. In the long-term, I’m not quite satisfied with only owning 50 shares of this dividend behemoth. I would like to get to at least 100 shares, and most likely a lot more. I’m keeping JNJ on my watchlist.

Chevron (CVX) and Exxon Mobil (XOM): Similar to JNJ, I would love to increase my position in CVX. I’ll be watching this one closely, as I’m sure there will be many more headwinds in the near future. Secondary to CVX, I may look to diversify and add another major energy company in XOM. But in the meantime, my focus will be on trying to acquire some more CVX at > 4.0% dividend yield.

Closing

I would love to load up on some blue chip dividend stocks like Coca Cola (KO), Pepsi (PEP), Procter and Gamble (PG), etc., but those all appear to be fairly valued, or slightly overvalued at the moment. I think patience will be key as I work on rebuilding my dividend growth portfolio. I’m hopeful there will be better entry points in the future to pick up those stocks. Until then, I will try and find value where I can, and right now I really like: GILD, AXP, and JNJ. I’ll also keep a watchful eye on CVX and XOM, since another buying opportunity may be just around the corner.

Happy Hunting!

{ 5 comments… read them below or add one }

1 writing2realityNo Gravatar February 15, 2015 at 7:58 pm

The American Express situation is quite fascinating, and while I haven’t done a ton of research into it, I’m sure things are getting a touch overblown. While the hit to revenue is tough, the Costco relationship was far from a high-margin operation for them given some of the concessions they had to make to gain that exclusivity. Who knows where they’ll go from here, but certainly a situation to keep an eye on.

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2 No Nonsense LandlordNo Gravatar February 16, 2015 at 4:44 am

All great stocks. Never underestimate the ability of a company to go bankrupt. Even the best companies in the world have done it. PanAm, Lieman, etc.

For the best bang for the buck in the long run, stick with index funds. Unless you think you are better than most investment professionals. I have been going with IVW and IVV. No trading fees at Fidelity.

If you want momentum, plan on switching stocks every 6 weeks or so, and taking a capital gains tax hit.

Or sell covered calls, maybe $1 over the price you just bought it, expiring 4-6 weeks out. Catch a quick 10% on a fast rise.

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3 BryanNo Gravatar February 16, 2015 at 7:32 am

I’d agree w/ No Nonsense. Stick w/ index funds and try to make plays on sectors, not individual stocks. If you think you’re better than Wall Streets power players who have millions of $ pouring into research, more nonpublic information than they’re probably legally allowed and super computers that can do high volume trading, then go for it. It’s not something I say to put you down but its what I tell my clients when they think they’re better than the market. It puts things in perception real quick.

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4 TawcanNo Gravatar February 16, 2015 at 11:03 am

I would love to add some JNJ, CVX and XOM into our dividend portfolio.

I’ve been also looking into index ETF’s as well to build some sort of hybrid portfolio.

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5 scottNo Gravatar February 17, 2015 at 4:13 pm

Those who insist index funds are the holy grail ignore that the Dividend Growth stocks that you are purchasing thow of increasing dividends every year. Some have done so for 40-50 years. Many increase their dividends 8-10% each year. The index funds have very low yields. in addition, you are buying a source of income that will produce come hell or high water-without additional fees or costs.

Even in the great recession share prices may have declined but VEY FEW of the long term dividend growth stocks reduced dividends. Keep up the good work.

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