Watchlist (September 24, 2012)

I purchased 40 shares of Norfolk Southern (NSC) last week, but prior to that transaction, I’ve been mostly sitting on the sidelines. In general, I feel like the stock market is currently overpriced. Nevertheless, as a dividend investor, I’m always on the lookout, trying to find attractive valuations to add to the portfolio. There are probably a few more gems like NSC out there, but they may be harder to pinpoint.

Here is a watchlist of some of the companies I have been eyeing as of late. This watchlist is a subset of a much longer, more comprehensive dividend compilation list. This particular subset features companies that I feel could represent value plays. These stocks are either at/near 52 week lows, or will tank on bad economic news.

You may notice that there are no oil companies on the watchlist as this sector is currently valued/overvalued, sitting at its 52 week high. Oil is cyclical, and you can bet I will add more shares of ConocoPhillips, and Chevron to the mix when the right time comes. Until then…

Caterpillar (CAT): This one was on my watchlist a few months back when the shares dipped to $78. I resisted at the time, and since then, the share price has soared back up. This one will be interesting to watch moving forward, especially if it drops back to the mid $80 range.

Cummins (CMI): Similar to CAT, another industrial leader I am watching closely. CMI trades with a beta of 2.0. This is a very volatile stock.

Union Pacific (UNP), CSX (CSX), Norfolk Southern (NSC): Just like last week, I still have my eye on the railroads. Should they continue their downward spiral, I will not hesitate to add more shares. NSC appears to be the most attractively priced of the big 3.

Cliffs Natural Resources (CLF): This one took a big dip down to $34 a few weeks back, and sprung right back up to the $40 range. Iron ore prices may not have bottomed, and could continue to drop further. More bad news out of China and further economic slowdown reports will be the catalyst for a good entry point. Another long term play on iron ore prices rising.

Marvell (MRVL): The PC market growth rate has slowed considerably, and MRVL was downgraded as a result. Like INTC, this tech stock has fallen out of favor. Still, with over 2 billion in cash and no debt, MRVL is poised for a rebound. Could be a good long term play.

Intel (INTC): This tech giant needs no introduction. With a dividend ratio close to 4.0%, 20 billion in cash, and state of the art manufacturing, Intel will continue to lead the charge to 22 nm technology featuring the new low-power 3-D TriGate transistors. Power consumption is said to be reduced to greater than 50% when compared to 32 nm.

Exelon (EXC): The unloved utility 😉 I’ve been adding more shares on dips, and may indeed add even more shares if the stock tanks even further. The last time around, I purchased at 6.0% yield.

Here is the complete list:

*AAPL: No, I don’t intend on adding any more Apple. I’m just watching this out of curiosity to see how it performs post iphone 5 launch.

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Dividend Growth Machine

Besides Intel and the railroads, one stock that has my attention lately is Cummins. Its valuation is getting quite attractive and it has a very strong balance sheet for an industrial company. As you mention, its stock price is rather volatile, but that means there is a higher probability of large dips providing buying opportunities. I will continue to watch it closely.