Friday, June 27, 2014

Amazing History of OIL



In this video I will look at how Middle Eastern events affect the Oil prices. How Peak Oil was popular in the 1920s and early 2000s and how each time Wildcatters finding oil in Texas and other areas in the United States changed it.  

I think one of the most fascinating industries is the Oil industry. If you have followed my blog you know I like to invest in oil companies because of the nice yield and dividend growth and the need for the industries product. 

I will be adding Royal Dutch Shell plc (RDS-B) to my Stocksnowball portfolio as of June 27, 2014. My top 2 oil investments are in my report! I also have publicly stated I am an owner of Exxon Mobil Corporation (XOM) at this current time I do not have it in my Stocksnowball portfolio because of current price and valuation if someone were buying today. 

I will write on RDS-B like I do in my reports. 

Company: Royal Dutch Shell plc 
Symbol:  (RDS-B) 
Industry: Major Integrated Oil & Gas
My Opinion: Dividend, Value 

Where did I come up with the idea to invest in RDS-B? Its been collecting dust on my watch list I never recall looking at it until the old CEO left and its price started moving which led me on doing research on the WHY!. There is no doubt that RDS-B has underperformed under the former CEO. The company was featured on Jim Cramer's Mad Money and gives a pretty good description of the problems under the former CEO click here. I like some of the new asset sales under new current CEO Ben Van Beurden they are selling non-core assets and becoming more disciplined with capital expenditures. The company's main problem was lack of leadership and now it seems to have a strategic plan under the 30 year oil veteran. 

Dividend:
Dividend $3.76 (.94 qtr) 
Current Yield 4.35%
Next Ex-dividend date is expected 8/14/2014

The company has raised its dividend the last few years and does have a nice starting yield. It is in no way a dividend growth company but will have the opportunity to continually raise the dividend under the new management and current plan with money raised and streamlining expenses. The main thing I'm looking at here is a nice dividend while the company works on its new strategic plan. Getting paid to wait! 

Price and Valuation:
As of the June 26th market close $86.45
52 week Range $65.24-$87.59
Last 7 years
Normal P/E Ratio 10.1
Current P/E Ratio based on 1st Q of 2.34 and Est. $7.08 is a P/E of 12.1 

The reported 1st qtr 2014 earnings of $2.34 per share on 4/30/14. This met the consensus of the analysts covering the company. I think compared to its peers it is a bit undervalued but that is expected with the companies past performance. We could see further multiple expansion but I'm more counting on the operating earnings to improve. It is undervalued to the GDF or earnings line currently on Fastgraphs.com but under the diluted earnings it is overvalued it will be interesting to see what the earnings end up with asset sales and buybacks at the end of the year. 

Conclusion:
This company has run up this year. Part of the run up is earnings, overall market conditions, and recent oil news and price rise from Iraq. Is there still value? I do think so but I would recommend a 2 or 3 partial position approach. Whatever your normal position size lets say $3000 I would either make 3 purchases of $1000 or 2 purchases of $1500. I am buying now and will wait to see if there is a correction of 5% or 10% to add again. If the first position does well you can always do what I do and let it DRIP. I never recommend firing a full position unless you are at a low you feel it is a good risk reward which we are definitely not near here. Timing the market is always difficult. We are long today at $86.80 

Thanks for reading and feel free to comment! 

DSF

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing. 


Tuesday, June 17, 2014

It's Hard finding Stocks in the current Market with a "Margin of Safety"

It is getting harder to find value in the market recently. If you look back to every business cycle you will see during it many companies will deserve higher and lower multiples depending on how their business is accelerating or decelerating.  Many company's stocks have gone up in this bull market for a few reasons: 1. multiple expansion 2. the earnings per/share growth 3. where we are in the business cycle. In the current bull market the economic outlook is a rising tide as all companies are getting the benefit of the doubt. 

I looked at a few companies this morning:

Altria Group Inc. (NYSE:MO) The current P/E of each diluted share is 17.7 compared to a normal of 14.9. Current price $41.45 using the normal P/E the price should be $34.89
Union Pacific Corporation (NYSE:UNP) The current P/E of each diluted share is 20.3 compared to a normal of 16.5. Current price $99.81 using the normal P/E the price should be $81.12
The Coca-Cola Company (NYSE:KO) The current P/E of each diluted share is 20.8 compared to a normal of 19.3. Current price $40.66 using the normal P/E the price should be $37.72

You can still make money and a decent return buying these quality companies but buying at a discount to the normal P/E can result in superior returns.

Currently long KO of the stocks mentioned. 

***What makes investing in businesses so special is they can grow and produce products people want and grow faster than normal that could result in historical data being totally irrelevant. In the case of Union Pacific Corp. I haven't done enough research to know if they deserve a high multiple because they are expanding in Mexico or business has picked up and will continue to do so.  The one key caveat investors should worry about is investing at the wrong time and suffering when business slows down. 

It comes back to Benjamin Graham and the term of Margin of Safety! 

Margin of Safety taken from Investopedia:

A principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value. In other words, when market price is significantly below your estimation of the intrinsic value, the difference is the margin of safety. This difference allows an investment to be made with minimal downside risk. 

Thanks for reading let me know your thoughts!

DSF

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing. 

Saturday, June 14, 2014

The First Stocksnowball.com Portfolio Report

Welcome,

My name is Sheldon Cummings also known as Dividend Stock fish (DSF). 


This is the first StockSnowball report! It is in-depth write-up of different companies in my portfolio. The ideas here are my own. I hope it will give some insight on the companies I have picked, my thinking, and will help you with your investments. I will start a portfolio with the companies below and keep track of them using the closing price of June 16, 2014. 

The Report features 11 different companies! 
I feel strongly about these companies even in a bear market.

-3 companies for income today with solid dividends. 

-2 companies creating spin-offs for shareholder value. Also with Dividend growth. 

-3 undervalued companies. 

-3 companies set for growth. 

Purchase the report from Payloadz here for only $6 

Thank you 


General Motors (GM) the GOOD, BAD, AND UGLY!

I've been talking about GM on this blog because of its really big dividend yield. The company has been undervalued to the market for som...