Friday, April 17, 2015

Economic Moat in Action with Phillip Morris (PM)

What is an economic moat? This term was made popular by Warren Buffett and it refers to a companies ability to maintain a competitive advantage over its competitors. It does this to protect long-term profits and market share from competing firms. Read More at Investopedia. Investing in excellent companies with a moat and track record are factors when I make investment decisions.


Looking at a moat in action with Phillip Morris (PM). The bulls won and the bears lost after 1st quarter numbers of PM were released. PM increased market share and pricing power to beat expectations. It would be silly to say I expected good things from PM this quarter. There were negative questions going into the quarter with currency issues, how safe the dividend is, and the recent hold on the stock buyback program. I bought the stock in the face of these fears. Mr. Market gives opportunity to the ones who can see past short term distractions. This is where growth and a moat become important. I invested in PM because it has consistently proven itself. I also liked the idea of buying an asset that is yielding 5.2% knowing a dividend raise is expected in the coming months. PM has performed well since the purchase last month. The currency may still be a headwind but when this problem is over we could see PM's moat come into full effect. There is a lot of price to earnings P/E multiple expansion needed to equal its peers. In the past PM used its profits to buy other assets like Kraft foods and other companies. This diversified its holdings, but now after many spinoffs and being spun off from its parent company Altria Group (MO) the company gives almost everything back to shareholders. The last reason I will mention to why I really like this company is that it is a play to diversify away from the dollar. If someone is afraid of future dollar weakness PM makes all of its earning in other currencies. At the moment it is a ball and chain to its ankle but one day it will be a boost to earnings. 

The moat concept of investing is pretty easy. Looking at a few other recent purchases we can see how I like buying companies with a moat, strong brand, and franchise! BUT the main thing to look at is that Mr. Market has given the opportunity with big price dips from the highs. Each company has hit road blocks and the short term is cloudy. Taking a step back and looking at the big picture one can see longer term opportunity. I like looking at the long term track record of dividends and dividend growth threw economic booms and busts.


Companies with a moat purchased for the portfolio on dips.

American Express Company (AXP)
Exxon Mobil Corporation (XOM)
Yesterday Wal-Mart Stores Inc. (WMT)


Let me know what you are investing in!

(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, April 11, 2015

My Mindset and Actions on this Oil Megadeal! (RDS B)


Fear stifles our thinking and actions. If we let fear make decisions for us we will lose money. Today I will take a look back at a post from June 27, 2014 the Amazing History of Oil. This was my first purchase for the portfolio and I bought Royal Dutch Shell plc (RDS-B). At the time it had the same dividend it does today .94 quarterly payout. When purchased it yielded 4.35% now it yields 6.25%. I also mentioned that it is good to leave dry powder available for future purchases if the stock price drops lower. The price has dropped lower and I have made two other purchases. The current yield for the stocksnowball.com portfolio is 5.38%. I mention all of this about the dividend because I like RDS-B as a income play and ca$h cow! I was content with that starting yield and am content with the yield I have now. I don't like losing money! Let me repeat that I don't like losing money when a company share price goes down but I understand why I bought it in the first place.

Understanding why the share price has suffered so much can ease fear. I know the underlining commodity oil has fallen 60%. While the position in RDS-B is down, its not down as bad as the commodity. The recent acquisition of BG Group also helps diversify the company away from just an oil company. Adding natural gas and liquid natural gas to the portfolio. The price paid for BG Group was a steep 52% premium over the recent current share price. This is expensive but all depends on future oil and gas prices. Shell did mention it was cheaper than finding the same amount of reserves if it had to explore itself. My opinion is we will have to wait and see how this deal is perceived 1 to 2 years from now and make a decision at that time. I do think we will see more mergers and depending if the price of oil stays here or drops may depend on if this deal was early. I personally think you take the deal when you feel its right. Shell's management has been around the block and made some good moves so I am putting my trust in them at the moment. 

After the third purchase RDS-B is 12.7% weighting in the SNB portfolio. I think the downside is limited unless oil finds new lows. 

Purchase history of RDS-B
  6/27/14    12 shares @ $86.80  yield 4.33%
10/16/14    15 shares @ $69.34  yield 5.42%
  4/10/15    20 shares @ $60.19  yield 6.25%  
Total shares 47.5434 @ $69.88  yield 5.38%

(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, April 7, 2015

March 2015 Update Stocksnowball Portfolio

The performance year to date (4/3/2015) is 2.54% and the SPY is up 2.49%

This month I made a YouTube video update: 




April 3rd SNB Portfolio link Transactions page 2 

Have a good month!

(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.


New Strategy for investing in Under Armour Inc. (UAA) and Monster Beverage Corp. (MNST)

On March 24, 2017 my blog entry Under Armour Inc. (UAA) Opportunity I talk about my purchase of 100 shares of UAA on 2/6/2017 for $20.55. I...