U.S. Dividend Watch List: February 17, 2017

Previous Year Performance Review

In our on going review of the NLO Dividend Watch List, we have taken the top five stocks on our list from February 19, 2016 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2015 Price 2016 Price % change
AIG American International Group, Inc. 51.53 62.50 21.3%
SIAL Sigma-Aldrich Corp. 139.76 139.76 0.0%
SWK Stanley Black & Decker 92.00 126.65 37.7%
JCI Johnson Controls Inc 34.88 41.91 20.2%
FLO Flowers Foods Inc 16.36 19.57 19.6%
      Average 19.7%
         
DJI Dow Jones Industrial 16,391.99 20,624.05 25.8%
SPX S&P 500 1,917.78 2,351.16 22.6%

The top five companies on our watch list had an average gain of 19.7% which trailed the average 6%. One of the factor contributing to our underperformance, if you consider 19.7% as such, came from Sigma-Aldrich (SIAL) which didn't trade up or down due to the acquisition. Shares remained flat for the entire year. Although we spoke little about the list, we were lucky enough to highlight two companies with exceptional performance. Stanley Black & Decker (SWK) and Cintas (CTAS) were the two companies our team eluded to. Cintas rose 42% and Stanley Black & Decker rose 37%. Our justification for their consideration was because they were part of an elite group called Dividend Aristocrat.

U.S. Dividend Watch List: January 17, 2017

Another week, another record for the market. The bull continued to push the market higher but in contrary, the number of company approaching the low has not decline much. Below are 22 companies on our watch list. Continue reading

The Economy Since the Crisis

A review of economic data encompassing the financial crisis to the present as presented on February 14, 2017, a must read.

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Transaction Alert

We executed the following transaction(s):

Commodity Index Review: February 2017

On August 31, 2015, we reviewed the Bloomberg Commodity Index had the following to say:

“While achieving the extreme downside target doesn’t mean that the decline in the index has ended, the majority of the decline from the 2008 peak is behind us.”

“We believe that those interested in the investment opportunities in commodity stocks should review the top tier stocks that have 7% or more individual commodity weighting in the Bloomberg Commodity Index.”

Based on that assessment, the following sectors would have been represented in individual commodity stocks:

  • gold
  • copper
  • corn
  • oil
  • natural gas

What has been the sector ETF performance of the related categories?  Below is the respective charts with percentage change:

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The gold ETF rose as high as +117% and currently sits with gains of +75%.  Notice that there was marginal downside action for the sector after September 4, 2015.

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The copper miner ETF did not fair as well immediately after September 2015, falling as much as –40%.  However,  the recover has been dramatic with the ETF chalking up an “in-line” performance with the gold ETF at +68% gains.

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The Teucrium Corn Fund has underperformed with a decline of –12.78% since the late August 2015 call on commodities.  This may be the sector to watch as it may be an outperformer in the category, if market conditions continue.

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The United States Oil Fund (USO) has suffered in a similar fashion as the corn fund but by a greater magnitude at a decline of –24%.

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Getting crushed in this category was the United States Natural Gas Fund (UNG) with a decline of –42%.

Unsurprisingly, the individual stocks affected by the representative sectors have had much better performance than the sector ETFs with losses.  As an example, our real-time purchases of Flowers Foods (FLO), Raven Industries (RAVN) and Helmerich & Payne (HP) had exceptional gains within the context of a declining sector at +36%, +63% and +74%, respectively.  Each of these stocks are heavily impacted by the segments of the above sectors of the Bloomberg Commodity Index.  The dichotomy between the commodity and the representative stocks explains why we have a long-held belief that the stocks are better for investors, in the short and long-term, rather than the pure play on the commodity itself.

Below is the updated review of the Bloomberg Commodity Index (BCOM) and our take on what to expect going forward.

Sears CEO: “We’re Cutting Costs, Ignore Conflict of Interest”

On February 10, 2017, Sears (SHLD) CEO Eddie Lampert put out a press release indicating that the company will generate savings of $1 billion in 2017.  The reaction by investors was a staggering +29% increase in the stock price.

Apparently, the timing of the news of “cost savings” managed to coincide with news that the same CEO of Sears just settled a $40 million conflict of interest lawsuit alleging that “…Lampert had stripped the company of its best assets to benefit himself and his hedge fund.”  This news was also reported on February 10, 2017 but seemed to have been “overlooked” by the general public or institutional investors may have acted in unison to support the effort to look the other way.

Lampert’s claims that the current efforts will revive Sears fly in the face of overwhelming evidence to the contrary.  While Sears continues to pile on debt, the bond rating agencies have negative outlooks on the actual repayment of that debt.  Additionally, Sears stock price, since Lampert came on board as CEO, has been in perpetual decline, having fallen more than –80%.

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The evidence suggest that the latest news of cost cutting is a cover for the settlement of the lawsuit.  As always, “the defendants said in court papers that the $40 million settlement was not an admission that the lawsuit's claims are valid.”  We hear this all the time, “I’m giving away $40 million of my assets but the plaintiffs claims are illegitimate.”  However, the clear conflict of interest on this matter suggests that anyone who continues to hold their position in Sears will not be rewarded for the value that has been lost since Lampert came on board.