Charles H. Dow, Father of Value Investing
It's All About the Dividends
Dow Theory: Buying in Scales
How to Avoid Losses
When Dividends are Canceled
Cyclical and Secular Markets
Inflation Proof Myth
What is Fair Value?
Issues with P-E Ratios
Beware of Gold Dividends
Gold Standard Myth
Lagging Gold Stocks?
No Sophisticated Investors
Dollar down, Gold up?
Problems with Market Share
Aim for Annualized Returns
Anatomy of Bear Market Trade
Don’t Use Stop Orders
How to Value Earnings
Low Yields, Big Gains
Set Limits, Gain More
Inside a Moneymaking Machine Like No Other
The Fuzzy, Insane Math That's Creating So Many Billion-Dollar Tech Companies
Berkshire Hathaway Shareholder Letters
Forex Investors May Face $1 Billion Loss as Trade Site Vanishes
Why the oil price is falling
How a $600 Million Hedge Fund Disappeared
Hedge Fund Manager Who Remembers 1998 Rout Says Prepare for Pain
Swiss National Bank Starts Negative
Tice: Crash is Coming...Although
More on Edson Gould (PDF)
Schiller's CAPE ratio is wrong
Double-Digit Inflation in the 1970s (PDF)
Quick Link Archive
Dow P/E: 21.36
Dow Yield: 2.33%
S&P 500 P/E: 24.89
S&P 500 Yield: 1.97%
10-Year Note Yield: 2.50%
30-Year Note Yield: 3.11%
WSJ March 17, 2017
DOW VALUE WATCH
Dow Fair Value (50% Principle):
2015 High: 20,125.58
2009 Low: 6,469.95
Fair Value: 13,297.77
+33.75% above fair value
as of February 5, 2017
Index Additions and Deletions
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3 Stocks Back on the Dividend Achiever Watch List
There are three stocks that I wish to bring to your attention that are on our Dividend Achiver Watch List. The most important element of these three stocks is that they were individually recommended by our team in the past and are now worth re-examining at this time to verify their respective merits.
First on our list is Matthews International (MATW). Matthews International was initially recommended on March 31, 2009 near the lows of the bear market. At the time, according to Dow Theory, we felt that the company had upside targets of $31, $40, and $49. On August 4, 2009, we issued a sell recommendation of (MATW) when it was trading at $31.95. Subsequently, (MATW) was able to get within $0.50 of the $40 target. After hitting the $39 range, (MATW) has fallen to the current level of $32.50. (MATW) has increased the dividend for 14 consecutive years in a row.
According to Value Line, (MATW) has a book value of $14.32. If we assume the lowest quarterly earnings during the worst of the economic crisis from Q4 2007 to Q1 2009 and project those earnings (the most conservative estimate) into the future, we get a Q1 2011 P/E ratio of 16.92. Value Line also considers (MATW) at fair valuation around $41.86 or 13 times cash flow per share. Using the most optimistic scenario according to Dow Theory, (MATW) is considered fairly valued at $35.77.
The next company of interest on the Dividend Achiever Watch List is AquaAmerica (WTR). For what it is worth, our team recommended (WTR) at one of the lowest points in 2009 on October 31, 2009. Our December 16, 2009 sell recommendation achieved a gain of 10% in 46 days. After hitting the high of $17.89, (WTR) has fallen to the current level of $16.59.
According to Value Line, (WTR) is considered at fair valuation when it trades at $19.30. If we take the worst period of earnings during the market decline from Q4 2007 to Q1 2009 and project those earnings into the future, AquaAmerica would have a P/E ratio of 37.70. Again, we're seeking the worst case scenario in our future projections. This allows us to better assess the risks we are about to take. As long as WTR can stay above the $14 low of 2008, the fair value should be around $18.70.
Finally, the stock with the most potential among the three is Northwestern Natural Gas (NWN). NWN was recommended on October 3, 2009 when the stock was trading a $40.94. At the time the recommendation was made the stock was at a relative low and proceeded to move higher. In the research that I did on (NWN) I found that since 1970, the stock has typically bottomed in the first four months of the year 72% of the time. Additionally, NWN has bottomed in the month of February eleven of the last 39 years or 28% of the time. This makes the decline from December at the price of $46 all the more interesting. We issued a sell recommendation of NWN on December 21, 2009 when the stock was selling around $45.25.
According to Value Line, NWN is considered to be fairly valued at $36.66. This implies that (NWN) has further to fall. However, with the consistency of hitting bottom in the first quarter of the year, especially in February, NWN is worthy of consideration at these levels. Suffice to say, I am most tempted by NWN and will continue to follow this stock for ideal entry points.