The NLO team executed the following transaction(s): Continue reading
- Japan
- Market Indicator
- Price Momentum Indicators
- Richard Russell
- Silver
- Speed Resistance Lines
- U.S. Dividend Watch List
U.S Dividend Watch List: July 20, 2018
Previous Year Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 21, 2017 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 |
| IBM | IBM | 147.08 | 146.35 | -0.5% |
| ROST | Ross Stores | 54.31 | 86.59 | 59.4% |
| TJX | TJX Companies | 68.92 | 97.07 | 40.8% |
| SON | Sonoco Products | 49.44 | 56.45 | 14.2% |
| MSM | MSC Industrial Direct Co Inc | 70.80 | 82.95 | 17.2% |
| Average | 26.2% | |||
| DJI | Dow Jones Industrial | 21,580.07 | 25,058.12 | 16.1% |
| SPX | S&P 500 | 2,472.54 | 2,801.83 | 13.3% |
Top five companies did extremely well, gaining 26%, as group despite lack of performance from IBM (IBM). The largest contributor was the retail sector companies Ross Stores (ROST) (+59.4%) and TJX Companies (TJX) (+40.8%). These gains far out strip the market of 13.3%. We thought that Ross Stores was trading at fair value thus wasn't worth the risk. Below is what we said about Ross Stores.
Next stop on the list is Ross Stores (ROST). This discount retail store traded as high as $69.80 late last year but shares have fallen 22%. It should be no secret to anyone that Amazon presence is hurting retailers be it discount or luxury. The brick and mortar model contain high overhead which makes it difficult to compete with online retailer. Our analysis suggest that Ross Store appears to be risky investment at this level. Dividend regression model shows that shares are right at fair value. Applying historical data and produce altimeter suggests shares are overvalued despite fallen 22% from the peak.
We also touched on IBM (IBM) which was virtually flat year-over-year. However, we believed shares would be a good trade at support level of $140 which did so recently (see chart below). The excerpt below was our commentary last year on IBM.
IBM (IBM) closed the week at yearly low. The company reported quarterly result that didn't excite the bull. Revenue continued to decline but revenue beat consensus estimates. Value investor will know by now that Warren Buffett sold majority of his holding in IBM. It wouldn't surprise us that he exit his entire position in the near future. Value Line estimated that IBM will produce cash flow per share of $17.50 in 2018 and believe shares are fairly traded at 9.5 times. This calculation put share price as $166, about 13% higher than current level. Since the peak in March ($182), stock price have fallen 19% and broke technical level at $150. Because of that technical breakdown, our prediction is for shares to find support at $140 range. Anyone looking to find value may want to wait a little longer and establish positions in $140 range.
One stock the market went against us big time was medical equipment supplier Owens & Minor (OMI). Despite hitting all-time low last year and reaching valuation level similar to 2008 low, shares continued to slide more than 50% and reached an extreme low of $15. Since then, shares hare rebounded to $17. The pain is felt to our portfolio as we do own shares of OMI. Blind sided by the issue at hand, we still believe shares are of good value but any hope of sizable profit is highly unlikely based on our purchase price. The important lesson to take away is to always anticipant sizable downside risk even if your assessment shows no sign of it. Then be prepared to either cut your loss if you're trading, realized short-term loss for tax purpose, or purchase more if you have full conviction.
U.S. Dividend Watch List: July 20, 2018
The market is displaying some bullish characteristic with late week rebound and closed above 2,800. The first time this occurred was in January of this year which technically looks like a parabolic move. A well defined pattern of higher-high is a more robust pattern with good support. As we move longer into this bull market, it would be natural to get defensive so we urge our readers to assess the asset allocation and the cash holding. Below is our dividend watch list for the week. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
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Bitcoin: July 2018
Below is a summary review of the price action of Bitcoin since October 2017.
The declining trend has to end at some point. However, the tendency has been for the price of Bitcoin to achieve new lows at 6,914.26 and 6,620.41 and finally 5,848.26.
Posted in Bitcoin
Canadian Watch List: July 2018
TSX 60 Performance Review
Below is the performance review of the TSX 60 stocks since December 13, 2017:
The TSX 60 is the sixty largest cap stocks in the Toronto Stock Exchange (TSX) index. It is from this group of stocks that the “Dogs of the TSX” are selected. The Dogs of the TSX are the 10 highest yielding stocks that are expected to outperform the rest of the index.
Inverted Yield Curve Self-Fulfilling?
In the Crain’s Cleveland Business July 17, 2018 article titled “Fed chiefs look to yield curve for insights into inflation, state of economy,” Atlanta Fed President is quoted as saying that inversion [of yield curve] could be a self-fulfilling prophecy if investors believe it will bring recession.
When we looked at the yield curve chart that was provided in the article, it seemed that the either a recession coincided with inversion or inversion coincided with recessions. However, there was little in the way of indicating that awareness of a pending inversion would lead the public to behave in a manner that would precipitate a recession.
It seems that there is enough coincidence of a narrowing of the yield curve and a recession to suggest that if it were a self-fulfilling prophecy then the period of 2010 was the beginning of that process. The year 2010 happens to be the period when the recession was considered to have ended. Yet, at the time there was no discussion of inversion and self-fulfilling prophecies.
It seems odd for a Fed Bank president to suggest that if people don’t believe it then maybe it won’t happen.
Shanghai Composite: Like a Bouncing Ball?
After looking at the Shanghai Composite, we came away with the feeling that the performance of the index looked like the pattern of a bouncing ball. The pattern of a bouncing ball is best illustrated in the image below.
Of course, the mechanical forces of gravity don’t have much to do with the emotions of financial markets. However, in spite of ourselves, we couldn’t help but make the association when it didn’t otherwise fit. Take a look at the Shanghai Composite Index below and tell us there isn’t an uncanny resemblance.
Interest Rate Monitor: July 2018
Below is the updated trend in interest rates.
U.S Dividend Watch List: July 6, 2018
Previous Year Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 7, 2017 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 |
| GPC | Genuine Parts | 86.86 | 90.74 | 4.5% |
| SJM | JM Smucker | 115.39 | 111.74 | -3.2% |
| GE | General Electric Co | 26.15 | 13.85 | -47.0% |
| HRL | Hormel Foods Corp. | 33.20 | 37.15 | 11.9% |
| CAG | ConAgra Foods | 33.42 | 35.73 | 6.9% |
| Average | -5.4% | |||
| DJI | Dow Jones Industrial | 21,414.34 | 24,456.48 | 14.2% |
| SPX | S&P 500 | 2,425.18 | 2,759.82 | 13.8% |
The top five companies didn't do so well with average loss of 5.4%. Biggest drag on this list was General Electric (GE). The biggest gain of 11.9% came from Hormel (HRL). Our team said the following about Hormel.
One company our model offer good risk/reward profile is Hormel Foods (HRL). Dividend payment is the best proxy for share price direction and using our dividend regression model, there is a 21% upside potential in shares of Hormel Foods. Average yield for this company historically has been in range of 1.5% but current yield of 2.2% suggest an undervalue range. Even so, one should take caution and establish a multiple purchases plan.
Another company we mentioned was Genuine Parts (GPC) which we believed to be trading near fair value at the time. Our assessment is fairly close to reality as share rose 4.5% for the year. We said the following about Genuine Parts.
Four companies are trading within 1% of its yearly low. First on the list is auto supplier Genuine Parts (GPC). Shares broke below $90 after Goldman downgraded the stock to sell from neutral rating and reduced its target price to $89 from $104. Our valuation model isn't as bullish on shares of Genuine Parts at current level but would be if shares are trading at $70. Trading at 4x book value is a bit rich and multiple of 3x would be more reasonable.
U.S. Dividend Watch List: July 6, 2018
It was a good week for the bull as the S&P 500 gained 2.2%. The momentum is swinging upward and look to the 2,800 mark to be the key technical level. The sideway trading pattern that began at the beginning of the year could mean an accumulation before the next leg up or down. A break below 2,600 would be very bearish and above 2,900 to be bullish. Our team will explores investment opportunities from the watch list below. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
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Starbucks (SBUX) Position Update
It wasn't too long ago that our team initiated a sizable position on Starbucks (SBUX). We said the following in our transaction alert.
U.S. Dividend Watch List: June 22, 2018
Previous Year Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from June 23, 2017 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 |
| SJM | JM Smucker | 120.72 | 105.71 | -12.4% |
| CSL | Carlisle Companies | 94.16 | 108.22 | 14.9% |
| TJX | TJX Companies | 69.27 | 95.08 | 37.3% |
| GE | General Electric Co | 27.57 | 13.05 | -52.7% |
| DNB | Dun & Bradstreet Corp. | 102.24 | 128.82 | 26.0% |
| Average | 2.6% | |||
| DJI | Dow Jones Industrial | 21,394.76 | 24,580.89 | 14.9% |
| SPX | S&P 500 | 2,438.30 | 2,754.88 | 13.0% |
The average gain for the top five companies was subpar. The first company on our list was JM Smucker (SJM). We thought that JM Smucker at the time was trading at fair value and a decline of 10% would prompt an investor with a good starting point. Fast forward to today and shares are off 12% from last year. As such, it's probably a great time to do evaluation JM Smucker as potential long. Our valuation model has a possible downside of 10% as the worse case scenario with 35% potential upside at current valuation.
One company we got completely wrong is Owen & Minor (OMI) which we though had reached an extreme downside. To our surprise, shares fell 44% compared to our projection of 15% downside risk. It would be difficult to walk away from a company with strong fundamental and balance sheet after a big decline such as this one. As a long-term investor, accumulating shares of Owen & Minor at the current level would put the risk and reward profile in their favor.
U.S. Dividend Watch List: June 22, 2018
Below are companies on our watch list this week. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
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U.S. Dividend Watch List: June 15, 2018
Previous Year Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 27, 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 |
| CSL | Carlisle Companies | 95.88 | 108.58 | 13.2% |
| TJX | TJX Companies | 72.44 | 95.17 | 31.4% |
| SJM | JM Smucker | 124.72 | 105.73 | -15.2% |
| CASY | Caseys General Stores | 108.03 | 100.83 | -6.7% |
| HRL | Hormel Foods Corp. | 33.95 | 36.44 | 7.3% |
| Average | 6.0% | |||
| DJI | Dow Jones Industrial | 21,359.90 | 25,090.48 | 17.5% |
| SPX | S&P 500 | 2,433.15 | 2,779.66 | 14.2% |
The top five companies average gain was 6% for the year. The best performer was TJX Companies (TJX) whose shares rose 31.4%. On the opposite end of the spectrum was JM Smucker (SJM) which lost 15.2%.
Regarding TJX, we said Target (TGT) would be our preferred option in the retail space given the current dividend yield and our assessment was proven correct. While TJX gained 31.4%, Target rose 46.8%. Excerpt below is what we said last year.
Trading near the low and not far from Carlisle is a discount retailer, TJX Company (TJX). It's no secret that retail industry is in a big slump and have seen their market share shifted to Amazon. Our team have not extended our study to TJX because we own a substantial shares of Target. A recent swoon in Target shares pushed the dividend yield up to 4.6%. Compared that with 1.7% for TJX and it's a no brainer to us. Time will tell if our assessment is right.
As for JM Smucker (SJM), we believed that the valuation wasn't ripe and a drop to $100 would mark a good entry point. Sure enough, JM Smucker is currently trading at $105, a fall of 15% from last year.
U.S. Dividend Watch List: June 15, 2018
Below are companies on our watch list this week. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
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Starbucks Revised Altimeter
Below is the revised Altimeter for Starbucks (SBUX).
Starbucks Downside Target
Below are the downside targets for Starbucks (SBUX) based on the work of Edson Gould.
Starbucks Altimeter
We’ve been watching the fascinating price action of Starbucks (SBUX) since it first appeared on our watch list dated November 10, 2017.
In the period from April 6, 2010 to October 28, 2015, the price of SBUX has increased as much as +418%. This is an exceptional return within a confirmed bull market. Of course, this all falls apart in a bear market and this consideration must be kept in the back your mind when thinking about the future prospects.
Since October 28, 2015, SBUX has traded in a range. However, when looking at SBUX from a different angle, we can see that without a doubt that there are significant changes taking place. Below is the Altimeter for Starbucks (SBUX). We believe that this perspective on the stock clarifies the relative position of SBUX.