In this posting we’ll outline the performance of the Dow Jones Industrial Average and the Dow Jones Transportation Average within the context of the Dow Theory. Additionally, we’ll see where we are in terms of the economy which Dow Theory is supposed to give some indication on.
Below is the performance of the individual Dow Jones Industrial Average constituents from December 29, 2017 to May 8, 2018 (intraday).
Our examination of the Dogs of the Dow concept has upended our prior thinking on how to approach this investment strategy. As we’ve seen, the original Dogs of the Dow has continued to prove an unfortunate investing process. In addition, the data below shows that there is much to be learned on the road to beating the index.
Prior 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 5, 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 |
| SKT | Tanger Factory Outlet Centers | 28.63 | 20.77 | -27.5% |
| GWW | W.W. Grainger | 189.23 | 286.77 | 51.5% |
| SCG | SCANA Corporation | 65.94 | 36.50 | -44.6% |
| BMS | Bemis Co Inc | 45.38 | 42.73 | -5.8% |
| SJM | JM Smucker | 126.08 | 113.31 | -10.1% |
| Average | -7.3% | |||
| DJI | Dow Jones Industrial | 21,006.94 | 24,262.51 | 15.5% |
| SPX | S&P 500 | 2,399.29 | 2,663.42 | 11.0% |
The average loss for the top five companies was 7.3%. Weighting down the list was SCANA Corporation (SCG) and Tanger Factory Outlet Centers (SKT) who lost 44.6% and 27.5% respectively. We didn't foresee the extreme drop in price but did warned our reader on REIT. The excerpt below was our remark.
One should exercise extreme caution on Real Estate Investment Trust (REIT). These include companies such as Tanger Factory (SKT) and SCANA (SCG). We believed that income investors entered this sector aggressively which makes the risk/reward profile at current level unattractive to us.
The best performing company of the top five was W.W.Grainger (GWW) with 51.5% gain. Our team was bullish on W.W. Grainger last year and was fortunate enough to get the timing right. As part of an elite group call Dividend Aristocrat, we believed that risk/reward was appropriate at the level we saw last year. However, there were companies in Dividend Aristocrat that went the opposite direction. AT&T (T) and Procter & Gamble (PG) lost 17% and 16% respectively.
U.S. Dividend Watch List: May 4, 2018
The market started the week at 2,680, dropped to 2,600 and closed the week at 2,660. The volatility is setting in but we see consolidation occurring. Our team continue to be mindful of the March low as the level to watch. If and when that level is breached, we will reassess our asset allocation between cash and equity holding. Below are companies for this week dividend watch list. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
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On May 3, 2018, it was reported that Cardinal Health (CAH) declined –21% due to:
“…the company's loss of a contract with PharMerica and lower drug prices are responsible for the bearish outlook (TheStreet.com).”
The impact of these issues has resulted in lower 2019 earnings estimates for CAH. Below are some thoughts on our expectations for CAH in the coming year.
In April 18, 2012, we said:
“In this case, the dividend has been rising much faster than the stock price, among the many reasons that Buffett might be interested in a technology stock near an all-time high. Now, just imagine what the stock will look like after falling to a 52-week low.”
On July 23, 2015, we said of IBM:
“We think that a value investor would have fun pouring over the data to determine the actual value of IBM. Gould’s Speed Resistance Lines [SRL] indicate that the conservative downside target for IBM is $130. However, we think a process of accumulation at the current price, and below, is a prudent long-term strategy.”
Now that Warren Buffett is no longer a selling point for potential new buyers, what do we think of IBM?
Posted in IBM, Warren Buffett
This is the first update to the Coppock Curve in 2018. Reason for this is because there has been a strong up surge in the market which deem this indicator useless. However, there has been a change in the tide in the indicator. Continue reading
On April 2, 2018, when Bitcoin was trading at $7,049, we said the following:
“The $9,148.23 level is the point where we believe the price of Bitcoin could rise to before a retest of the $11,479.73 level, if remotely possible. Based on the recent volume characteristics, we think that the $9,148.23 is in the works.”
As of April 27, 2018, Bitcoin is priced at $9,278.22 and has achieved our target of $9,148.23 as outlined in Dow Theory.
The April 2, 2018 assessment came after our February 17, 2018 review when Bitcoin was trading at $11,092.15 and we said the following:
“…before a new high (substantially above the $19,343) is achieved, we expected a retest of the $6,914.26 level (or something close, like, $7,000-$7,200).”
On April 6, 2018, Bitcoin declined as low as $6,620.41. All of the assessments have been based on the work of Charles Dow’s Dow Theory and Edson Gould.
Below is the updated assessment of where Bitcoin is headed from here.
Posted in Bitcoin, Dow Theory, Edson Gould
Performance Review
Below is the total return performance of stock that appeared on our Canadian Watch List dated April 23, 2017 with prices adjusted for dividend.
| symbol | name | 4/21/2017 | 4/26/2018 | 1yr TR |
| CGX.TO | Cineplex Inc. | 50.48 | 30.44 | -39.70% |
| CPG.TO | Crescent Point Energy Corp. | 13.14 | 11.66 | -11.26% |
| EMA.TO | Emera Incorporated | 45.35 | 40.62 | -10.43% |
| PLZ-UN.TO | Plaza Retail REIT | 4.6 | 4.2 | -8.70% |
| REI-UN.TO | Riocan REIT | 25.04 | 23.07 | -7.87% |
| BCE.TO | BCE Inc. | 58.41 | 54.56 | -6.59% |
| CUF-UN.TO | Cominar REIT | 13.2 | 12.43 | -5.83% |
| KEY.TO | Keyera Corp. | 36.44 | 34.45 | -5.46% |
| IMO.TO | Imperial Oil Limited | 39.84 | 38.44 | -3.51% |
| ACD.TO | Accord Financial Corp. | 8.57 | 8.95 | 4.43% |
| FCR.TO | First Capital Realty Inc. | 19.25 | 20.11 | 4.47% |
| ET.TO | Evertz Technologies Limited | 15.85 | 17.59 | 10.98% |
| FFH.TO | Fairfax Financial Holdings | 604.56 | 699.61 | 15.72% |
The average return of the entire watch list was –4.90%. This is contrasted with the Toronto Stock Exchange change of +0.07% over the same period. The breakdown of the top five stocks in the individual fundamental categories is as follows:
| rank | high p/e | % chg | high p/b | % chg | high yield | % chg |
| 1 | CGX.TO | -39.70% | CGX.TO | -39.70% | CUF-UN.TO | -5.83% |
| 2 | EMA.TO | -10.43% | ET.TO | 10.98% | PLZ-UN.TO | -8.70% |
| 3 | KEY.TO | -5.46% | BCE.TO | -6.59% | REI-UN.TO | -7.87% |
| 4 | ET.TO | 10.98% | KEY.TO | -5.46% | BCE.TO | -6.59% |
| 5 | BCE.TO | -6.59% | FFH.TO | 15.72% | EMA.TO | -10.43% |
| avg % chg | -10.24% | -5.01% | -7.88% | |||
| rank | low p/e | % chg | low p/b | % chg | low yield | % chg |
| 1 | CUF-UN.TO | -5.83% | CUF-UN.TO | -5.83% | IMO.TO | -3.51% |
| 2 | REI-UN.TO | -7.87% | CPG.TO | -11.26% | FFH.TO | 15.72% |
| 3 | ACD.TO | 4.43% | ACD.TO | 4.43% | CPG.TO | -11.26% |
| 4 | FCR.TO | 4.47% | PLZ-UN.TO | -8.70% | CGX.TO | -39.70% |
| 5 | PLZ-UN.TO | -8.70% | REI-UN.TO | -7.87% | ACD.TO | 4.43% |
| avg % chg | -2.70% | -5.85% | -6.86% |
The Canadian list continues to reflect stocks that perform better in the “low” categories as opposed to the stock in the “high” categories. One point that stands out is that if CGX.TO were omitted from the “low yield” grouping because it appeared in two other “high” categories then the low yield stocks would have averaged +1.34% using four stocks or –0.02% if using the next stock in the ranking (Keyera Corp).
Prior Year Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from April 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 |
| GWW | W.W. Grainger | 195.15 | 288.40 | 47.8% |
| SCG | SCANA Corporation | 66.27 | 35.92 | -45.8% |
| SJM | JM Smucker | 126.58 | 114.92 | -9.2% |
| RLI | RLI Corp. | 54.50 | 63.61 | 16.7% |
| TGT | Target Corp. | 54.78 | 70.32 | 28.4% |
| Average | 7.6% | |||
| DJI | Dow Jones Industrial | 20,547.76 | 24,462.94 | 19.1% |
| SPX | S&P 500 | 2,348.69 | 2,670.14 | 13.7% |
The average gain of the top five companies on the last year's list yielded 7.6% gain. The largest decline came from SCANA Corporation (SCG) which fell -45.80%. Though we didn't elaborate on SCANA in this writing, our readers will know that we have cautioned of the risk associated with utility companies. The best performer was W.W. Grainger (GWW) which gained +47.80%. We said the following about W.W. Grainger a year ago.
"First on our list is W.W. Grainger (GWW), an industrial servicing company. Grainger reported earnings that missed estimates and lowered its outlook that tanked the stock earlier this week. Shares are trading at the yearly low. Based on our dividend model, shares have the potential to reach $260 but we see current price as fair value. Based on the newly revised EPS estimate of $10, one should expect a 30% downside risk. As such, we would advise one to wait for the price to fall another 15% before accumulating shares."
The key take away is our assessment that one should wait for -15% pull back before accumulation. Shares of W.W. Grainger did fall to $155 or as much as -21%. If one happen to be lucky enough to purchase shares after a -15% decline to $165, the one year return would be at +75%.
Another company we touched on and were bullish on was Target (TGT). In one year, the share price rose +28.40%. We said the following of the stock:
"Next company we'd like to highlight with some potential for downside but greater potential for upside is Target (TGT). To be transparent, we are long Target. We see that the shares could rise 30% from the current level with either multiple expansion to 13x from 10x. However, if net income rises in addition to multiple expansion, shares could rise further than the 30% mark. In addition, the Coppock Curve analysis suggest that shares will rise over the long-term by 22% after the buy signal. Such a signal came in November 2016 but we do not expect the price would recover anytime soon. Target has a strong balance sheet and a dividend yield of 4.50% which should keep long-term investors happy until the sentiment changes."
Not often will our forecast come close to fruition but this one did. We projected a +30% upside and got +28.40%. The result of the upside would be due to multiple expansion pushing P/E to 13 and shares closed the week trading at 13.2x net income. Because the stock has done everything we'd hope for, profit taking, partial or full, should be highly considered.
U.S. Dividend Watch List: April 20, 2018
The market continued to gyrate wildly throughout the week. The S&P 500 broke above 2,700 mark but failed to hold that key support and closed the week at 2,670. A technical pattern is displaying a consolidation pattern or "line" formation between 2,600 and 2,800. If the market continue this trend, it gives investors great opportunity to conduct their research. Below are companies on our watch list this week. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
On July 31, 2017 we did a technical review of Altria (MO) that covered the Coppock Curve, Dow Theory and the Spare/Tengler relative models. This posting is an update of that review.
The following transaction(s) were executed:
Below is a chart from Roy Wenzlick’s Real Estate Analyst dated June 1934 showing the different levels of the ease in real estate credit as the reciprocal of the foreclosure rate.
Posted in real estate, Wenzlick
In this postings, we will present upside and downside targets for the 3-month Treasury based on the work of Edson Gould.
Top Five Watch List Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from April 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 |
| TGT | Target Corp. | 53.24 | 72.29 | 35.8% |
| SCG | SCANA Corporation | 65.40 | 37.47 | -42.7% |
| BMS | Bemis Co Inc | 48.15 | 43.63 | -9.4% |
| MAC | Macerich | 64.07 | 57.35 | -10.5% |
| HRL | Hormel Foods Corp. | 34.25 | 34.93 | 2.0% |
| Average | -5.0% | |||
| DJI | Dow Jones Industrial | 20,656.10 | 23,932.76 | 15.9% |
| SPX | S&P 500 | 2,355.54 | 2,604.47 | 10.6% |
Our analysis of Target (TGT) proved to be well timed. Share rose 35.8% from prior year. Below is the commentary on Target shares last year.
The top four companies from this list are the same as our previous list. Target (TGT) leads the pack and is trading less than 1% above the yearly low. The stock appears to be retesting the the low of $52.70. However, the technical set up appears to be bullish as the Relative Strength Index (RSI) is making a higher-high. Based on our observations, whenever we see this occur, there is good chance that the bottom is set, at least in the short-term. Additionally, our analysis of Target using the Coppock Curve suggests that now is an opportune time for accumulation.
Another company we were bullish on was Hormel Foods (HRL), the maker of SPAM. Shares dropped as low as $30 and peaked at $38. However, the performance since last year yield only 5% increase in share price. The following quote is an excerpt from last year post.
- Hormel's financial strength is A rated according to Value Line Investment Survey.
- The dividend yield of 2% does not seems like much but is higher than the historical average for this company.
- The P/E multiple of 20x may appears to be high when compared to the market. However, we believe that multiple could expand to 25 if this bull market persists. If this bull market is coming to an end, we could see that multiple collapse to 12.
We see a possible upside to $47 with a possibility of downside to $25. A multiple purchase plan is highly recommended.
U.S Dividend Watch List: April 6, 2018
The volatility in the market linger and our watch list has more than 100 companies ranging from small to large cap in different sectors. However, we would urge extreme caution as the bull trend appears to be in its last leg. If and when that occurs we will inform our reader of the approach we will take in our portfolio. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
Review
On March 6, 2017, we said the following:
“What stands out about the current move upward is the fact that the decline went into negative territory. While the decline wasn’t as low as we’d like, at or below the 1970 level, we have to accept that there are few times this indication went negative without a very strong recovery to the upside. For now, we’re hedging our commentary by watching for the 2013 level before going on to the 1964 peak. However, we suspect that the recovery in S&P earnings could test the 1976 peak.”
The chart below updates the Year-over-Year percentage change in the S&P 500 earnings.
At the time of the posting last year, the charting of the change was slightly above 0% and well below the 2013 level. We’ve highlighted in the red line the reported S&P earnings since 2016 to the most recent reporting. The orange horizontal line traces out the peak of 1964.
Posted in Earnings, Earnings Trend, S&P 500