“My assets froze while yours have dropped. Now is that? Is that?”
“Is That Love?”- as recorded by Squeeze by Chris Difford/Glenn Tilbrook
Last month, we published a note examining well known, large cap names with single digit P/E’s and dividend yields of 4% or higher. A month later we’ll reiterate that call. For investors with a longer term horizon, there’s gotta be a pony in here somewhere.
The S&P 500 is basically where it was when we posted the previous piece. So what’s changed? Not much except for the situation in Europe has gone from “bad” to “even worse”. Granted, there was a zero growth jobs report for the U.S. somewhere in the mix. But that’s not nearly as exciting as sovereign default.
Nevertheless, most of the names we profiled (COP, IP, INTC, LLY) are priced about where they were a month ago. The appetite for risk assets (aka “stocks”) wasn’t that great in August. It’s probably even weaker now. So Its difficult to step up to the counter and order with conviction. It will be even more difficult with the names we are about to look at as most of them deal with either U.S. industrial recovery or, cue ominous, scary music, a return of confidence in financial companies. All have forward P/E’s of 9.5 or lower and yield at least 3.5%.
Dow Chemical Co. (DOW)
Eaton Corp (ETN)
AFLAC Inc. (AFL)
EI DuPont de Nemours and Co. (DDD)
Adding those names to our previous suggestions would help you build out quite the blue chip portfolio.
The question is still “are we there yet?” And the answer is still “I don’t know.” However, here is another handful of large company stocks with single digit forward multiples and respectable dividend yields. The good news is that markets are still quite volatile. Yes. That’s a good thing in that opportunities to buy high quality at good prices will be created thanks to fear and stupidity. Art Cashin, an NYSE veteran floor guy suggests that in times like these, investors should “turn their baskets” in order to catch some bargains they may want. The market may turn or not. Either way, there are worse stocks you could be stuck with.
Is that love or this week’s three lil’ piggies?
“I was born on a pirate ship…”
International Shipholding (ISH)
Recent Price: 18.41
P/E: 5.6
Current Yield: 8.14%
The Skinny
Is it time to by the overseas shippers? I don’t know. But ISH may be worth a peek. The company owns a fleet of U.S. and foreign flagged vessels and provides international and domestic maritime transportation. ISH turned in some decent revenue numbers even as uncertainty has gripped the globe. 2008 (a bonafide recession year) revenue was up 43% YOY and 2009 revenue climbed 35%. The stock trades pretty cheaply relative to next year’s earnings and at a 36% discount to it’s 52 week high.
The Danger
Wow…where to start? It’s easy to be hesitant with an overseas shipper these days. The U.S. economy continues to stumble. Europe’s grinding to a halt. China’s probably next. Mix all that together and you get less plastic crap being shipped from here to there and all points in between. Energy costs haven’t quite come back into the barn yet. That can always squeeze those margins. Don’t forget about hurricanes, typhoons, Somali pirates, currency fluctuations and the whole thing looks like a big, hot mess.
“Copper…steel…and iron…”
Nucor Corp. (NUE)
Recent Price: 34.45
P/E: 11.4
Current Yield: 4.2%
The Skinny
It’s no Facebook. But..you can’t build a highway bridge out of Facebook. Steel, on the other hand, is another story. After being pummeled by our pals, the Chinese, dumping cheap steel here in the U.S., NUE is battling back and is even expanding. They’re currently building a $750 million facility in St. James Parish, LA. For a steel company, NUE’s long term debt is modest at 36% of capitalization. Also comforting is the $4 billion in cash sitting on NUE’s books. With 20% of the U.S. steel market, NUE is a pro at generating free cash flow.
The Danger
1 to 2% domestic GDP growth isn’t good for anyone’s business…especially heavy industry which…always needs steel for something. And as other economies slow down, look for steel prices to come back as well. Good on the production side. Bad on the selling stuff side which, at the end of the day, is the most important side. Also, don’t forget about American business’ favorite excuse for inaction: regulatory uncertainty. NUE couldn’t break ground on the plant until receiving an air permit from the Louisiana Department of Environmental Quality. I’m sure federal hoops were even trickier to jump through and could possibly become trickier.
“The P to the F to the F….”
iShares S&P U.S. Preferred Stock ETF (PFF)
Recent Price: 36.64
P/E: NA
Current Yield: 7.14%
The Skinny
We’ve probably profiled PFF before. But, thanks to the latest market shimmying, looks like there’s a price opportunity. Quickly, PFF is a basket of preferred stocks that compose the corresponding index. Shares are off about 8.8% which has pushed the yield up to 7.14%. Not bad considering a 5 year treasury pays a handsome 90 or so basis points. I’m by no means a technician. However, the daily chart on PFF looks constructive. Near term, might be good for a nice little bounce and a couple of dividend payments. Also, remember the price support the preferred market is receiving thanks to the Durbin Ammendment.
The Danger
Bank stocks have been beaten to a virtual point of late. The difference between now and 2008 is that the bank preferreds (save for BofA) have not received the same treatment…yet. Always keep in mind that the most dangerous words in investing are “this time it’s different”. When (not if) the wheels fall off of Europe, the picture will change rapidly. Why am I harping on this? Well, although PFF holds a basket of preferreds, the majority of them are financial company issues. Diversification isn’t the greatest. Caveat emptor.
Join the hundreds and hundreds of other smart people like you who follow us on Twitter! @Yieldpig
Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question
“Is That Love?”- as recorded by Squeeze by Chris Difford/Glenn Tilbrook
Last month, we published a note examining well known, large cap names with single digit P/E’s and dividend yields of 4% or higher. A month later we’ll reiterate that call. For investors with a longer term horizon, there’s gotta be a pony in here somewhere.
The S&P 500 is basically where it was when we posted the previous piece. So what’s changed? Not much except for the situation in Europe has gone from “bad” to “even worse”. Granted, there was a zero growth jobs report for the U.S. somewhere in the mix. But that’s not nearly as exciting as sovereign default.
Nevertheless, most of the names we profiled (COP, IP, INTC, LLY) are priced about where they were a month ago. The appetite for risk assets (aka “stocks”) wasn’t that great in August. It’s probably even weaker now. So Its difficult to step up to the counter and order with conviction. It will be even more difficult with the names we are about to look at as most of them deal with either U.S. industrial recovery or, cue ominous, scary music, a return of confidence in financial companies. All have forward P/E’s of 9.5 or lower and yield at least 3.5%.
Dow Chemical Co. (DOW)
Eaton Corp (ETN)
AFLAC Inc. (AFL)
EI DuPont de Nemours and Co. (DDD)
Adding those names to our previous suggestions would help you build out quite the blue chip portfolio.
The question is still “are we there yet?” And the answer is still “I don’t know.” However, here is another handful of large company stocks with single digit forward multiples and respectable dividend yields. The good news is that markets are still quite volatile. Yes. That’s a good thing in that opportunities to buy high quality at good prices will be created thanks to fear and stupidity. Art Cashin, an NYSE veteran floor guy suggests that in times like these, investors should “turn their baskets” in order to catch some bargains they may want. The market may turn or not. Either way, there are worse stocks you could be stuck with.
Is that love or this week’s three lil’ piggies?
“I was born on a pirate ship…”
International Shipholding (ISH)
Recent Price: 18.41
P/E: 5.6
Current Yield: 8.14%
The Skinny
Is it time to by the overseas shippers? I don’t know. But ISH may be worth a peek. The company owns a fleet of U.S. and foreign flagged vessels and provides international and domestic maritime transportation. ISH turned in some decent revenue numbers even as uncertainty has gripped the globe. 2008 (a bonafide recession year) revenue was up 43% YOY and 2009 revenue climbed 35%. The stock trades pretty cheaply relative to next year’s earnings and at a 36% discount to it’s 52 week high.
The Danger
Wow…where to start? It’s easy to be hesitant with an overseas shipper these days. The U.S. economy continues to stumble. Europe’s grinding to a halt. China’s probably next. Mix all that together and you get less plastic crap being shipped from here to there and all points in between. Energy costs haven’t quite come back into the barn yet. That can always squeeze those margins. Don’t forget about hurricanes, typhoons, Somali pirates, currency fluctuations and the whole thing looks like a big, hot mess.
“Copper…steel…and iron…”
Nucor Corp. (NUE)
Recent Price: 34.45
P/E: 11.4
Current Yield: 4.2%
The Skinny
It’s no Facebook. But..you can’t build a highway bridge out of Facebook. Steel, on the other hand, is another story. After being pummeled by our pals, the Chinese, dumping cheap steel here in the U.S., NUE is battling back and is even expanding. They’re currently building a $750 million facility in St. James Parish, LA. For a steel company, NUE’s long term debt is modest at 36% of capitalization. Also comforting is the $4 billion in cash sitting on NUE’s books. With 20% of the U.S. steel market, NUE is a pro at generating free cash flow.
The Danger
1 to 2% domestic GDP growth isn’t good for anyone’s business…especially heavy industry which…always needs steel for something. And as other economies slow down, look for steel prices to come back as well. Good on the production side. Bad on the selling stuff side which, at the end of the day, is the most important side. Also, don’t forget about American business’ favorite excuse for inaction: regulatory uncertainty. NUE couldn’t break ground on the plant until receiving an air permit from the Louisiana Department of Environmental Quality. I’m sure federal hoops were even trickier to jump through and could possibly become trickier.
“The P to the F to the F….”
iShares S&P U.S. Preferred Stock ETF (PFF)
Recent Price: 36.64
P/E: NA
Current Yield: 7.14%
The Skinny
We’ve probably profiled PFF before. But, thanks to the latest market shimmying, looks like there’s a price opportunity. Quickly, PFF is a basket of preferred stocks that compose the corresponding index. Shares are off about 8.8% which has pushed the yield up to 7.14%. Not bad considering a 5 year treasury pays a handsome 90 or so basis points. I’m by no means a technician. However, the daily chart on PFF looks constructive. Near term, might be good for a nice little bounce and a couple of dividend payments. Also, remember the price support the preferred market is receiving thanks to the Durbin Ammendment.
The Danger
Bank stocks have been beaten to a virtual point of late. The difference between now and 2008 is that the bank preferreds (save for BofA) have not received the same treatment…yet. Always keep in mind that the most dangerous words in investing are “this time it’s different”. When (not if) the wheels fall off of Europe, the picture will change rapidly. Why am I harping on this? Well, although PFF holds a basket of preferreds, the majority of them are financial company issues. Diversification isn’t the greatest. Caveat emptor.
Join the hundreds and hundreds of other smart people like you who follow us on Twitter! @Yieldpig
Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question
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