The Dow Jones Industrial Average is down almost 4.5% over the past month, and while not a correction by conventional definitions (10% or more drop), the market has still experienced a healthy retraction. I’m excited when I see moves like this in the market. I generally make purchases every month, because I believe that I don’t have any inside track on where the market is going. I realize I’m a very average stock trader, and just a regular Joe. Will the Dow be at 14,000 in 1 year? Will it be at 10,000? Nobody knows, and anyone who claims to know this is fooling himself. I definitely do not know, so I try to invest small amounts monthly, in a dollar-cost averaging strategy. I believe that is what will serve my needs best over the long haul.
Although I generally invest once a month, obviously my favorite times to invest are in times of market pullbacks or other general commotion. With chaos and confusion comes opportunity. My overall capital allocation will be a little light this month after paying off my car, but I’m very excited to make a purchase very soon.
I wanted to talk a little about two stocks I currently have my eye on.
Aflac offers supplemental health insurance and life insurance in the two largest insurance markets in the world, the U.S. and Japan. In addition to its cancer policies, the company has broadened its product offerings to include accident, disability, and long-term care insurance. It markets its products through independent distributors, selling most of its policies directly to consumers at their places of work.
Aflac has experienced phenomenal growth over just about any time period you can look at. Revenue in 2001 was $9.60 billion dollars. In 2010, revenue was $20.73 billion dollars. Dividends have been solid, and growing at a very nice clip. The dividend was $0.19 in 2001, and increased to a full $1.14 in 2010. Obviously solid growth across the board here. They have been raising the dividend for 28 consecutive years. I like the business model and they have been a strong player in the health/life insurance arenas. The devastating earthquake and tsunami that hit Japan is obviously a human tragedy and will no doubt affect Aflac’s bottom line. Because of this, there is some risk entering a position with Aflac at this time. You can read the Q1 Earnings Call Transcript here. I take away that the company is optimistic about future growth, but also a little hesitant about how Japan is going to affect the company in the short-term. Although there is some short-term risk and volatility here, I think this is a solid long-term play. It is definitely on my watch list. It has fallen 17.44% over the last month, which presents a nice entry point. It currently trades at a 10.23 P/E ratio, and has an entry yield of 2.64%.
Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.
This is a pretty short synopsis. This company is the dominant force in chipmaking and has an enviable place in the world of technology. I’m no guru when it comes to tech, but I feel comfortable getting my feet a little wet with a position in Intel. Intel’s growth has been very strong. Revenue in 2001 was $26.54 billion dollars. For 2010, they finished with revenue of $43.62 billion dollars. Pretty solid numbers from a sales standpoint. Dividends have been extremely strong over the last 8 years, which is how long they’ve been raising the dividend. They have raised the dividend twice this year, which is obviously a bullish flag from management. They currently pay a $.84 yearly dividend based on the current payout, which is very strong. I am hoping to get into Intel closer to the $20 mark, but I’m not sure if it will drop that low again this summer. I may bite at current prices, as I feel it’s a fair price to pay. The current P/E ratio is 10.28, which is a very solid valuation in my opinion. The current yield is 3.81%.
These are just two stocks on my watchlist, but I feel both are strong candidates at current valuations. I’m more inclined to take on a position with Intel, as there is less current risk, a higher current yield, similar valuation and perhaps stronger growth potential. I’d like both, but I don’t have a lot of dry powder this month and will only be able to take on one. I may purchase a position as early as late this week. We’ll see.
What’s on your watchlist?
Thanks for reading.