Recent Buy

buyIt looks like I’m still keeping some of my old pace up. I wasn’t sure how much capital I’d be able to routinely deploy after leaving my full-time job back in May, but I’ve been incredibly happy with and grateful for the pace of stock purchases thus far. This is now my second stock purchase this month, coming not long after adding to my burgeoning position in Unilever PLC (UL).

I had enough capital for one more purchase this month, and I actually anticipated staying pretty true to my watch list, as I did with my UL transaction. However, Visa Inc. (V) rocketed beyond the price I was wiling to pay, and I’m also staying cautious around the idea of averaging up on what’s a rather small company, Armanino Foods of Distinction Inc. (AMNF).

I still see some value out there, and I’m committed to growing my Unilever position. In addition, continued weakness in BHP Billiton PLC (BBL) means I may add more there in December, after most recently adding to my equity in the company just last month.

However, the purchase I’m discussing today initially became an idea after I wrote about the stock for Daily Trade Alert. I knew of the company already and what they did, but I wasn’t quite familiar with their dominant position, excellent fundamentals, huge dividend growth potential, and attractive valuation. So an idea was born, and I decided to initiate a position in the company.

I purchased 20 shares of National Oilwell Varco, Inc. (NOV) on 11/13/14 for $71.05 per share.

Overview

With corporate history dating back to 1862, National Oilwell Varco is a leading worldwide provider of equipment and components used in oil and gas drilling and production, oilfield services, and supply chain integration services to the upstream industry.

The company conducts operations in over 1,200 locations across six continents. Approximately 65% of their fiscal year 2013 revenue was derived from operations outside the US.

They have recently operated in three segments, although these segments will be renamed for fiscal year 2014 and beyond after the spin-off of NOW Inc. (DNOW) was completed earlier this year. The segments up until FY 2013 were as such: Rig Technology (51% of FY 2013 revenue); Petroleum Services & Supplies (31%); and Distribution & Transmission (22%).

NOV provides all the heavy equipment necessary for oil and gas drilling, including rigs, derricks, rotarys, blowout preventers, mud pumps, wireline winches, cranes, drill pipes, drilling motors, drill bits, and transfer pumps, among many other products. They are apparently a one-stop shop for their clients.

Fundamentals

What most impressed me when first investigating National Oilwell Varco was the rate at which the company has grown over the last 10 years. Now, oil has been priced rather high, especially since 2009. However, it appears to me that NOV has been particularly able to capitalize on this trend, with some of the better fundamentals I’ve seen in this space.

So let’s take a look. Their fiscal year ends December 31.

Revenue grew from $2.318 billion in FY 2004 to $22.869 billion by the end of FY 2013. That’s a compound annual growth rate of 28.96% over the last decade. Mighty impressive, in my view.

Meanwhile, earnings per share increased from $0.64 to $5.44 during this period, which is a CAGR of 26.84%. Again, spectacular. The results were a little erratic, which is to be expected from a company that’s heavily exposed to oil and gas. And they also experienced a downturn during the financial crisis, like quite a few other companies. Not only did the Great Recession take hold, but oil dropped rather substantially during this period as well. However, the long-term trend is clearly upward.

S&P Capital IQ predicts EPS will grow at a compound annual rate of 14% over the next three years, citing a lack of notable upside potential to order flows. Still, a 14% growth rate is pretty fantastic.

NOV’s dividend growth isn’t as lengthy or mighty as some of the oil supermajors out there, but it appears that management is committed to paying and growing its dividend. The CEO, Clay Williams, stated during the most recent quarterly earnings call:

NOV is a special and unique enterprise, with market-leading positions across almost everything we do. We’re pleased to be in a financial position to be able to return capital to our shareholders through share buybacks, as well as paying an attractive dividend, while still being able to invest in growth opportunities.

But they do have a growing record. The company has increased its dividend for the past six consecutive years. And over the last five, they’ve increased it at an annual rate of 30.4%. Those are the kind of annual pay raises I can get behind!

The stock yields 2.59% based on my purchase price, which isn’t quite as high as I typically target. But it’s certainly healthy enough for me to invest here, especially considering the dividend growth rate. And the payout ratio, at just 31.5%, is quite low. So there’s not only plenty of room for future dividend increases, but also room to cushion any downturns in the industry.

So the CEO’s quote above mentioned buybacks. The company announced a $3 billion share buyback program at the end of September, which amounts to nearly 10% of the market cap of the company. This buyback comes not long after Williams took over the company, and he obviously seems some value in the company’s own shares. The company actually increased its share count over the last decade during an acquisition spree.

NOV maintains an excellent balance sheet. The long-term debt/equity ratio stood at 0.14 at the end of last fiscal year, while the interest coverage ratio finished at 31.1.

The company’s profitability metrics appear sound. Net margin has averaged 12.30% over the last five years, while return on equity averaged 11.29%.

Qualitative Aspects

When performing some research on the company, I noticed that their dominant position in their space comes up over and over again. Just an anecdote perhaps, but I’ve read that the company is nicknamed “No Other Vendor” as a play on their stock ticker, which refers to their all-world dominance and product availability for all aspects of their clients’ needs. They have the products necessary for both oil and gas; onshore and offshore; domestic and international. It’s this diversification across energy exploration and geography that really interested me.

It’s estimated that they enjoy the #1 market share in almost every product line in which they compete. Furthermore, the company estimates that nearly 90% of the world’s mobile offshore rig fleet and the majority of the larger onshore rigs manufactured over the last 20 years use products manufactured by them.

This strong market share and diverse product lineup gives them competitive advantages. You can’t viably avoid NOV’s products when building rigs, which gives them a strong base of recurring revenue. In addition, they manufacture most of the products necessary for the drilling process itself. And since they’re the most dominant company in their space, they can comfortably price their products to avoid competition. Competition, by the way, is fairly limited for NOV as they’ve been busy acquiring smaller companies over the last decade to round out their business and expand their offerings and services.

The company maintains a rather healthy backlog, at $16.43 billion as of the end of Q3. That’s a bit lower than where they finished FY 2013, but still solid.

Risks

I view the largest risk for NOV as a potential protracted downturn in oil prices. Oil prices have declined rather significantly and swiftly since the summer highs, and you see some of that play out in NOV’s stock; it’s down some 15% just since late August. Lower oil prices reduce demand for NOV’s products. In addition, there is always the threat of a black swan event in the energy space, and a failure of one or more components that National Oilwell Varco manufactures could lead to potential litigation and the loss of future orders.

Valuation

The stock trades hands for a P/E ratio of 12.15, which isn’t only well below the broader market, but also below NOV’s own five-year average P/E ratio of 14. It appears to me that this discount is present due to concerns over oil prices.

I valued shares using a dividend discount model analysis with a 10% discount rate and an 8% long-term growth rate. That growth rate appears to build in a margin of safety by itself, as it’s less than 1/3 NOV’s earnings growth rate over the last decade. Factor in a low payout ratio and I see no reason why NOV can’t offer that type of dividend growth rate for the long term. The DDM analysis gives me a fair value of $99.36.

Conclusion

National Oilwell Varco absolutely dominates the oilfield services space. They manufacture just about every component that goes into a rig, as well as everything necessary for the drilling process. They have corporate history dating back well before the turn of the century, and I believe they’ll still be around at the turn of the next one. Their growth over the last decade has been absolutely stunning, and even if their growth rate were to permanently halve for some reason, this is still a great investment here. Oil prices could remain low for an extended period of time, but I believe their dominant position, strong backlog, diverse products, and exposure to all aspects of energy exploration across the world means they should be able to weather any short-term issues with oil prices. Of course, if you believe oil will go lower and stay there for a long period of time, this would not be the best time to invest in NOV or any other energy company.

The valuation seems to build in a sizable margin of safety. I used a growth rate that’s lower than their historical EPS growth rate over the last decade, considerably lower. Furthermore, the actual value on shares using that lower growth rate indicates potentially severe undervaluation. I’m comfortable with that type of margin of safety, even factoring in the drop in oil prices.

I’m going to include a couple of other valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

Morningstar rates NOV as a 4/5 star value, with a fair value estimate of $89.00.

S&P Capital IQ rates NOV as a 3/5 star hold, with a fair value calculation of $86.30.

This purchase adds $36.80 to my annual dividend income, based on the current quarterly $0.46 dividend.

I’ll update my Freedom Fund in early December to reflect this recent purchase.

Full Disclosure: Long UL, V, AMNF, BBL, and NOV.

What do you think about NOV? Ever take a look at it? Impressive fundamentals?

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Edit: Corrected spelling for winches and backlog information.

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140 Comments

  1. Solid buy, especially considering the recent drop in O&G across the board. There has been talk lately of a possible GE buyout of NOV but as far as I can tell, it is just speculation. Interesting to see how it plays out in the next year or so.

  2. Hello DM,

    Good analysis on the purchase as always. I’m a long time reader but first time poster, so let me start by thanking you for the profound inspiration to start investing and building my own portfolio of incredible companies at fair valuations which reward me with dividends.

    I have a question for you however, which I was hoping you could answer. I recently came across a windfall of about $150,000USD and I don’t know how I should deploy it. Normally, I invest excess cash which I am able to save every month, but I have never had in my hand so much money to invest in one single time and am very confused.

    Should I keep it in cash? Invest in a few companies? Invest in a lot of companies? How much to invest in each? Should I wait for a market correction as I read on the news?

    Please help…

  3. Jason,

    you continue to hold your impressive buying pace.
    I did not know NOV yet, so thanks for the introduction.
    I like your focus on long-term growth rates (mostly 10 year time-frames). That is a great way to judge a business and prevents you from buying the “one hit wonders”. The oilfiled service sector seems to have a bright future, too.

    I wish you all the best with this one.

  4. Seems a very good price to be in. My ultra-fast-price-prediction-formula gave me a fair value of 87.70, in line with Morningstar and S&P Capital IQ values you refered.
    You managed to have a 20% safety-margin, that is not usual and it is very valuable.
    It has the risk that it operates in a field that is in some kind of doubt about the future, and may suffer even being a good and well managed firm.

    Was this another comission-free buy? That’s one of my favourite parts in your posts. I wish i could have some of those here in portugal.

    Cheers!

  5. I was wondering when the NOV buy was coming 😉 Loading up the pea shooter to take a shot at it myself in a week or so. Today I received my first but far from last US dividend ever and it came from Realty Income, happy times.

    I can’t let go of the thought that you wrote about some week ago, about how time slows down when you aren’t in the hamster wheel anymore kind of, sounds peaceful. Cheers and thanks for a lovely blog!

  6. Rob,

    Thanks! I think the valuation makes sense here, especially after the drop. Should be a solid long-term holding.

    Lots of speculation out there in O&G after the Halliburton deal, but I don’t pay attention to that stuff. Amazing to me how unfounded rumors just spread around.

    Best regards!

  7. Jason,
    Funny how different people react to the same circumstances. I recently sold NOV because I expect a downturn in orders while the drop in oil prices plays out. Being considerably younger than me, I think that you will be rewarded over the long term, but I wanted more reliable (if there is such a thing) earnings growth. I recently bought V, but before the run-up.
    Keep up the good work,
    KeithX

  8. ExecutiveGuy,

    Appreciate the readership. Thanks for taking the time to drop a comment. 🙂

    I’m glad you’ve been enjoying the process. Collecting increasing cash money in the form of dividends certainly makes it a lot more fun!

    As far as your question goes, the research shows that you’re better off investing a lump sum all at once. However, I’d personally feel better easing that much money in. That’s just me. I would personally probably just tack on an additional $10,000 or so per month on top of my usual purchases until that $150k is exhausted. So it would be gone after 15 months, max. The market could of course continue to move up over that time frame, thus reducing opportunities and putting you in a position where you’re worse off. Of course, a big drop after investing $150k might be detrimental to your psyche. That depends on how resilient you are.

    Not just psychological, but I don’t know if I could reasonably find enough opportunities for $150k right now. Depends on the size of the portfolio in question, and what kind of weights you’re comfortable with. So you’re getting into personal risk tolerance, time horizons, income needs, etc. Thus, it’s tough for me to answer this question exactly for you. But I would slowly work that $150k in over the course of a year or so, picking my opportunities. That’s just me, but, again, investing the whole lump sum is typically the better way to go so you get your target allocation correct and you don’t miss out on any cash flow.

    I hope that helps!

    Cheers.

  9. Stef,

    Thanks for dropping by!

    Hope you found some value in the post and maybe a potential idea for a future investment. Tough to find a company more dominant in this space than NOV, which I like. The buyback should support shares and dividend growth until oil rebounds, but we’ll see. 🙂

    Hope all is well over there.

    Best wishes!

  10. DM,

    Sounds like a good buy. They are involved in an industry that will continue to be important, likely throughout our lifetime. In addition, much of that rigging and drilling equipment also can find uses in mining and groundwater extraction (and that will NEVER go away).

    You’re now blowing 50 positions out of the water and your buys are picking up. That is all around excellent, keep it up!

    – Gremlin

  11. Nuno,

    It definitely appears there’s a sizable margin of safety here, even using the lowest valuation numbers supplied from S&P Capital IQ. So I feel fairly comfortable here, but, of course, anything is possible. If oil drops more and stays there for a long period of time, this company might suffer. But I think the buyback will support shares and dividend growth. If they drop substantially and unreasonably, then I’ll just look to add more. 🙂

    Unfortunately, my free trades just expired. Enjoyed them while they lasted. I made sure this purchase was more in line with my historical averages due to the $7 I pay, which ends up being about 0.5%.

    Thanks for stopping by!

    Best regards.

  12. swedendividend,

    Congrats on your first US dividend! That’s fantastic. May it be the first of many. 🙂

    The days are indeed long now. Of course, I purposely structure my day so that it runs slow. I try not to overwhelm myself, as I’m just not one of those people that has to “be busy” all the time. I quite enjoy unstructured free time to just read and write. But it’s truly wonderful. I can’t say enough good things about freeing your time up and being able to tackle the opportunities you really want to go after.

    Happy hunting with that pea shooter!

    Take care.

  13. KeithX,

    That’s what makes it a market, right? Always a buyer and a seller. 🙂

    NOV might be a bit slow going over the short term, but I’ll be quite happy if they come anywhere close to that 14% prediction. Couple a low payout ratio in there and I think double-digit dividend raises are likely over the next few years, but it all depends on oil prices. Long-term, I think the demand for oil stays strong.

    V’s a strong play. It’s on my watch list, but I just missed it there. Glad I got in when I did, but I hope it drops back down so that I can add a bit more.

    Thanks for sharing!

    Best wishes.

  14. Gremlin,

    I agree. I can’t imagine their product portfolio’s importance or demand is severely reduced over the long haul. Cyclical for sure, but I think the long-term story is strong. We shall see!

    Yeah, I imagine I’ll be well over 50 before I’m done. I can think of a dozen companies right off the top of my head that I’d like to own a piece of, but do not. It should be a large collection of truly wonderful businesses before I’m all done. 🙂

    Hope you found some value in the post.

    Cheers!

  15. Interesting buy.

    I’m generally looking for more in energy, but between BP and CVX, I don’t necessarily need a ton more integrated holdings… although right now the entire sector is a solid value.

    Btw, great beat for TGT! I was glad to get in when I did in the low 60s (surprisingly just a few weeks ago). I don’t expect any blowouts for the next few quarters, but hopefully the improvement can demonstrate some resilience in the company and solid footing in Canada.

  16. Ravi,

    I’m going back and forth on BP. It’s near my cost basis, but I purchased before oil dropped to these levels and before the ruling went against them. So the risk has increased rather substantially, while the price hasn’t decreased markedly. That said, I still think there’s value there, and even a worst-case $18 billion won’t ruin them. Further asset sales, however, would probably occur. Not sure if I want to increase my exposure there, given the risk.

    Yeah, it look like TGT had some excellent results. What I most enjoyed was the low figure for the costs related to the breach. I remember everyone freaking out about that, and nailing the company’s stock price to the tune of billions. Ends up being a rounding error for the company. I wish I would have bought less in the high $60s and more in the $50s, but you can’t win them all. I averaged down nicely and I’m happy with my position here. But Mr. Market can be bipolar. Just like it swings to the negative too much, I think it’s swinging to the positive too much here. And I also think that last dividend increase was probably a bit too generous. But I’ll gladly take the cash flow! 🙂

    Thanks for dropping by.

    Best regards.

  17. Jason,

    Great update. While i am not familiar with this company, i am sure you have done your homework judging by this informative article. Keep up the good work! I am curious, do you plan on continuing with adding new businesses to your portfolio? I thought awhile back you had mentioned stopping at around 50 companies. Has this plan changed? I would imagine since you are writing full time now, it allows you to better research and manage your holdings, allowing you to hold more companies without fear of mismanagement. I would love to be that diversified, however i could never devote the time it would take to manage them properly. How many holdings would you recommend for a guy like me who only has 10 or so hours a week to devote to research? I personally think i will stop around 20 holdings. Thanks for your input!

    Josh

  18. I agree. I definitely was hesitant to add if I could get more in the low 60s as it was a higher risk, but at 70 it’s no longer a great value. It could grow substantially in the future, but that’s not something I can make an educated bet for. I’m not a research analyst, just a lazy guy trying to make a buck. 🙂

    I did miss the V train. I’d been looking for a while to get into payments, but never found what made sense to me. I don’t have much experience with growth stocks, so it was hard to really value the payments sector… for me anyway.

    At these levels, I’m considering AXP. Decent value, although not a screaming buy.. albeit with lower growth than V and MA; however, they also hold less credit risk than the other two. Given their foray into prepaid debit cards and such, I do see the opportunity for them to take over electronic payments/banking for underserved communities (i.e. “the less affluent”). It would be an incredible way to get access to capital at nearly zero %, after all, they definitely don’t offer interest on those balances. I don’t know enough about the market to see how big of an opportunity this is, so I suppose I’ll wait to learn more. It’s an interesting case, though.

    In any case, many others I’d like to get into at some point. Also got into MCD at 96, so hoping for some innovations in their product/services in the next year or two.

    Always a pleasure. NOV seems like a good value. I may be interested if I come up with some more capital. I need to learn more about oilfield services/equipment sector.

  19. I think I came across NOV when I was searching for Novartis. I remember glancing at NOV’s fundamentals and was impressed with them, but some other company probably caught my attention. Too many good stocks to pay attention to – a good problem to have. 🙂

  20. A-G,

    Oil is certainly cyclical, but I think the long-term story is there. And what’s great about NOV is that it’s exposed to both oil and gas.

    If we see oil drop even further I might have to increase my exposure to energy a bit, but I’m somewhere around 15% right now already.

    Thanks for stopping by!

    Cheers.

  21. Hi,
    I like the investment as an individual investment. However, don’t you think you are a little bit over allocated to oil companies? COP, CVX, RDS, PSX, XOM and BP
    If you look at energy in general you can add KMI and OKE
    Whta do you think?

  22. Looks like a great buy Jason. NOV is one of those companies I’ve always meant to take a closer look at but for some reason I always forget. Being out on the rig that I work at I see one of their trucks either delivering parts or working on something every other day. I’d be curious to see what their dividend policy will be like if there’s a slowdown in the oil field. Itll be interesting to see if they still increase or hold it flat.

  23. NOV is a good buy. I don’t hold this company because my 16% of portfolio is in Energy Sector. I also have HP on my watch list. Any thought on HP?

  24. Josh,

    Well, I originally planned to stop around 50 because I was working full-time. Add in writing for the blog and I had very little time to really watch over a huge portfolio. However, my time has freed up considerably, which allows me to expand things a bit. That all said, I actually don’t spend nearly as much time as I thought I would managing the portfolio as it stands. Most of the companies I’m invested in just don’t require a lot of attention. It’s not like I need to look over the shoulder of Johnson & Johnson’s management or something. I think I’ll write a post soon about this, about how a large portfolio of mostly blue chip stocks just isn’t that time-intensive.

    Tough for me to say what might work for you, however. I know for sure I don’t spend 10 hours per week on managing my own portfolio, as far as research goes. But I write about stocks a lot, and so there’s some commingling going on there. But 20 stocks will likely give you more than enough diversification, assuming you’re spread out across different sectors, geographies, etc. I look at diversification less in terms of portfolio diversification and more in terms of income diversification, especially these days now that I’ve already achieved the former. 20 stocks means a dividend cut will affect 5% of your income, assuming equal weights. Probably unlikely to happen if you focus on high-quality companies, but the recent financial crisis showed us dividend cuts are more possible than we think, even from otherwise successful companies.

    I hope that helps!

    Best regards.

  25. Ravi,

    “albeit with lower growth than V and MA; however, they also hold less credit risk than the other two.”

    Not sure about that. AXP actually takes on the credit risk of its clients, since most of their cards are issued in-house. V and MA just act as an intermediary, while the banks issuing the cards take on the credit risk (and the potential reward therein). Factor in the fact that AXP’s network isn’t nearly as large (due to higher fees, from what I’ve read), and it seems to be a higher-risk/lower-reward play. Just my $0.02.

    Cheers!

  26. Jason,

    You should look at BXMT has a 7% dividend in high grade A loan origination and the company has been aggressively growing. Seems like a perfect fit for you (obviously I’m long).

  27. JC,

    I appreciate the insight there, since you’re in the industry. That’s a good sign! 🙂

    It’ll be interesting to see how the dividend shakes out, but the low payout ratio and high growth rate gives me some comfort. It’s certainly not out of the realm of possibility of a cut if oil drops dramatically, but even their 2009 EPS (when oil was a lot lower) could have comfortably covered the current dividend. And they’ve grown since then.

    Let me know what you think if you ever take a look.

    Best wishes!

  28. AJ,

    I’m sitting on a similar energy allocation. A bit high for my tastes, but I’m going where the value is.

    HP seems solid as well. I did a write-up on it for DTA recently. Similar fundamentals to NOV, though a much longer dividend growth streak and in a different business (drilling). The one thing I didn’t like about HP was that, while diversified, they’re mostly exposed to US land drilling. If I were to buy a driller (and I may), it would be HP.

    Cheers!

  29. Ryan,

    Looks like an mREIT to me, no? I have a policy against mREITs. Not very good long-term records across the board, and I can’t totally understand the business and what they own. That said, could be a great investment for others. Just not for me. Good luck! 🙂

    Take care.

  30. DM,
    I like this purchase. Back when I watched Cramer(a few years ago now), he always liked this one, but I never looked at it. Now that my portfolio is expanded, I’m ready to add more energy related stocks besides CVX (one of my largest holdings). With oil prices down, this is a good time to start looking seriously. NOV may be a good place to look because I don’t necessarily want to be another conglomerate like BP or XOM.
    -RBD

  31. Congrats on finding more value in this challenging market. I think the oil business in general still has several good decades ahead, so I think you will see good performance from NOV.

  32. Peter Lynch had a portfolio of like 1000 stocks and he did pretty well ;D I might be exaggerating but I think you have a good point in that high quality blue chip stocks doesen’t need much overlooking so to speak. When big news happens you will notice and can take a closer look.

  33. NOV is an excellent buy, Jason. I hold shares since 2012 and I love the company. Recent they became more focused following the NOW split off. They started a massive share buyback program and the divvy grows at a solid pace :-). NOV is indeed the one stop shop for oil and gas exploitation equipment which gives them a wide moat. Oil price can be a concern in the short term. But I don’t see the world running without oil and gas any time soon. So long term prospects should be very ok. I’m happy to up my position when the price drops towards 68$.
    I’m also eyeing BP for a while now. They have a nice dividend. But I still fear the risks they carry…

    Take care.

  34. This is why I love our little community, as I wasn’t too familiar with this company and you provided an excellent overview. While I’m not in the market at the moment for a company such as this, it would be an excellent addition to an established portfolio, such as yours. Overall, with the numbers presented, I think it will be an excellent purchase for you. When oil begins to rise, you should see a nice capital gain on the stock, as it should carry over to all related companies.

  35. Nice buy here Jason, and in a company that hadn’t really made it on my list just yet. I’ll have to do some more research to really understand their operations, but thanks for the head start!

    Bit by bit! Keep inspiring and chugging along!

  36. Jason, I know you will not invest in closed-end mutual funds, but I would urge all the readers to take a close look at HQH and HQL. These are closed-end mutual funds that trade like stocks, and invest in over 50 biotech and healthcare stocks (like Gilead Sciences, Celgene, Biogen, Amgen, etc.). They also pay a 7%+ dividend yield, and have a long track record of beating the S&P 500 and increasing their dividend payouts.

    I am fully invested in HQH and just started purchasing HQL on a monthly basis. Both are great investments, just wish I had started purchasing them sooner. Not many good healthcare stocks out there with a record of beating the S&P and increasing their dividends.

  37. Nice buy. I’m personally buying cbi…Well done buying now. CBI isn’t in your wheelhouse as the div growth isn’t there. However the valuation is quite compelling, also buffett has been buying heavily 🙂

    Another one that I’m buying that is in your wheelhouse is Pnr. Small entry yield but the div growth is fantastic and 37 years of growth. they build infrastructure for water which we can all agree will have huge demand as the rest of the world becomes more developed. Take a look at Pnr!

  38. RBD,

    Cramerica, right? Haha. I think he’s funny and entertaining, but offers little otherwise. Good for him for at least trying to help retail investors in some way, though. I used to watch him years ago, when I still had cable. He flip flopped all the time on stuff. Not sure if he’s still that way or not.

    I’d definitely take a look at NOV. Might not suit you, but I think the fundamentals are pretty strong. Definitely stronger than any of the supermajors out there over the last 10 years. The only thing they lack is a lengthy dividend growth streak, which I’m hoping is just revving up. 🙂

    Thanks for dropping by!

    Best wishes.

  39. Khen,

    Good question there. I am a bit heavy on energy right now. It’s somewhere around 15% of my total portfolio. I’d prefer it around maybe 10-12% long term. However, I’m still building the portfolio. It’ll likely be three times its current size in another 10 years, so I have time to build up around energy. I’ve been a bit light on energy purchases this year due to the weight there, but I’m okay with a temporary over-allocation. I don’t want to get too crazy there, but I’m also not going to pass up value and quality when it’s right in front of my face simply due to a temporary allocation problem.

    I hope that helps! 🙂

    Take care.

  40. Spoonman,

    I hope you’re right. I think oil dependence is here to stay for at least a few more decades. And I’ll continue to profit as long as I can from that. 🙂

    Hope all is well up in the PNW for you guys!

    Best regards.

  41. swedendividend,

    I remember him talking about how he could more easily recall stock tickers than his kids’ birthdays. I don’t wan to get that crazy with it, but I do find myself in a position where I can recall about 200 stock tickers right off the top of my head. I don’t know if that’s good or bad. 🙂

    Cheers!

  42. Jos,

    Thanks for the comment there. Appreciate your perspective as a shareholder.

    I agree with you that oil and gas dependency is here to stay for at least a few more decades. And NOV should continue to do well over that period, especially as they continue to acquire bolt-on businesses that widen their moat even more. I’m excited! 🙂

    Thanks for stopping by.

    Best regards.

  43. Agent,

    I’m happy to share! 🙂

    I love finding gems like this, that others haven’t heard about. I find a lot of times they perform better than your usual suspects, so I’m happy to initiate a position in a company with fundamentals this spectacular. Their dependency on the price of oil is a concern, but that’s true for all the major oil companies as well. I’m hoping to lighten the load on energy across my portfolio, though. So I’ll likely have to take it easy there throughout 2015. But I’m positioned well there anyhow. Once you do the heavy lifting, it’s time to sit back and let the dividends roll in, while you allocate them elsewhere. One brick at a time!

    Cheers.

  44. EWB,

    HQH has indeed done well over the last five years. However, going out longer than that leads to mixed results. And the dividend payout is rather erratic, going for a year or two here and there with no payout at all, from what I can see.

    It looks like it could be a solid investment, if you know exactly what it owns and how much leverage it may use. The one thing that’s important to look at with CEFs is NAV. And right now it’s trading at a slight premium to that. Usually, it trades at a 3% or so discount, so I would wait for a better entry point, if this was something you were interested in.

    “Not many good healthcare stocks out there with a record of beating the S&P and increasing their dividends.”

    I don’t know about that. JNJ and BDX are just two off the top of my head that have killed both the S&P 500 and HQH over the last twenty years. And they’ve both increased their dividends generously over that time frame. And that’s without leverage. The S&P 500 is up 357% over the last 20 years. HQH is up just over 100%. Meanwhile JNJ is up almost 1,000% and BDX is up almost 1,300%.

    Take care.

  45. Interesting company!
    I own a smaler Norwegian company that is active in the same industry and the big question is, as you pointed out, where the oil price is going. The industry has had a really good period untill just recently and the question is on what level the profitability will be the next couple of years.
    The situation is “somewhat” reminiscent of the case with Deere & Co in the sense that the industry has had high earnings because of prices of the underlying commodities were high.

    Seeing as the earnings could drop further it’s great that the payout ratio low as with Deere & Co. The balance sheet seems strong as well, which is another important safety net. The company seems to be a good catch at first glance!

    /Best Regards

  46. took2summit,

    Hmm, I just took a look at PNR. Thanks for the suggestion. I think I’d have a problem with the growth, though. EPS has a CAGR of just over 5% over the last decade, while TTM EPS is actually lower than 2004’s numbers. Some of the profitability metrics are a bit underwhelming as well. Any thoughts on margins, ROE, and ROIC? I don’t mind a yield below 2% if the dividend growth rate is fairly substantial. But it looks like their five-year DGR is 7.1% and the 10-year is 9.1%. Not bad, but I’d prefer a 3% or so yield with growth rates in that range.

    Just some things I see with a quick glance, but I certainly like the business model. I’ll definitely keep my eye on it. Thanks for the suggestion! 🙂

    Best regards.

  47. Congrats on another solid purchase! I had a question about ur AMNF position. It’s in the top five on my watch list. For me this time of year is very expensive (taxes, work expenses, Xmas) and I try to look to a stock like this one because it’s cheap, I already own shares of AMNF, and I still feel like they have a potential for growth. I plan to purchase 250 shares by the end of the week and then save the rest of my cash until dec 1. Bad decision?

    I really like NOV on paper, but I see too much liability risk from lawsuits, malfunctioning products spills and any number of job site accidents. But I guess that could be said about almost any oil/gas stock. Competition usually sharpens a company’s wits and makes them continually produce a better safer product. If they had more/ bigger competition I think I would like them more.

    Awesome post, as usual! Thanks for letting me contribute!

  48. LTI,

    Absolutely. Where the price of oil is going is that million-dollar question. If it goes lower, it’ll effect more than just NOV, that’s for sure. The good news is that companies like NOV are so profitable that they should remain strong even through a prolonged drop in oil prices. The company has been operating about as long as oil’s been around, so they’ve lived through some pricing issues. But we’ll see how it goes.

    Thanks for dropping by!

    Cheers.

  49. Pat,

    Well, I love AMNF. I’m not sure if I want to average up here or not, but I’m definitely hoping to double or triple the position in the next year or so. 250 shares is about $500. I’m not sure about your commission fees, but that’s a rather small purchase. Unless you’re only paying $2 or $3 in commission, I’d try to make sure it’s at least a grand. However, never buy stocks if you’re in a cash crunch. If you’re light on cash, just wait until next year. AMNF isn’t going anywhere. 🙂

    Right. NOV has risks, and one of them is a product malfunction. However, spills and such are a risk with any major company in O&G, as we’ve seen with BP. Certainly something to be mindful of, though.

    Best regards!

  50. Phil,

    Glad I could bring it to your attention. The numbers really jump off the page, but make sure to do some DD before you invest, if you do invest. I think it’s a fantastic company, but others will surely disagree. 🙂

    Cheers!

  51. Another really solid business added to your collection – you really don’t stray too far from quality it seems, always looking for high market share, strong balance sheets and a decent history. I’ve invested in a couple of resources / oil and gas services businesses, but none of them have the presence that NOV seems to. Great write up as always!

  52. You’re definitely right, however I prefer stocks/CEFs with higher yields than JNJ and BDX. If the market ever plunges again (which it will at some point), JNJ will be the first stock I buy. I tend not to buy stocks/CEFs with yields lower than 3.5% (just a personal preference of mine).

    HQH has paid dividends on a regular, consistent basis since 5/2004:
    http://www.nasdaq.com/symbol/hqh/dividend-history

  53. This was a surprise buy to see. I didn’t expect another November buy this soon. I guess that’s just a testament to having a high savings rate. While I have heard of NOV before I never really looked at it seriously nor have followed it. Thanks for bringing this analysis to the forefront for me. As oil remains depressed the oil majors and services companies seem to present the best relative values going forward. No one knows when a rebound in commodity prices will occur but there is little doubt that it will happen eventually. Kudos to building up that energy sector play in your portfolio. I’m sure in just a few short years it will provide some nice capital appreciation along with rising dividends. So far, November has left me gun shy. I still have not made a purchase this month which is very rare for me as I have been pretty religious about making buys every month for many, many years. Still have a week and a half to go. We’ll see.

  54. Jason,

    I definitely try to stay pretty close to home. I’ll take a risk every once in a while, but the bulk of the portfolio is geared toward the best businesses I can find. It should be a mighty nice collection by the time the last brick is installed. 🙂

    Glad you enjoyed the post. NOV has a lot to like here, but the price of oil is a lingering concern. 2015 could be iffy, but I’m confident about their long-term prospects.

    Best regards.

  55. DivHut,

    Energy definitely has some value. I’m trying to move around the supermajors a bit, as I already have healthy exposure to quite a few of them. XOM is one I would like to add to, but I last purchased it much cheaper when oil was much higher. I’d rather add to it somewhere in the low $80s with oil where it’s at. We’ll see how long it remains like this, though. Anybody’s guess.

    I’m sure you’ll find your opportunity. Still a few days left to put some capital to work. If not, there’s always next month. 🙂

    Cheers!

  56. Mantra:

    If you were a radio talk-show host I would be saying “First time, long time” as I have been following your journey for nearly two years now. You are a superb example of initiative, self-discipline and tenacity and it is most enjoyable to join you in your journey to FI.

    And informative, as with articles like this one. I have a soft spot in my heart for the oil industry as my father worked in it for 38 years. Thus I am partial to it and I am thoroughly enjoying its recent renaissance after having been in decline for so many years. NOV actually had a store in my hometown many years ago so I am somewhat familiar with it though not in recent times.

    I am a follower of David Van Knapp over on Seeking Alpha and he likes to talk about a company’s “story”, i. e., how it actually makes its money. NOV’s story reminds me of the old bromide about the Gold Rush: It wasn’t the miners that got rich, it was the people that sold the miners all their supplies that got rich. NOV seems to be one of those suppliers. And in staying with David’s line of thinking, the energy industry seems to have the best growth story going in America these days, the recent price decline in oil notwithstanding. Pipelines, natural gas processing plants, chemical plants and export facilities are being built that portends steady growth in the industry for several (many?) years to come. Few, if any, other industries seem to offer such prospects. Thus I would not be overly concerned about the current price blip.

    For further confirmation, Chuck Carnevale, another of my favorite contributors to Seeking Alpha, mentioned NOV in his most recent article. You know that if a company is on “Mr. Value’s” radar, then it is a worthy candidate for further due diligence!

    Again, thank you for sharing your journey with the world. It is truly motivating to the rest of us.

    Cannoneer

  57. Congrats on adding to your holdings! I hadn’t heard of this company and I really like what I see at first glance. That’s some serious dividend growth these past few years and if it continues your YOC will skyrocket really fast on this one. Wishing you the best with this investment and I’m happy you’re continuing the purchases at such a fast rate!

    Best Wishes,
    Ryan

  58. Just my 2 cents worth, but I would do like DM is saying. With his method you’re dollar cost averaging and you could have the luxury of throwing added capital when you think the market is low and just investing the regular 10K or so that month if you think the market is fair/over valued. This takes discipline for sure, so if you’re concerned about the money burning a hole in your pocket and you getting the itch to go spend on extraneous items then I’d say invest it all in one lump. Either way I think you’re going to win in the long term.

  59. Dividend Mantra,

    Nice post and and an excellent buy with NOV. The compound annual growth rate of revenues and earnings you mentioned is quite impressive. I think you will do really well over the long term with this company. What is even more impressive with this growth that it includes the recession. Here in western Canada in 2009, all the major oil companies and oil service industries were laying people off in record amounts.

    Your dividend tree keeps getting bigger and bigger quickly.

  60. Jason,

    IF you are looking for an account with 30 free trades a month you should check out MerrilEdge. here is the offer: “Qualify for up to thirty $0 online equity and ETF trades per month when you have a balance of $25,000 in your Bank of America deposit accounts, or have $25,000 in cash in your Merrill Edge self-directed accounts.”

  61. Dividend Cannoneer,

    Thanks for all the support and readership over the years. Much appreciated!

    I knew when first starting this journey that I had to be as persistent as I possibly could, so I’ve done my best to live up to that. I’ve written before that the only superpower I have is consistency, and it’s true. Even better, we all have this power within us, which is why I think financial independence is attainable for just about anyone.

    Thanks for letting me know that Chuck was writing about NOV. I had no idea, but I have a lot of respect for Chuck and his writings. I’ll have to see if I can find his piece to see what he said, but I’m glad that we’re on the same page. I don’t see what’s not to like here. Oil might stay low for a while, but I think the long-term story is intact here. You practically can’t drill for oil or gas without using their products. I love that!

    Thanks again for the support and kind words. Really appreciate it. This community makes it all worth it. 🙂

    Best regards.

  62. IP,

    Thanks for dropping by!

    Top line and bottom line growth has been outstanding over the last decade, and they actually didn’t even suffer that much through the Great Recession and subsequent drop in oil. Their numbers almost remind me of a consumer products company in the way the growth was fairly secular. Not sure if it will continue or not, but I’m certainly happy to have a ticket on this train to see where it goes. 🙂

    Cheers!

  63. Ryan,

    Thanks! I’m really pleased with my ability to continue adding at this rate. Might not be able to continue in this manner indefinitely, but I’m doing all I can to put as much capital to work as fast as I can.

    The numbers are really impressive. I was actually a little shocked when I first took a look. They’re up there like a growth stock, yet it offers a P/E ratio like a deep value stock along with a fairly attractive yield.

    I hope all is well!

    Best wishes.

  64. Mr. Stock Fox,

    Thanks for the suggestion!

    I don’t plan on ever keeping $25k in cash around, but it looks like you can get around that with a $50,000 total balance and what they call “Platinum Preferred Rewards”. Looks like you just need a checking account for that. However, I looked into MerrillEdge a while back and they didn’t have very good reviews. Might have changed since then, though.

    Cheers!

  65. Nice buy! Oil services companies have declined due to lower oil prices. I think you got in at an attractive valuation. What are you thoughts on the merger between Halliburton and Baker Hughes?

  66. DM,

    Looks like you made a good choice, congrats. I have decided that if I wait awhile I can add some additional shares of XOM, CVX, COP. A lot of shareholders are currently trying to pick up shares but the price is still dropping for every buyer there seems to be more sellers. Currently, I keep $30K+ in the bank just doing nothing for I have 34 different stocks enrolled in the Drip program, I’m starting to wondering if I should not start putting that extra money to work, Next year may be a good time to pick up more energy stocks such as CVX shares, thoughts?

    B

  67. Henry,

    They’ve definitely experienced some weakness lately, which is exactly why I’m interested. 🙂

    I’m not real concerned about the merger. I wonder if it might affect SLB more than anyone else. NOV doesn’t directly compete with HAL in a lot of their product lines, so I think they’ll be fine. NOV has been one of the more active acquirers in this space, so I wonder if that’ll pick up now.

    Cheers!

  68. Brittney,

    Well, I’m a shareholder in all four of those companies, so I’m a fan. 🙂

    Impossible to speak to timing, though. Oil could go anywhere from here. Anyone’s guess. I don’t worry about timing that stuff. The key is to focus on the long-term winners that have been around through multiple price contractions over the last century. Buy those high-quality companies at an attractive valuation using all known data and go from there.

    Best wishes!

  69. Great find DM, NOV’s number are very attractive and impressive (except for the entry yield, but the growth rate makes up for it) I will include NOV on my watch list. Thanks for sharing!
    FFF

  70. Hi Jason,

    I have been a long time lurker on your site. it’s really impressive what you have accomplished in such a short period of time and enjoy watching your progress.
    I have a quick question. As your portfolio has grown how do you keep up to date as to when dividend increases occur without constantly trolling the company websites?

  71. Jason interesting stock hope it performs to your expectations. Additionally, thanks for the intro to UL Plc, I will definitely keep an eye on it. Also, after reading your praises for Warren Buffet’s biography; I decided to buy a copy & I found it to be a great an very easy read. Thanks for the indirect referral.

  72. Interesting buy DM, iv never actually heard of NOV. I’v been a bit more cautious lately with looking at oil companies due to the general weakness of WTI and havnt had a chance to look at any quarterly reports since prices have gone down. Although with the lower prices/pullback some of those good oil companies are looking pretty attractive. I think for now though, personally I’d hold off and wait for news from the upcoming OPEC meeting. With some good news, oil stocks could get a nice price bounce 🙂

  73. lester,

    Appreciate the readership very much. I hope you continue to find value in the content. 🙂

    I’m notified every time one of my stocks declares a dividend, so I know right away when one is increased. I signed up for email alerts via Seeking Alpha, which makes it easy to stay on top of that stuff. Hope that helps!

    Cheers.

  74. FFF,

    Yeah, I think it’s a pretty strong play from both the fundamental and qualitative side. Of course, the price of oil could cause some fluctuations. But I’m confident in the long-term story.

    Happy to share! 🙂

    Take care.

  75. Sunny,

    Glad you’re enjoying “The Snowball”. One of my favorites. I’m currently around 450 pages in on the second read. Always good stuff. It just weaves his life story so well. And you can see where a few key decisions here and there, especially early on, made such a difference for his life. Just seems like he was making the right choices like 99% of the time.

    Thanks for dropping by!

    Best wishes.

  76. DW,

    I hear you. Although, the best time to buy up stocks like this is when everyone is cautious because of the drop in oil. Now, if oil stays low for a substantial period of time, then it might get rough. But I can’t imagine that over the next 10 years the demand on energy (and the price) doesn’t increase. We shall see.

    Take care!

  77. that helps a bunch, thanks so much.
    ya, your site rocks, pure and simple. It’s frankly remarkable what you have achieved.

  78. Hi DM

    Good buy, NOV is on my watchlist since the oil drop. Maybe interesting to hear your view on some other interesting picks now like: HP (you mentioned before), OXY and SLB, and now of course very intereseting for me QCOM (after the recent drop because of china), i have only IBM as technlogy-hold. i know you don’t like technology stocks so much but QCOM has a pretty solid balance sheet and a nice DG record! Best Regards from Zurich SDG

  79. I am a swedish novice investor and have made some buying earlier based on this eminent blog. And due to the declining swedish crown and a stronger USD it has been a nice journey so far – like Walmart 23 percentage up for me.

    Thank you for the inspiration and your true dedication to your goals. As a family father I try my best to follow your advices but I guess I have it a bit harder at this point in life to put away amount enough.

  80. NOV always pops up when I look at Berkshire’s holdings, and I always seem to pass over it, probably because the yield is not all that high. The recent dividend growth and stock price decline means I’ll have to give it another look.

  81. Hello DM!

    I’m also a long-time reader but first poster and I want to thank you so much for your inspiring blog!

    I was wondering, on what you base your research. I find it very difficult to get information on companies “by googling” about where in the market they stand and what their prospects are.

    I read the annual and quarterly reports which are obviously biassed and I find that analysts often have very differing opinions. Do you have any suggestions on that? Would be appreciated 🙂

  82. Looks good to me……. Modern Graham gives it a plus for both the defensive and the enterprising investor… Fastgraphs charts show an undervalued stock. VURU gives it a 75/100. I think that you made another good investment. I personally just purchased Tupperware (TUP) and Qualcomm (QCOM). Thanks for a great blog. TJ

  83. This would put you at 52 companies, I think. Nice!

    This wasn’t on my radar at all until this post. Now it’s my next purchase. I just sold all my shares of Leggett & Platt to buy Illinois Tool Works. I HATE selling a dividend payer, but with an $11 appreciation in share price since I bought it in December, a P/E ratio of over $70, a 5 year dividend growth history of 3-and-a-half % (compared to a 10 year dividend growth history of about 8%), and a payout ratio of 209%, I feel like my money could be better used elsewhere. ITW was next on my list, and now thanks to this post, NOV is immediately after. I hope I made the right choice there.

    Here’s to all of our dividend growth success!

  84. Really interesting choice! I’ve never really sat down and looked at it, though I know Warren Buffett likes the company. Do you feel his influence has affected the price of NOV at all? Hope it treats you well!

  85. SDI,

    Thanks for stopping by from Switzerland! 🙂

    Yeah, I’m not a big fan of tech plays, so QCOM is probably outside my realm. I think there are some solid picks in energy, though. HP is a great driller. If I were to buy a driller, it’d be HP. I’m actually surprised that some of the big energy plays haven’t come down further after the big drop in oil. I wouldn’t be shocked to see continue weakness there, especially if oil doesn’t rebound quickly.

    Have fun shopping!

    Cheers.

  86. Per Penning,

    I appreciate you following along!

    We aren’t all in the same position in life, and so we don’t all have the same means or goals. The key is to develop realistic goals for your situation and do all you possibly can to reach those goals. That’s what’s really important. 🙂

    Glad things are working out for you so far. Anything could happen in the short term, but I think the companies I discuss and invest in will do well over the long run.

    Best wishes!

  87. Justin,

    The yield is a tad low, but I’ve become more and more comfortable with stocks with yields below 2.5% as I’ve gone along. I’ve noticed that some of my best investments (in terms of dividend growth and total returns) have been stocks with yields around 2% or so. Yield is not one of the first things I look at, but I’d definitely prefer 3%+, all else being equal. Unfortunately, things aren’t usually all equal, so I just continue to try and invest in the greatest companies I can find…and NOV seems to fit the bill.

    Cheers!

  88. tjmcdee,

    Looks like I’m in good company. 🙂

    TUP is really interesting. I did a short write-up on it a couple of months ago and concluded it was undervalued. I guess they’re having some issues down in South America, but they’re growing quite quickly. I’m not a fan of the direct-to-consumer model, but they’ve really done well with it. Best of luck!

    Take care.

  89. Joey,

    Yeah, I looked at LEG a while ago. I missed out on some gains there, as it was much cheaper when I looked. But I just couldn’t make the numbers work for me.

    ITW has been one of my best investments. I have nothing but good things to say about that company. Probably roughly fairly valued right now.

    Would love to have you as a fellow shareholder in NOV, if it works for you. I’d definitely recommend the DD to see if it fits in your portfolio, but I’ve found it to be compelling. The big question is where oil goes. The CEO is neutral on 2015, but extremely optimistic about 2016 and beyond. I tend to find myself in the same boat.

    Thanks for dropping by!

    Best wishes.

  90. Might be an interesting future column for you to write and your readers to put their 2 cents worth. ” 20 stocks to buy, ignore & sleep soundly”

  91. Have 7 free trades that expire next month, thought that would be the best way to use them without making big purchases just for the sake of making a big purchase

  92. Hi DM. very nice buy, but I think and feel it is a bit too soon. I guess they will or might fall a bit more before resuming their rise. Who really knows ? After checking different valuation models, I decided it was still too soon, so I clenched my fist in my pocket. Now what ? I then checked others and saw I had sold OKE a while ago. The value of OKE looked quite good to me, so I decided to be again co-owner with 100 shs.

    I remember a quote from (I think it was Peter Lynch) who said; the best stocks you can buy are probably the ones you alreadyy have. And more to this, Buffett in an interview, heard him say some time ago, that big fortunes were not made holding too many stocks, but few stocks with bigger participation. I wish I would have the wisdom and courage to foollow his advices.

    Anyway I wish us good luck !

    Cheers !

    PS; could you tell me how I can add my old face foto on your bloog ?

  93. DM,
    Speaking of buffet what is your thoughts on IBM. Trading @ 52 week low!!!! As well as BBL. Looking to add to positions those two really standout too me. Thanks for the reply???

    Thanks,

  94. Brian,

    That’s a good idea. Thanks for the suggestion.

    Though, it might be tough for me to narrow it down to just 20. That would be difficult. There would definitely be some outstanding companies left out in the cold. 🙂

    Cheers!

  95. Wasnt aware of this company…thanks for bringing it to the attention. I am overweight energy in my portfolio – and currently stands at 17% of my overall portfolio. So, I think I will wait adding more energy stocks to my portfolio at this time.

    Man…thats a lot of comments to scroll through 🙂 keep up the great work
    R2R

  96. DD,

    That’s a good question.

    I don’t think Buffett is impacting the price. Berkshire isn’t even in the top 10 as far as institutions that own the stock, so it’s not really that large of a chunk of the company. And Berkshire’s been somewhat systematically selling off shares lately, along with some of their other energy holdings. It’s also hard to say if Buffett actually initiated the position in NOV in the first place, which means he’s also not the one selling. But the dates of the buys/sells means there hasn’t been a lot of money made either way.

    Cheers!

  97. Aspenhawk,

    We shall see. You might be right there. Tough to say where some of these stocks are going to go with oil prices so volatile. But I’ve never been one to try my hand at timing that stuff. I just buy when the fundamentals appear sound and there’s a margin of safety. It’s a system that’s treated me well thus far. 🙂

    As far as your photo goes, you can sign up for an account here:

    http://en.gravatar.com/

    Best regards!

  98. R2R,

    Haha, sorry about the comments there!

    I hear you on energy. I’m sitting at about 15%, which is why I’ve been loathe to add much there lately. I haven’t been very busy with energy stocks this year, at least not direct energy plays. But I suppose I go where the opportunities are, and I know the portfolio is going to triple within the next decade, so there’s time to even out those weightings over time.

    Thanks for dropping by.

    Best wishes.

  99. Hey Jason,

    good choice. I’m a shareholder for more than a year now and came to similar conclusions like you. From my point of view this is a very outstanding company. I was wondering that it is rarely discussed within the dividend investor community (maybe due to the short dividend history), but I’m pleased that you made the start now.

    Best regards,
    Ralf

  100. Hi Jason,

    Thank you for the heads up on this investment…I appreciate your research and writing!

    I started looking at this company on Scottrade and I noticed the 5 year EPS growth rate on the Earnings Tab was only 2.13% as compared with over 12% for the overall S & P?

    That sounds only so so… What am I missing?

    Chris

  101. I noticed you said that you had enough capital to make a purchase. May I recommend moving over to Bank of America/Merrill Lynch. If you have 50K+ in investments you get 30 free equity trades per month or if you have over 100K you get 100 trades. I recently switched over and it’s awesome to not have worry if the stock I am buying is in large enough quantities to justify the 7.95 commission I used to pay. I used to save up and make one large purchase. Now I can buy as money flows in or instead of buying $2K of one stock I can add $200 to ten positions I already have.

  102. Ralf,

    Happy to be a fellow shareholder! 🙂

    I think part of the reason NOV wasn’t on the radar before is simply because they had a low yield. They didn’t start paying a dividend until fairly recently. And they started really aggressively raising the dividend over the last couple of years. Couple that with a falling share price, and you get the yield you have now.

    But I’m certainly glad it’s on the radar now. It has some tremendous potential, assuming that we’re still heavily dependent on O&G 20 years from now. I think that’s a fair assumption.

    Thanks for stopping by!

    Best regards.

  103. Jordan,

    Well, I’m going to be opening a second brokerage account here pretty shortly. I’m going to have to diversify away from Scottrade, as my account will eventually exceed SIPC limits. So I want to try to keep each account under $500k, as reasonably as possible. I think the time is right, now that I’m nearing $200k.

    I’ve read mixed reviews on MerillEdge. I Googled the company for reviews and a lot of forum boards just don’t have good things to say about them. Could just be anecdotal, though. I certainly like the idea of free trades once I cross over $50k, which would allow me to make purchases slightly more often. Though, I doubt I’d be buying anywhere near the 30-per-month limit. I just don’t think it’s necessary to buy stocks in $100 increments every couple of days.

    It sounds like you’re enjoying the services, though, so maybe I’ll have to give it a serious look. It’s probably between Fidelity, Schwab, TD Ameritrade, and MerrillEdge for the next brokerage. However, by the time it’s all said and done I’ll probably end up with 3-4 accounts anyhow.

    Thanks for the suggestion!

    Best wishes.

  104. Thank you both for the comments!!

    I will probably follow DM’s advice in that it makes a lot of sense to spread that money evenly over the course of 12-15 months depending on how many opportunities present themselves over that period.

    Investing a lump sum may be justified by research, but sounds scary, even thou as a dividend growth investor we don’t care very much for the daily volatility in the markets.

  105. Chris,

    Hmm, I don’t know why Scottrade shows that.

    I always recommend two things when determining growth rates:

    1. When looking at growth rates, I always use 10-year data. Using a shorter time frame doesn’t allow certain business cycles to smooth themselves out. Even then, you want to look at the numbers relative to the industry, and see if there’s a trend. There’s always the chance of a one-off year. Business isn’t performed in a vacuum.

    2. Look up the numbers for yourself and do the math.

    NOV reported EPS of $3.52 in fiscal year 2009. They reported $5.44 for fiscal year 2013. That’s a five-year stretch. The compound annual growth rate for that time frame is 11.5%.

    I’m guessing maybe Scottrade is using six-year data, which would include 2008? That’s six fiscal years in that case. That would be a strange number to use, and it would also be looking at their peak earnings before oil dropped pretty dramatically.

    I hope that helps!

    Best regards.

  106. Jason,

    Was wondering if you’ve ever taken a look at SDRL. Similar stock to NOV, but focused on ocean drilling. I’ve had it on my watch list for a while, but I’ve never pulled the trigger … the extremely high div yield makes it scary, but compelling. Right now it’s trading near it’s 52-week low.

    Jake

  107. Why is the data in Yahoo Finance and in MSN Money different?
    I allways went to Finance Yahoo but yesterday opened MSN money and the numbers don’t match.

  108. If you like you can check out my article about negative interest rates.

    All the Best
    DK

  109. Jake,

    I’ve taken a look at SDRL. But I don’t believe it’s a well-run business. It’s highly leveraged and its free cash flow metrics are extremely poor. The company is basically losing money, constantly. If I were to buy a driller, it would probably be HP.

    SDRL is a high-risk play, so I wouldn’t be surprised at all to see the dividend cut. It’s down some 50% YTD, so one wonders how low it can go. But the same was being said when it was down 25%. Only invest here if you can take on the risk. If you’re okay with the potential of losing money and seeing the dividend cut, go for it. I’d definitely make sure it was only a small part of my portfolio.

    Take care.

  110. Nuno,

    Many of the financial sites out there are inaccurate to some degree. I was just mentioning in an earlier comment that you’re always best served by checking the numbers for yourself.

    That being said, I personally use Google Finance. I’ve found it to be the most accurate.

    Cheers.

  111. November 21, 2014 — American Realty Capital Properties, Inc. (“ARCP”) (NASDAQ: “ARCP”) announced today that, pursuant to the authorization of its board of directors, ARCP has declared a monthly common stock dividend of $0.0833333 per share for December 2014.

    Whew! Lol.

  112. Stugats,

    Haha.

    Yeah, tough to say what’s going to happen here with this one. Not sure if anything will happen with future monthly dividend payments or not. I suspect part of that will hinge on what happens with creditors, which will ultimately probably revolve around how much of an adjustment there is to the books. It’s an interesting show, but I definitely don’t want to watch any reruns.

    Cheers!

  113. Jason,

    Thanks for the good advice. Like I said, I’ve never been able to summon the courage to initiate a position, but that yield sure looks pretty. I think I’ll play it safe and continue to avoid it.

    Jake

  114. Hey Jason, Great advice on the NOV deal. I like oil related stocks right now as a great buying opportunity. The oil companies will find a way to get the price back up as history is a good predictor for the future. The oil companies are a big “gorilla”. Insofar as the person who has 150k to invest, I would look at your list and cherry pick it with about 25 stocks and put the entire 150k in now. Yes, the market could correct and it could also go to a Dow of 20k. We just do not know these things. No one does. Most, if not all of the companies in your Freedom Fund did not lower their dividends during the downturn in 2008. So even in a correction we will be buying more shares cheaper. Just my opinion. I thought the market was going to correct when the Dow was at 15k. Just goes to show what I know >:). Dan

  115. Hey again, I also use Google finance. Real time quotes and a stellar site. I also download to Quicken Home and Business. That’s a real PLUS too. Just another comment about NOV. NOV seemed to have a false high in 2006-2008, so the drop was not to surprising. If you take out the high for those two years, I see a steady growth. Dan

  116. Dan,

    Right. Your comment hearkens back to what I kept hearing 2-3 years ago. Everyone was expecting the market to severely correct, and it just never came. You just can’t time the market like that. The key is to focus on high-quality, buy cheap, and keep. The market doubles roughly every 10 years, so worrying about the short-term gyrations is just not worth the stress, in my opinion.

    I think there are only two companies I’m invested in that lowered their dividends during the financial crisis: GE and WFC. And WFC was basically forced into it via TARP, from what I understand about it. But having a strongly diversified portfolio means even a dividend cut or two isn’t going to put you in a spot to where you can’t cover your expenses in retirement. In fact, income diversification is a big reason why I’m invested in so many companies.

    You’ve got the right mindset! 🙂

    Best wishes.

  117. Dan,

    Yeah, their growth was almost secular like over the last 10 years. EPS dropped when oil dropped, but not as much as you might expect. Their results are a bit less cyclical than I see with some other energy plays, which I certainly like. 🙂

    Cheers!

  118. Jason,

    I read your review on SA and the company has an impressive track record. I had been wondering if you would purchase one of the oil service companies. You kept mentioning that you thought there was value there and I was curious what you’d come up with. Good luck with your purchase of NOV. It looks like a good one!

  119. Brent,

    Thanks, bud!

    Yeah, NOV seems pretty solid. The price of oil could go anywhere, but NOV was still pretty profitable in 2009 and 2010, after oil crashed.

    I still see some value in other oil service companies, but I don’t want to go too crazy here. I’m already well over my planned allocation to energy, but I’ve been hunting where the value is.

    Thanks for dropping by!

    Best regards.

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