Recent Buy

buyA third stock purchase this month. Woo-hoo! I didn’t plan on any more buying activity after the initiation of a position in National Oilwell Varco, Inc. (NOV), which came not long after adding to my position in Unilever PLC (UL). October was a bit busier than usual for me in regards to capital allocation, and I dipped into my emergency fund to cover some of that activity. Maybe buying high-quality stocks at attractive valuations is an emergency?

Anyway, I realized I had to simultaneously build the emergency fund back up while also deploying capital to the portfolio. Not an easy task, but first world problems aren’t really all that difficult. However, this most recent purchase means the emergency fund will have to remain a tad dry for now.

I don’t often catch stocks at or near their 52-week lows, as I make no attempts to time the market or individual stocks and their prices. But I did perhaps catch some luck with this most recent transaction, buying shares just a few pennies above their yearly low.

I purchased 20 shares of BHP Billiton PCL (BBL) on 11/20/14 for $50.20 per share.

Overview

BHP Billiton Plc is the world’s largest diversified resources company. They’re engaged in the exploration, development, processing, and production of a number of minerals. They also have a substantial oil & gas business.

The company operates in five segments: Iron Ore (32% of fiscal year 2014 revenue); Petroleum and Potash (22%); Copper (21%); Coal (14%); and Aluminum, Manganese, and Nickel (13%).

Their production operations are located primarily in Australia, the Americas, and southern Africa. They have a workforce of approximately 123,800 employees and contractors at 130 locations in 21 countries.

This is a dual listed company structure. They have two parent companies – BHP Billiton Limited and BHP Billiton PLC – that operate as a single economic entity, run by a unified management team. The company is headquartered in Australia. This article is referencing the BBL shares that trade on the London Stock Exchange and are offered as ADR (American Depository Receipt) shares on the New York Stock Exchange for US investors. One can also purchase the BHP shares which trade on the Australian Securities Exchange, which are also offered as ADRs. Since the BBL shares trade in the UK, the dividends they pay are not taxed by a foreign government due to a tax treaty between the US and the UK.

Conviction

I just discussed BBL’s fundamentals last month after buying up shares in the company, so I won’t rehash that information for you here. But I think you’ll find double-digit compound annual EPS growth and near-double-digit revenue growth over the last decade pretty attractive.

What’s changed since I added to my position last month?

Not much of anything, other than the fact that I could buy shares about 5% cheaper. If I liked BBL at near $53, why wouldn’t I like it even more at near $50? As such, I took this opportunity to average down further.

So I maintain conviction here in this high-quality company and their ability to grow their profits and dividends over a long period of time. Commodities can be volatile, and Billiton’s business is cyclical. But as a long-term investor looking out over the next couple of decades and beyond, I think the future me will be very glad the me of today bought here at near $50.

For any interested shareholders or potential investors, the company released a presentation yesterday. It goes over some of the divestment plans, increased productivity, and reduced expenditures. Simultaneously reducing capital expenditures and improving productivity should result in increased free cash flow, even while commodities like iron ore remain weak here.

One interesting aspect of the upcoming demerger is that BBL will maintain its current dividend, implying a higher payout ratio with a smaller asset base to propel profit. Not only that, but there’s the potential for a dividend payout from the new company as well. This is of course simply speculation, but there is a chance for both companies to pay out a dividend after the demerger is complete. In addition to the dividend, there’s a chance for unlocked value, as it appears to me that the market is basically pricing this new company at a value of $0.

BBL’s shares yield 4.94% here, which is obviously an extremely attractive yield in this market. Factor in the potential growth of the dividend over the long haul, BBL’s high-grade assets, worldwide geographical exposure, and operational excellence, and the investment thesis becomes pretty clear. I think the downside is a lot more limited than the upside here, and a yield near 5% pays me handsomely and generously to wait for conditions to improve. The hefty dividend is well-supported by a payout ratio of 47.9%, which should give them room to continue to increase the dividend even while commodities like iron ore and oil are weak, and the demerger of a small piece of the company is eventually executed.

Risks

I pointed out some of their risks last month, which obviously remain the same. Primarily, you have exposure to a highly cyclical base of commodities. Price swings, like we’ve seen with iron ore and oil this year, can have a dramatic effect on the company’s profitability, its stock price, and possibly even its ability to pay and grow its dividend. There’s also geopolitical risk to factor in; however, the company primarily operates in countries with very stable governments. Lastly, BBL lacks any kind of real pricing power, which limits its ability somewhat to control its own destiny.

Valuation

My opinion on the valuation of shares in BBL hasn’t changed materially in the last month as nothing has fundamentally changed with the company over that time frame. Shares currently trade hands for a P/E ratio of 9.69, which is almost half that of the broader market. It’s also much lower than BBL’s five-year average P/E ratio of 14.

I valued shares using a dividend discount model analysis with the same input as last month – a 10% discount rate and 5.5% long-term growth rate. This growth rate seems reasonable considering it’s about half of BBL’s 10-year EPS growth rate. I purposely use fairly conservative numbers with more uncertain investments like BBL due to the volatile nature of commodities. However, even using this conservative valuation model I still get a fair value of $58.14. That means shares potentially offer a 15% margin of safety even after factoring in somewhat low growth, which indicates to me that shares are a value here.

Conclusion

BHP Billiton remains the world’s largest and arguably best diversified natural resource company. Mr. Market’s irrational pricing hasn’t changed that, but it has created an opportunity. Their broad exposure to a number of resources that the world requires for civilization as we know it puts them in a position where long-term success is highly likely. The short term could remain rocky, but I can’t imagine that buying BBL at $50 here will turn out to be a poor long-term investment. However, anything is possible, which is why I maintain a diversified portfolio.

This purchase adds $49.60 to my annual dividend income, based on the current $1.24 semi-annual dividend.

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

Morningstar rates BBL as a 4/5 star value, with a fair value estimate of $70.00.

S&P Capital IQ rates BBL as a 4/5 star “buy”, with a 12-month target price of $59.00.

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

Full Disclosure: Long NOV, UL, and BBL.

What are your thoughts on BBL? Does this seem like a good value right now? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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107 Comments

  1. Great buy Jason! We are all ‘timing’ it really good with their released presentation (I am still working on reading the whole presentation), as a recent shareholder, it gives me a good night sleep knowing that the company is looking out for me. Prices may drop some more from here and I wont hesitate on buying some more shares. Thanks for sharing!

  2. Nice catch at the low!

    I’m really considering buying some BBL at this point. It really looks like low-hanging fruit, as you say. Although, I may not be able to scrape enough money together to make a major purchase next month, due to taking time off for half of November and setting aside money for the upcoming tax season. It’ll be the first month I didn’t add to my portfolio since I started investing. Ehh, we’ll see what happens.

    Thank you for sharing your purchase! You’re on a roll!

  3. Mantra,

    You are just killing it! Serously – you are on a roll! Nice pickup and it’s an awesome add to your dividend forward looking income. I hope the de-merger creates further value and higher payouts, isn’t it funny when companies are trying to do that? Also – great job re-upping on your position, also receive great joy when you’re able to buy something you own at a cheaper price than before, simply due to market pressures. Nice job DM, hope you’re having a great week into the big Holiday!

    -Lanny

  4. I just picked up some BHP shares on the Australian market last week, and I agree that our future selves will be pretty happy buying at these prices. Commodity prices will always be exposed to wild swings occasionally, so when the Market isn’t enjoying the ride down it’s a great time to pick up such a quality company that will be around for many years. I may even top up again if it stays down for another couple of weeks!

    Nice summary as always DM, and great you’re managing to find some extra capital to keep fuelling your portfolio – it’s pretty hard to let opportunities like this pass by!

    Cheers,

    Jason

  5. I also bought these today at the price of $50.61. This will probably be the last purchase for me this month. As you mentioned, I also hope this will be a stock to look back at and be glad I bought.

  6. Just bought some shares today. I agree with you that both valuation and yield are attractive at this price level. Especially when looking at the long term horizon. Let’s hope the little risk we take here pays off.

    Cheers.

  7. MDP,

    I make no attempts to time anything, that’s for sure. When I bought last Thursday, I just missed the 52-week low. But a few cents won’t make a difference 10 years from now anyway. 🙂

    Cheers!

  8. Lanny,

    Thanks!

    It definitely feels great to add to a high-quality asset like BBL at a cheaper price. A cheaper stock means a higher yield, and a higher yield means more dividend income. I like the sound of that! 🙂

    You guys are doing great over there as well. Keep it up!

    Best regards.

  9. FFF,

    I’m with you. Commodities are volatile, but I actually don’t worry about BBL at all. Doesn’t keep me up at night for even a second. They’ve been at this for a long time and have delivered for shareholders over and over again. I see no reason that won’t continue in the future. 🙂

    The presentation was nice. The combination of lower capex and increased productivity should put them in a great spot in a year or two. Looking forward to it.

    Take care!

  10. Jason,

    Absolutely. Mr. Market doesn’t enjoy the ride down, but I sure do. Even better, I’ll enjoy the ride back up even more when I have more equity in the company. 🙂

    I’m really fortunate I’ve been able to stay so active. This purchase was most certainly unplanned, but the opportunity was there. I’m going to have to take it easy for the next month or two, however.

    Glad to be on the same page here regarding BHP Billiton. I think our future Jasons will be quite pleased!

    Cheers.

  11. Martin,

    Nice to have you on board.

    Anything is possible, especially when discussing commodities. But I can’t imagine BBL isn’t more profitable and paying more dividends 10 years from now. They’ve been investing in the business and that growth should carry them through until the next upswing in iron ore and oil. We’ll see how it goes! 🙂

    Best regards.

  12. Jos,

    Indeed. I’m optimistic the risk will be worth the reward, but time will tell. Either way, I don’t plan on making BBL a large position, but I think over the long run I’ll be happy I added here twice in two months in the low $50s.

    Let’s hope they continue rewarding us shareholders for many years to come!

    Best wishes.

  13. Tawcan,

    Value is value. It seems like many of us have a nose for it. BBL appears to be low-hanging fruit here, which doesn’t require much of a stretch to buy. Either way, I’m glad to have some fellow long-term shareholders invested here. 🙂

    Cheers!

  14. Haha couldn’t resist the price eh? I have been thinking about snagging a bit more myself, perhaps early this next month should things stay depressed. We’ll see what happens!

    Needless to say, the nut continues to grow! Thanks for sharing your purchase!

  15. You are on a roll! Congratulations on yet another purchase 🙂 looking forward to seeing your Freedom Fund update in December.

  16. BBL never made my radar, not that it’s not a good pick. Commodity plays are en vogue these days as most have slid quite a bit from wheat to oil to copper to gold/silver. I can totally see why you have decided to add these 20 shares to your portfolio and while you get that juicy dividend to wait there’s little doubt that in the coming months and years BBL will pay off with continued dividends and price appreciation. November has been quite busy for you. Didn’t expect three separate buys. Guess it was an “emergency” to add to another well valued high quality name. I just published my recent buy today too. Averaged down on my BNS.

  17. We are all scooping it up!! I bought last week and really thinking about adding more this week. It’s a great place to park your money at the moment with a great yield and attractive value. Keep it the good work Jason, you are killing it with all these buys!

  18. W2R,

    Couldn’t resist, my friend. Couldn’t resist. Plus, I had to catch up to you and your 65 shares. 🙂

    I’m with you. I don’t plan on BBL being a large position, but I wouldn’t mind maybe adding another 30 or 40 shares down the line if it stays this low.

    Thanks for dropping in!

    Best wishes.

  19. Nicola,

    Thanks!

    Should be another great update. The equity holdings continue to expand, which ensures more dividend income in the future. All in all, good things. 🙂

    I hope you’re having a great week over there.

    Take care!

  20. DivHut,

    BBL won’t make the cut for everyone, that’s for sure. Especially if the portfolio isn’t already built up and full of high-quality, less volatile companies. But I can afford to own some BBL here, which compliments some of my other commodity plays in oil supermajors and the like. I don’t want commodities to be a major portion of my portfolio, but I feel comfortable based on the values here.

    Nice job adding to BNS. I’m a big fan of that bank. Haven’t gotten around to adding more. One day, however!

    Cheers.

  21. Agent,

    Happy to be a fellow shareholder! And even more happy that we’re both able to continue adding to our stakes. BBL should continue to do well over the long haul, but the short term might remain rocky. Of course, that’s just an opportunity. 🙂

    Thanks for dropping by.

    Best regards!

  22. Nice buy, you’re definitely on a roll. Great yield and you’re buying at an attractive price point. I personally am wary of buying commodity stocks, I bought a bunch back in 2008/2009 (back when I was much less educated on investing) and ended up losing a few thousand dollars when the sector took a plunge. But this looks like a fairly safe bet, I will keep BBL on my watch list for now.

    By the way, can you make your Watch List post a regular part of your blog? I would appreciate it if you publish it on a regular, monthly basis. You always have some great ideas on new stocks to invest in. AMNF and TIS look really interesting to me, I had never heard of either one of them until you posted about them.

  23. Nice buy Jason

    I am waiting for payday on Friday to have enough cash to buy more BHP Billiton, so hope the price doesn’t recover before then.

    I think the long term opportunity for commodities is massive, and BHP cower the whole spectrum, it will also be interesting to see what happens with the spin off company.

    Happy Investing
    FI UK

  24. Seraph,

    I’ve missed the occasional month here and there as well. Sometimes it just doesn’t work out. But missing a month or two out of a journey of 10-15 years isn’t really a big deal in the grand scheme of things. 🙂

    Tax season will be rough for me. I might miss buying stock in February or March there, depending on when I get everything together. My quarterly estimated taxes surely aren’t enough right now, so I’m sure I’ll owe a pretty penny. I’ll keep the good times rolling while I can, but I hope it’s not too rough of a tax season for either one of us!

    Thanks for stopping by.

    Best regards.

  25. EWB,

    I know you weren’t alone there with unrealized losses back then. Oil took a sharp nosedive, but so did the general economy. Even stalwarts like Coca-Cola dropped pretty sharply during the financial crisis. I wish I would have started investing back in 2008, though. I’d be much further ahead.

    I do publish a watch list article every month, or I try to. I limit it to just a few stocks that I’m actually strongly looking at adding capital to, rather than just a long list of stocks that may or may not be interesting at any given time. I feel that would open up commentary on a whole host of other stocks that might take up more time than I can possibly give to the subject. But if there’s something interesting out there, I try to share my thoughts. AMNF was one where I discovered it and invested in it fairly quickly – maybe a week or two between the two events. Sometimes I jump on stocks, if I feel the opportunity is there and I have capital available.

    Thanks for the support!

    Take care.

  26. Nice work DM!

    I’m hoping the price remains around this level in the next two weeks when I get paid, as I’ll be joining you. They’ve been on my watchlist for 3 months now, and I think they’re one of the best buys out there at their current price.

    Thank you for sharing the detail. I didn’t know all of the information you provided above. If anything it’s compounded my decision to buy shares in them when I have some capital.

    All the best!
    Huw

  27. Congrats on adding more shares and FY dividend income to your stream. I just had a quick look at it before I executed my BNS buy yesterday and noticed that the current PE is 9 and Forward PE 18. Is BBL expecting an earnings drop over the next year? From what I gather in your article, the earnings are expected to continue growing. What gives? I havent had the time to look deeper into the books yet.

    Best wishes
    R2R

  28. Huw,

    Would be happy to have you on board as a shareholder. I think it’s one of the best values in the market, all in all.

    There’s certainly a lot to like from a long-term perspective. Who knows what will happen with iron ore or oil tomorrow, or even Chinese demand over the next six months? But I’m confident their resource base will become more valuable over a long period of time. And shareholders should profit handsomely from that. We’ll see!

    Best regards.

  29. R2R,

    Hmm, not sure why the forward P/E ratio is listed like that. S&P Capital IQ has FY 15 EPS at $4.70 per ADS. That would imply a forward P/E ratio of 10.68. From what I can tell, that’s after factoring for the demerger, so the separated entities could be worth more than what I’m proposing here. Tough to say.

    Take care!

  30. DM,

    Keep it up man! BBL is the stock of the day it seems. Congrats on getting more at that cost – 52 week lows, love it. I also enjoy their sector, those materials and needs will never go away.

    Looks like your fund and dividend output should be pretty awesome next calender year.

    – Gremlin

  31. Looks good. Had it at the top of my list as commodities seem to be out of favor. Might be one where we would have to average down in the future.

  32. Hi DM

    So it wasn’t only me on shopping tour this month. I purchased Unilver, Exxon, Allianz, Daimler and General Mills, each for ~1200 euro. The problem is i have no free time at all, i am serious, my day looks like this: 1) work, 2) 30 min workout 3) go home check the stock market…. and weekend well, that is for the market only. I really got dependent on it, do you have/had this addiction ? or how do you “control” yourself ?

  33. Hey Jason, I already have 100 shares of BBL, and I am about to buy NOV. I have a question: I follow stocks on Google Finance and have a portfolio set on on the medium. Today the shares of KMI do not show up, and when I google in for a quote it just shows 00.00. Do you know what’s happening. Thanks, Dan

  34. Excellent buy!

    I made a purchase today and it was either going to be BBL or Unilever. I went for Unilever to fill out my position but had some difficulty passing up BBL at this level! As always, I doubt I’ll mind this in the future when I look back on the decision.

  35. DM,

    Thanks! Appreciate the support and the screen name. Not used to responding to “myself” very often. 🙂

    I’m really blessed. I mean I worked incredibly hard for a long time to get to this point, but it sure feels great to be doing this now.

    I hope all is well with your journey as well!

    Best wishes.

  36. Gremlin,

    Exactly. Prices will swing up and down, but the world isn’t going to stop needing iron ore, copper, or potash any time soon.

    Next year should be fun for a large number of us dividend growth investors. I see a lot of investors have been very busy buying up stock over the last year or so, which should translate into huge dividend payouts for 2015. Looking forward to it! 🙂

    Cheers!

  37. zoltan,

    Great job there! I’m with you on Unilever in particular. I’m hoping to increase my position in that company pretty soon.

    I don’t really have an addition to checking stocks or anything. In fact, one thing I love about my portfolio is that it typically oscillates less than the broader market, which means I just don’t feel a need to incessantly check on things.

    The article I published just this past Sunday discusses why managing a large portfolio isn’t that time consuming:

    https://www.dividendmantra.com/2014/11/is-managing-a-large-dividend-growth-stock-portfolio-time-consuming/

    Some people might check on things more often than others. There’s nothing really wrong with that. If you enjoy it and it doesn’t get in the way of anything else in your life, then I don’t see a problem. I don’t think it’s necessary, but go with what works for you. 🙂

    Take care!

  38. Alexg,

    Commodities are definitely out of favor right now, and iron ore has been particularly weak lately. Short-term opportunities for long-term investors. 🙂

    Thanks for dropping by!

    Best wishes.

  39. sedin26,

    I think you made a great choice there. I continue to like UL, and I’m hoping to add to my position here pretty soon. I don’t think it’s as cheap as BBL, but it needn’t be so. I’m okay paying full pop for UL, but I do think it’s trading hands for slightly less than full price.

    Best regards.

  40. Jason,
    I initiated a position in BBL yesterday. Along with all of the facts that you mentioned, Morningstar has the book value at almost $30 per share, or approximately 60% of the stock price. Love the value here, will look to add to the position in the future.
    Happy Thanksgiving (and go Lions),
    KeithX

  41. I also bought 90 BBL today after reading yesterday’s release (now 440 shares total). Value seems good to me and the comment about the dividend policy is reassuring…It might say something pretty negative about the overall market valuation that so many of us are buying the same thing though.

  42. just a temporary glitch. now it’s back on for whatever reason. I notice KMI is merging and higher dividends are expected. Any thoughts on KMI ? Best, Dan

  43. KeithX,

    Good point about the P/B. Looks like it’s the lowest it’s been over the last 10 years. Meanwhile, the yield is the highest. Gotta love that. 🙂

    I’ll be watching the Lions on Thanksgiving. I hope they overcome that nasty loss against the Patriots.

    I hope you have a great Thanksgiving with you and yours!

    Cheers.

  44. pacer45,

    Gotta go where the value is, and with less value out there it’s slim pickens. 🙂

    That’s a nice position there in BBL. I wouldn’t mind getting mine up to 100 shares or so here over the short term, although I never intended for it to be a major position for the portfolio. Is that a large investment for you?

    I agree the dividend commentary has been positive. Reminds me of comments from COP management before the PSX spin-off.

    Thanks for sharing!

    Take care.

  45. dannn,

    Morningstar rates KMI’s FV at $40. I’m a bit more optimistic than that, but I also think it’s a high-risk play. There’s a lot of debt across the partnership structure, but it’ll be nice to see everything consolidated under one roof. Not much to dislike otherwise, however. You’ve got the largest and arguably the best pipeline company in the US here. They’ll be around for a long, long time and the dividend growth should be pretty fantastic over the next few years, as Kinder has been guiding for.

    Best wishes!

  46. Its a little over 3% for me so I guess that’s roughly average on a portfolio of 32. I’m not opposed being overweight on some within the portfolio(KMP/KMI is closer to 10%), but BBL is not one I’d care to make a significantly larger weight than where it is now.

    Yes the COP+PSX dividends turned out pretty well for anyone who held on to both after the spin – I reckon we’ll both be collecting some at the beginning of next month 🙂

  47. Spoonman,

    Accumulating assets is a wonderful activity, but moving to the point of actually living off of the dividend income is even better. I’ll gladly trade places. 🙂

    In all seriousness, I hope things are going well up there in PNW.

    Cheers!

  48. Well done, Jason !

    You have the courage to act according to your conviction.

    I come back on NOV and admit I was wrong in my estimate of fair value. I come now to a fv of 78. Maybe I will add it to my collection.

    Thanks

  49. Still waiting on some fresh cash but I’m considering to buy 50 BLTs this month. Looks like a great entry yield and a low enough p/e to act as a cushion against further commodity price drops.

  50. Nice purchase DM. I am looking at this stock as well since I don’t have exposure to commodities other than oil. The stock has recently dropped a bit making it even more attractive. Might make the purchase sometime soon.

  51. Say Jason,
    Do you work for gurufocus? I clicked on a headline when I looked up BBL on yahoo, and found a cut and paste copy of your post, credited only to gurufocus and not to you. Just FYI.

  52. I picked up 100 shares to initiate a position in BBL the same day. My price was $50.17. Was thinking about BBL since about 55, this is like the first time where I was able to exhibit patience and it actually worked out for me. Not something I do often but I didn’t see much I wanted to buy out there (already really heavy on energy) so BBL was literally the only one on my watch list. Finally saw it drop under 50 and knew it was time! somehow I got carried away at work though and ended up buying a little higher than 50. Oh well

  53. I can’t get my head around BBL.

    What effect will the divestment have on things? Analysts seem to be predicting lower for next few years before rebound. Commodities tanking. Valuation looks reasonable but how do you tie valuation to the divestment? I’ve learned long ago to not always take a CEO’s optimism for reality (and Mr. Market is not happy with it). Problem is i don’t have a lot of experience for these divestments/demergers or whatever you want to call them. Reading other examples (none which directly apply here) they either “unlock value” or one of them are “bad assets”.

    Longer term i have no doubt they will prevail but i keep waffling on trying to enter now vs other opportunities to flesh out the portfolio. So torn!

  54. Jason

    Great buy and superb addition to your portfolio. I think it was a wise decision on your part and will bring long term benefits. I am long on BBL and add to my position on dips, it is my only holding in the Industrial Sector. I have no concerns about any short term volatility as BBL is a long term play for me. Although iron ore and oil are down right now they are not the only assets in BBL’s portfolio, and they will not stay down forever. Meanwhile collect and enjoy those good dividends.

    Best of luck on reaching your goals. I enjoy following your adventure.

    Regards
    DJ

  55. By the way, I just noticed that Seadrill completely suspended its dividend. Another great example of why it’s important not to chase (extremely) high yields.

  56. Aspenhawk,

    I think it’s easy to have conviction when you’re confident about something. If you’ve done all the homework necessary, then conviction should come naturally. It’s when you’re just going with the crowd or gambling on something, that’s when it’s difficult to have conviction.

    NOV definitely looks solid for the long term from my vantage point, but tough to say what’s going to happen over the next year or so.

    Thanks for dropping by!

    Cheers.

  57. ThomasDV,

    BLT? The sandwich? 🙂

    In the end, BBL still has really solid assets. Tough to say what’s going to happen to the price of those assets over the short term, but over the long haul demand will remain.

    Thanks for dropping by.

    Best regards.

  58. Dave,

    I imagine so. BBL is a monster of a company, so it’s going to be a large holding for any of the funds that specialize in basic materials or resources. Seems like a smart play to me. 🙂

    Take care!

  59. DGJ,

    I think it’s attractively valued for the long-term investor, but there could certainly be more weakness in the short term. Tough to say. I do feel, however, that the downside is severely limited in comparison to the upside. So I feel very comfortable tripling my position over the last couple of months. Would love to have you on board if you feel it fits your portfolio. 🙂

    Cheers!

  60. took2summit,

    Got a great price there. Could go anywhere in the short term, but I can’t see how it’s not a more profitable company paying out more dividends a decade from now. Likely, the share price will follow and we’ll be sitting on capital gains as well. I’m very optimistic. 🙂

    Glad the patience worked out for you. I waited for quite a while before striking above $52, but was certainly glad to see it fall this low not long after.

    Thanks for dropping by. Keep it up!

    Cheers!

  61. Zol,

    Well, that’s up to you to decide. I’m not relying on a CEO’s optimism. I’m valuing a business based on all known data and extrapolating that out into the future. With or without the demerger, this is an attractive business. If the side of the business that’s spun off also does well and pays a dividend too, then that’s just icing on the cake. But that side of the house is basically valued at $0 if you look at the market cap of the company before the announcement and now. In fact, it’s probably worth less than $0. Iron ore dropped there as well, but there’s more to it then that, as one can see by how the other major iron ore miners played out.

    You have to keep in mind, as I mentioned in my last article on BBL, the demerger is mostly noise. I believe BHP Billiton’s profit from the assets being demerged is like 1%.

    Best regards.

  62. DJ,

    Indeed. Not the only assets and they won’t be down forever. This is definitely a long-term play on demand for the resources that civilization needs to build and thrive. I’m certainly okay buying while the sky is falling, because, well, the sky isn’t really falling at all. 🙂

    Glad to be a fellow shareholder!

    Thanks for the support. Wishing you the best of luck reaching your goals as well.

    Take care!

  63. ThomasDV,

    Yeah, a lot of investors have been asking me about SDRL lately. All you really needed to do was look at the FCF to determine this was a bad investment. I was never interested. The truth is usually in the numbers.

    Cheers!

  64. Lol 🙂

    I think I need to buy the BLT shares on the London exchange to be sure avoid withholding tax. As a Belgian I’m not really sure what will happen when I buy the BBL ADR on the US stock exchange, I can’t find a lot of information about it. I know US citizens buying BBL don’t pay withholding tax but I’m afraid that’s not the case for foreign investors?

    The only downside of the BLT shares on the London exchange is the 0.5% Stamp Duty Reserve Tax when buying the stock.

  65. ThomasDV,

    Sorry, I was just kidding about the BLT remark there. 🙂

    I’m honestly not sure about Belgian taxes at all. The London shares might be the best way to go. I would definitely recommend researching that.

    Cheers!

  66. Congrats on the new purchase. I am still at the early stages of constructing my portfolio. Have 8 full positions, but bbl is something I do want down to own down the road. I noticed that Kelloggs (K) is never mentioned here and you dont own it. Right now it is a large cap blue chip that has a dividend of 3.02, dg for 9 yrs and a low PE of 13.57. DG is 4.9 percent averaged over the past three years and payout ratio is 50%. But overall with Corn Flakes, Pringles and Eggo all in the stable and therefore likely to exist in 40 yrs time, is this a defensive/dg stock that you think might be worth holding forever?

  67. Jason
    Hello
    I read his article “These 7 Dividend Growers Just Announced Dividend Hikes”
    Very interesting and I will have on my radar NIKE
    You think about the strategy “10% Trades”?
    Thanks,
    Juan

  68. Shmuel,

    I think Kellogg is okay. They’re heavily exposed to cereal, however. I believe it’s about half of their revenue. They’ve got some well-known brands there, but I’m not just not real sure about big growth in cereal moving forward. I like their Pringles grab. I think that was smart. Cereal is heavily processed and full of added sugar, for the most part. So I don’t know if that’s going to be a dominant product over the next 10-20 years. If I were to invest in this space I’d much prefer GIS due to their wide diversification across foods and increasing exposure to organic offerings.

    Cheers!

  69. Juan,

    Nike is a great company, no doubt about it. Wish I would have invested there a while back. So many stocks, so little capital.

    I have no opinion on the 10% trade strategy. I’ve never personally used it, so I can’t say one way or another. Seems viable, but I just have no experience with it.

    Take care!

  70. Woah thats a good buy right now. Thanks I will put it on my watch list. Energy and materials has been all over the place. Way to take advantage and get a nice yield doing so.

  71. A-G,

    I hope you see something you like! 🙂

    Commodities have been a bit crazy lately. Iron ore and oil have both been extremely volatile. But I view volatility as opportunity, assuming we’re still reliant on these basic resources 10-20 years from now, which I believe we will be.

    Hope you have a great Thanksgiving! Thanks for dropping by.

    Cheers.

  72. Roger H,

    Thanks for letting me know about that. I’ll have to dig into that and figure out what the rules are regarding citation. Weird how an article can get around the internet and not necessarily accredit the author.

    I hope you have a great Thanksgiving as well!

    Appreciate the support.

    Best regards.

  73. DM:

    Happy Thanksgiving! I agree BBL is a good buy at the current price. In fact, I recently added to my position as well. I think BBL is one of the strongest commodities stocks and will hold its value even in a downturn.

    I must caution you not to be too enthusiastic about the great performance of BBL (or any other commodity stock) since 2000. The 2000s commodities boom/bubble (http://en.wikipedia.org/wiki/2000s_commodities_boom) that peaked in 2011 was the greatest we have ever had and likely will not be repeated any time soon. In fact, I think we might be heading for another major commodity depression like the big one from 1982-1999, a period when BBL and other commodity stocks did poorly during one of the greatest stock bull market ever. If we do get another major commodity depression, we will get ever better buying opportunities! BBL will probably drop another 50% from the current price, while other weaker commodities stocks will get crushed. Even in the worst case scenario, I think BBL will hold its own and we get paid a nice dividend to wait it out.

  74. Just a word of caution about the Kellogg Company. Guys, take note of the annual reports for the last few years. The P/E ratio listed by most internet sites is VERY misleading. There are several reasons why Kellogg is a BAD/TERRIBLE buy right here. I point you to the earnings per share over the last few years. Notice anything interesting? I’m not going to lecture about how to analyze a company correctly for if you know how to do it, you will understand what I am talking about with Kellogg.

    This is just a friendly warning about the perils of investing in individual stocks. Make sure you know your stuff before you do this type of investing.

  75. Difu Wu,

    Right. Miners like BBL aren’t always very correlated to the broader stock market due to the fact that supply and demand for their resources are tied to different factors. Of course, that might be a good thing if you fear a market crash.

    I’m not in the business of predicting commodity cycles, but you could very well be right there. I look instead at the crumbling infrastructure here in the US and the massive amount of building out that civilizations across countries like India still must perform at some point. So I just look at BBL as a long-term play on those resources. Could go anywhere over the next few years, but I’m really more concerned about where they might be 10-20 years from now. An issue for me might arise if the dividend becomes endangered, and would have to reassess if something happens there. But the low payout ratio combined with productivity improvements allows me to be pretty optimistic here. We’ll see! 🙂

    Thanks for dropping by!

    Best wishes.

  76. lou,

    I haven’t actually read any Kellogg annual reports since it’s not a company I’m particularly interested in. I’m guessing maybe you’re speaking about one-time events impacting EPS?

    Just not a business that I’m real excited about, but maybe I’ll take a look at it in-depth at some point.

    Cheers!

  77. Sorry Jason,
    I didn’t mean that comment for you. I meant for it to be linked to Schmuel. I know you know how to analyze companies. I was just trying to get those who might be looking at K to take a closer look before they leap. I happened to be reading a bunch of your last posts and comment sections when I saw that one. So if I could get someone to think a bit deeper before they acted, no harm done.

    Anyway, in a nutshell, besides obvious balance sheet issues(debt structure,etc.),and the interest rate cycle in general, I was referring to the rise in EPS due to lower retirement costs and increased return on K’s investment portfolio. It creates an illusion that the company is hugely more profitable that it really is. This may go on for another year also, but who knows. It seems unsustainable though.

    So I just hope a few people here can benefit from my comment and will look closer going forward at these companies. Baseline numbers on a financial site, like Yahoo finance, never tell the real picture. I know I made some mistakes along the way.

  78. Oops, (not lower retirement costs), lower than usual drawdown(as a percentage) in their retirement/pension/investment funds due to a rise in return of that portfolio.

  79. lou,

    No apologies necessary. Appreciate you spreading the knowledge.

    Like I said, I’ve never taken a good look at K. But it’s always a good idea to read through the numbers and find out if there are any adjustments to earnings that might not be recurring. One-time events can occur often with some firms, often enough to where the’re almost expected. But most times they skew EPS either up or down in a meaningful way that isn’t necessarily representative of true earnings power. Always something to be on the lookout for.

    Cheers!

  80. I sometimes think you are the selfless sage of personal investors. I always appreciate you detailing your methodical approach and logic behind your decision to purchase and it is always consistent. Keep it up. As someone who has always had a financial adviser, I have learned a lot from your posts and better for it.

  81. Tommy,

    Thank you! I don’t know if I’m a sage, but I do my best to stay consistent. 🙂

    I do hope more and more people continue to stop by the blog. I’m not trying to put any financial advisors out of work, but I think a lot of people can do better on their own.

    Thanks for dropping by. I hope all is well with your journey. Let’s hope for more leisure time in the future.

    Cheers!

  82. DM:

    As a starting investor who is trying to learn how to do my own investment thesis, I am having trouble finding basic information on companies. How do you find the data for your overview sections?

  83. Thanks for putting BBL on my radar. As you mentioned, I woke up this morning to an early Christmas present, so I pulled the trigger and picked up some BBL at $47.78. I feel pretty good about this position.

    Tip of the hat to you Jason.

  84. I’m in for the long haul with you DM! Purchased me some BBL yesterday (Nov 28). Here’s to a future of dividends!

  85. Pingback: Recent Buys - NOV and BBL - DividendDeveloper.com
  86. I am in the market for a few shares of a few different companies-BBL is one of them. I think I am going to pick up about 30-50 shares soon. Not a whole lot of cash on hand, so I want to get a few shares if I can. I am looking at about the $35 range. This stock along with all the others have been tossed out like the baby and the bathwater. If the dividend is solid, then it will be a good purchase. I wish I had more money, but my dividends and cash were all in last month. Maybe when I get my GE dividend next month, I will buy more. I do feel no matter hwere I buy, the stocks are going to go lower. We seem far from a bottom. But the income potential seems to be nice for this stock. What do you think?

    Keep cranking,

    Robert the DividendDreamer

  87. Robert,

    “I do feel no matter hwere I buy, the stocks are going to go lower. We seem far from a bottom.”

    I’m not sure about that. It seems investors were saying just the opposite a year ago as stocks relentlessly rose. Impossible to say what will happen in the short term, but I think stocks will continue to go up over the long haul.

    BBL has surprised me. I didn’t anticipate it breaking below $40. I hadn’t planned on that being a large position, but it’s getting too cheap to ignore here. Very little (no?) growth even needs to be had in order for this to be an acceptable investment from here. The dividend definitely seems sustainable, but we won’t have updated numbers until the H1 report comes out. Iron ore and oil have both dropped fairly substantially over the last six months, but I guess one has to ask if they believe this is a permanent issue or not. Hard to say, but BBL has been around for a long time and through much cheaper commodities. We’ll see how it goes!

    Best regards.

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