The Dow Jones Industrial Average is down almost 4.5% over the past month, and while not a correction by conventional definitions (10% or more drop), the market has still experienced a healthy retraction. I’m excited when I see moves like this in the market. I generally make purchases every month, because I believe that I don’t have any inside track on where the market is going. I realize I’m a very average stock trader, and just a regular Joe. Will the Dow be at 14,000 in 1 year? Will it be at 10,000? Nobody knows, and anyone who claims to know this is fooling himself. I definitely do not know, so I try to invest small amounts monthly, in a dollar-cost averaging strategy. I believe that is what will serve my needs best over the long haul.
Although I generally invest once a month, obviously my favorite times to invest are in times of market pullbacks or other general commotion. With chaos and confusion comes opportunity. My overall capital allocation will be a little light this month after paying off my car, but I’m very excited to make a purchase very soon.
I wanted to talk a little about two stocks I currently have my eye on.
Aflac (AFL)
Per Morningstar:
Aflac offers supplemental health insurance and life insurance in the two largest insurance markets in the world, the U.S. and Japan. In addition to its cancer policies, the company has broadened its product offerings to include accident, disability, and long-term care insurance. It markets its products through independent distributors, selling most of its policies directly to consumers at their places of work.
Aflac has experienced phenomenal growth over just about any time period you can look at. Revenue in 2001 was $9.60 billion dollars. In 2010, revenue was $20.73 billion dollars. Dividends have been solid, and growing at a very nice clip. The dividend was $0.19 in 2001, and increased to a full $1.14 in 2010. Obviously solid growth across the board here. They have been raising the dividend for 28 consecutive years. I like the business model and they have been a strong player in the health/life insurance arenas. The devastating earthquake and tsunami that hit Japan is obviously a human tragedy and will no doubt affect Aflac’s bottom line. Because of this, there is some risk entering a position with Aflac at this time. You can read the Q1 Earnings Call Transcript here. I take away that the company is optimistic about future growth, but also a little hesitant about how Japan is going to affect the company in the short-term. Although there is some short-term risk and volatility here, I think this is a solid long-term play. It is definitely on my watch list. It has fallen 17.44% over the last month, which presents a nice entry point. It currently trades at a 10.23 P/E ratio, and has an entry yield of 2.64%.
Intel (INTC)
Per Morningstar:
Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.
This is a pretty short synopsis. This company is the dominant force in chipmaking and has an enviable place in the world of technology. I’m no guru when it comes to tech, but I feel comfortable getting my feet a little wet with a position in Intel. Intel’s growth has been very strong. Revenue in 2001 was $26.54 billion dollars. For 2010, they finished with revenue of $43.62 billion dollars. Pretty solid numbers from a sales standpoint. Dividends have been extremely strong over the last 8 years, which is how long they’ve been raising the dividend. They have raised the dividend twice this year, which is obviously a bullish flag from management. They currently pay a $.84 yearly dividend based on the current payout, which is very strong. I am hoping to get into Intel closer to the $20 mark, but I’m not sure if it will drop that low again this summer. I may bite at current prices, as I feel it’s a fair price to pay. The current P/E ratio is 10.28, which is a very solid valuation in my opinion. The current yield is 3.81%.
These are just two stocks on my watchlist, but I feel both are strong candidates at current valuations. I’m more inclined to take on a position with Intel, as there is less current risk, a higher current yield, similar valuation and perhaps stronger growth potential. I’d like both, but I don’t have a lot of dry powder this month and will only be able to take on one. I may purchase a position as early as late this week. We’ll see.
What’s on your watchlist?
Thanks for reading.
Hey Mr. Mantra 😀
I really enjoy reading your posts, and I would like to thank you for all of your common sense wisdom and extremely original views on life and investing.
I have been a long term investor in Intel (INTC) due to its low debt and ever increasing dividends….even though their primary market of personal computers is somewhat suffering, I think they have the ability to not only weather this recession, but benefit through acquisitions.
One stock that has been on my watch list is Gas Natural, Inc. (EGAS). It trades on the AMEX and is a very small cap stock. The qualities that I appreciate is the fact that they are small and have been acquiring other entities and expanding rapidly throughout the nation. They have lower debt than their peers and they pay a juicy 4.7% yield…..another perk is that they pay monthly dividends as opposed to quarterly. I would be interested to know what your valued opinion is. Thanks again for all the terrific information and for writing a truly great blog!
DM,
Liking your website and creed.
Like INTC… in fact bought some more yesterday!
AFL… a little bit concered about the impact that Japan has on her… is that 18% drop really enough ? Yield is OK, but last years 2010 (non-increase…~2% is a little concern).
Current targets looking pretty good for me right now… PG, JNJ (though should have bought more of both sub $60), GD, LMT, RTN… HGIC is on the list too…
If watching financial market is not part of your every day life, I do not understand how do you find time for it?
Two facts:
– Only 202 of the 500 biggest companies in the United States in 1980 were still in existence 20 years later.
– On December 29, 1989, Tokyo’s Nikkei stock average reached its all-time peak of 38,915.87. Twenty years later, the Nikkei has never again reached that level — and, in 2009, reached a new low of 7,054.98.
So buy and hold is yesterday. But individual stocks?
Surely you are doing more than average person of your age to achieve financial independence, but I do not see how it could be sustainable.
What is your secret?
Jon Carlson,
Thanks, I appreciate it and I’m glad you enjoy the blog. I put a lot of work into this blog to try to reach out to other people. I really believe living frugally and investing monthly into undervalued stocks is the path to financial independence.
I’m glad that you are giving the thumbs up on Intel. Seems like a good value right now. I’m just waiting on capital right now.
As far as EGAS, I don’t know how much help I can provide, unfortunately. I tend to stick to my circle of competence and microcap is definitely outside that circle. I’ll try to do some research and get back to you but most stuff outside the $500 million mark (market cap) falls outside my realm.
Thanks for stopping by. Stick around!
TheRenegade,
Glad to see you here again. Thanks for commenting. I agree with you on your picks. I seen your comments on SA, and agree with you on HGIC. I own a position with Harleysville, but I think the valuation is favorable right now and the yield is very strong. I also agree with you on the defense stuff. Very low valuations and great yield. Obviously, cyclical…but strong long-term picks. War isn’t going away. I was actually talking to a fellow blogger and a guy on SA about LMT and RTN recently. I have my sights set on INTC, but the defense stocks are also great.
Thanks for stopping by.
Financial Independence,
I don’t have a secret. I don’t remember ever saying I don’t watch the market. I do watch the market, and my portfolio. Do I do it every day? No. I’m a long-term holder…so daily gyrations in the market mean very little to me.
I don’t know how to respond to your comments. If you’re afraid of market catastrophe, or if you are risk averse then investing in equties maybe are not for you. The companies I invest in tend to be large players, usually leaders in their particular field and usually worth billions of dollars. Will Coca-Cola fail in the next 20 years? Doubtful. I don’t need to watch Coke’s daily swings.
Again, I have no secret. Becoming financially independent is a long, hard road. I live without a car. I don’t have cable tv. I don’t go out to eat a lot. I walk and bicycle long distances now. I eat ramen noodles more than I probably should and I invest in quality companies that I believe will have a high return on my equity. It’s not fast or easy. But I believe it will be successful. I hope you stick around and watch the process in action.
Aflac’s presence in Japan is huge. What’s happened there is and will be weighing in on Aflac heavily.
Intel crushed its competitors once, I wonder if it’ll be able to pull off something like that again with Nvidia! (AMD’s almost history).
MoneyCone,
Thanks for stopping by.
I agree with you on Aflac. The tragedy in Japan shouldn’t be understated from a human loss perspective or an investor perspective. I think it’s a risky short-term play, but long-term it should be a fairly conservative pick. It may slide in the near future.
I think Intel is great. My only concern is the waiting game they are playing on the mobile/tablet market. ARM already has a leg-up, so it will be strange for Intel to enter a market as a competitor and not the clear leader. The massive amount of money they spend on R&D should have them as a strong player soon. In the meantime, I’ll collect my near-4% yield.
Thanks for commenting.
Luckily, I stumbled upon your website. I enjoyed going through your blog. Very good analysis and to the point.
I hope Intel’s new Tri-gate transistor technology will be efficient in cutting the processor power consumption and increase the processing speed. This might attract most of the mobile customers and boost the revenues.
Anonymous,
I’m glad you enjoy the blog and I hope you continue to visit.
I agree on the new technology. Obviously, cutting power is crucial to getting into the mobile market. If anyone has the ability to take that market over, it’s Intel. I think the best times are still ahead for Intel.