Recent Buy

buyThis most recent stock purchase will surprise no one that follows this blog.

Give me a high-quality dividend growth stock at an attractive valuation and I’m usually going to buy it, assuming I have the capital available and room in the portfolio for it. Give me an even cheaper price (with unchanged long-term fundamentals) shortly thereafter, and I’m likely to scoop up additional shares as fast as I can. Averaging down is practically my middle name.

As such, I decided to start the month of August by immediately averaging down on a recently initiated position in a company that I’ve watched over the last few years somewhat passively.

Why the sudden interest? 

Well, it’s basically available at one of the lowest possible prices you could have grabbed it at over the last five years, even while earnings and guidance both remain strong. And the yield is almost twice its five-year average.

Let’s check it out!

I purchased 15 shares of Caterpillar Inc. (CAT) on 8/3/15 for $77.31 per share.

Overview

Caterpillar Inc. is the world’s largest manufacturer of heavy construction and mining equipment, and also manufactures diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.

The company operates in the following five primary segments: Energy & Transportation (39% of fiscal year 2014 sales), Construction Industries (35%), Resource Industries (16%), Financial Products (6%), and All Other (3%).

Approximately 62% of FY 2014 revenue was generated outside the United States.

They have a network of 177 dealers – 129 of which are located outside the US. These dealers, which are mostly independently owned and operated, serve more than 180 countries and 3,500 outlets.

Solid Q2 And Accelerated Buyback

I just recently analyzed the company and its stock after initiating my position, so I won’t do that again. Instead, I’ll quickly go over a couple important points.

The company recently released its Q2 fiscal year 2015 results and, in my opinion, they were pretty solid. Earnings per share guidance for the year remained unchanged, which stands at $4.70 to $5.00 for the full year.

Revenue guidance was reduced slightly not out of unexpected challenges in the core business, but due to the strong dollar possibly impacting revenue a bit more than initially anticipated. This is, however, not an uncommon problem among all global businesses right now.

Quarterly EPS was down approximately 26% year-over-year, reflecting the cyclical nature of the business and more or less in line with the stock’s price change YOY. But you have to remember something. When you buy stock in a company like Caterpillar after earnings have dropped significantly due to where it’s at in the business cycle, you’re locking in a low purchase price even though it’s highly unlikely lower EPS will be extrapolated out forever.

So while the company’s EPS isn’t locked in, your purchase price on the stock is. You get to take advantage of those cycles over the short term by locking in an attractive long-term investment. Obviously, buying this stock at over $110 in 2012 when earnings were at their highest point over the last 10 years isn’t smart because you’re locking in your purchase price on all-time high earnings, knowing this is a cyclical business and earnings will at some point fall again. Conversely, locking in when earnings are low, knowing they won’t be low forever, is probably not a bad idea.

And shareholders are also locking in a very appealing yield right now. CAT yields 3.98% here. That’s attractive in both absolute and relative terms (the five-year average yield is 2.2%). Outside of the financial crisis, that’s as high a yield on this stock as you could have possibly snagged over the last 10 years. So I think CAT is paying current buyers a rather handsome rate to wait out the cycle and buy while the stock is cheap.

All this talk about the cyclical business makes it all the more impressive that the company has managed to increase its dividend for the past 22 consecutive years. You have to be fiscally responsible and prepared to manage the business through the ups and downs to be able to do something like that. It’s one thing to increase your dividend year in and year out for a couple decades while running a consumer products company with fairly secular growth, but it’s even more impressive when you’re able to do that while running a heavy machinery company.

In that regard, we can see just how prudent management is right now, in real-time. The company sees that the stock is attractively valued and has decided to take advantage of that by announcing the acceleration of share buybacks.

They’re buying back $1.5 billion worth of common stock (about 3.2% of the market cap of the company), which is three times the amount of money the company spent on buybacks during the first two quarters of the year. I feel that’s being opportunistic, and it appears to be a good use of shareholders’ capital. If CAT is good enough for me as an individual investor down here at $77/share, I then also think it’s good for the company (and me as a shareholder due to accretive nature of the repurchase).

Risks

The company is heavily exposed to a number of cyclical industries, making its very business model highly cyclical.

Since the company is extremely global with most of its sales occurring abroad, it faces currency risks.

Its global dominance has been challenged in China, as the company trails market leader Komatsu Ltd. (KMTUY).

Caterpillar also faces acquisition and integration risks. Poorly timed acquisition of Bucyrus International, Inc. in 2011 and the write-down of assets related to ERA Mining Machinery Limited highlight this risk.

Any slowdown in the global economy could adversely affect the company due to its exposure to economically sensitive industries.

Valuation

The stock’s P/E ratio is 13.26 right now, which is similar to the P/E ratio the stock sported when I initiated my purchase. Falling EPS was met with a falling stock price, but I’m willing to bet that CAT will be earning much more profit on a per-share basis over the short term and long term. That in turn should drive growing dividends.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 6.5% long-term dividend growth rate. I think that growth rate is fair when looking at the long-term track record for underlying operational growth and dividend growth, as well as the moderate payout ratio and potential for growth moving forward. Both the long-term and short-term numbers for dividend growth seem to indicate I’m including a margin of safety there. The DDM analysis gives me a fair value of $93.72.

Conclusion

As I stated before, the company is pretty much unrivaled in terms of scale, diversification, network, and brand.

The near term appears challenging, but that’s exactly when I like to pounce on a high-quality dividend growth stock. I don’t want to buy when everything is cheery and everyone is in love with a stock (like my example of CAT in 2012). I want to buy a slice of a great company when everyone hates it and they’re selling. That means maximum value, maximum yield, and minimum risk (assuming the fundamentals haven’t permanently deteriorated).

This purchase adds $46.20 to my annual dividend income, based on the current $0.77 quarterly dividend.

I’m going to include current valuation opinions from other analysts below, which I use to concentrate my reasonable valuation estimate:

Morningstar rates CAT as a 3-star stock, with a fair value estimate of $79.00.

S&P Capital IQ rates CAT as a 3/5 star “hold”, with a fair value calculation of $78.40.

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

Full Disclosure: Long CAT.

What do you think of CAT here? Like the stock? Excited about the accelerated buyback? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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92 Comments

  1. Great buy Jason, What I love is the fact that this stock has gone down since you bought it and instead of looking at it as if you “lost money” you are looking at how much you can make by purchasing more. It really just shows you how powerful dividend investing is and how a the price of the stock isn’t really always as important as the stock itself.

  2. Jealous! I have been wanting to buy some CAT or CL this month but am slowly working on getting extra capital from my side gig to afford it. Love the blog, keep up the great work.

  3. You sure have been flexing your buying muscles lately. Yet another solid buy for the long term. I kinda wish the US/CAD exchange rate isn’t so high so I could buy more US stocks.

  4. Jesus christ man! Where do you get all the money to buy all these stocks 😀 extremely jelaous on you! you´re doing great, keep it up! 🙂

  5. Keep buying high quality stocks!! You are few steps close to your financial freedom..

    A lots of US stocks are in my watch list, including CAT, but our currency, CAD, dropped more than 25% in one year, so it looks very expensive for us to covert CAD to USD right now..

    But I am keep loading Canadian stocks in your north border :), quality stocks are very cheap right here 😀

    Cheers,

  6. Great buy! There’s a lot of value out there. You can throw darts at this market and achieve value. keep up the good work.

    j-harr

  7. Good Day Jason
    CAT is a company that’s going to be around a long time. CATS products are top of the line. Cats products are used not only in the USA but all over the world. This gives CAT a wide moat around them. With CAT stock repurchase this will help reduce the share float, and will help with earnings per share. CATs 4% dividend yield will pay you to wait til the world economy turns around, and then will see some stock price appreciation. I see CAT constructing you to a profitable dividend congrats Jason.

    Cheers

  8. Nice buy DM. I think CAT is a pretty solid name to buy into for equipment companies. Heh, I even have some CAT socks 🙂 hopefully construction keeps up, and oil fields start new work and order those massive earth movers.

  9. DM,

    Solid purchase you’ve got there. CAT has been on my watch list for quite some time now and at a current yield of nearly 4%, now might just be the time to pull the trigger. A bit off topic…what are your thoughts on CMI? It’s hovering near its 52-week low and appears to provide a decent yield at 3.07%.

    DC

  10. Hi Jason,
    I like your blogg alot. First thing i check in the morning. You are a true inspiration for me. I have just started to do what you do, only different is that i live in the Nordic. Im going to buy CAT later in August if the price will stay the same, waiting on some dividend first 😉
    Now i might be asking for to much but what font are you writing with on your blog? It is so nice to read on the screen. I am about to start my own blog in swedish to help me keep on track of my goal.(i am not a natural writer as you are)
    If it is possible i would like to use the same font as you do.

    Keep up the good work!

    / Daniel following you from Sweden

  11. Tyler,

    Absolutely. A stock simply represents a (very small for us) slice of ownership in a company. It’s the company and the value of that company that matters. Price is what you pay. But value is what you receive in return. If the gap between price and value moves in a more favorable direction for you over the short term, well, then that’s just an opportunity. 🙂

    Cheers!

  12. CC,

    Thanks so much. Appreciate the kind words. Glad you’re enjoying the blog. I put my heart and soul into it. 🙂

    Sounds like some great ideas over there. Hope you’re able to scrounge up even more capital than you anticipate!

    Stay in touch.

    Take care.

  13. Tawcan,

    Putting in 100% effort, that’s for sure. I’m fortunate in that it’s working out so well for me. 🙂

    I’m sure the currency will swing back around at some point in time!

    Cheers.

  14. Aktienovisen,

    This time last year I was investing a lot less fresh capital. But I always believed in myself. Hard work goes a long way. 🙂

    Appreciate the support very much. I wouldn’t be where I am without the readers, so it’s in large part thanks to all you guys.

    Hope August ends up being a fantastic month for you over there.

    Best wishes.

  15. FJ,

    Exactly. Every new growing dividend stream puts us that much closer to freedom. 🙂

    You guys are in a great spot up there with plenty of high-quality companies to choose from. So it would probably make sense to focus on those domestic plays until there is a more advantageous exchange rate down the line.

    Keep it up!

    Cheers.

  16. j-harr,

    Thanks!

    I’m not sure about throwing darts, though. The S&P 500 is sitting with a P/E ratio of 21 right now, which is significantly higher than its long-term average. I don’t think the market is cheap by any stretch. And I wouldn’t be surprised to see the market drop by 10% or 20% at any time.

    But that’s why I focus on the cheaper (but still high-quality) merchandise located at the clearance rack in the back of the store. That’s true whether I’m buying stocks or clothes or groceries. 🙂

    Take care!

  17. Michael,

    I’m with you, bud. The 4% yield is pretty attractive, and pays you handsomely to wait out the cycle. Meanwhile, the opportunistic buyback is, in my view, how it should be done. Management’s prudence should pay off for shareholders over the long run. If I didn’t think management should be buying back stock now, I wouldn’t be buying the stock myself. Of course, hindsight is 20/20 and the stock price could go anywhere. But, looking at the value here, I think it’s a strong move.

    Thanks for dropping by!

    Best regards.

  18. Surprised!
    Not… 🙂
    I’ve been paralyzed with indecision these first couple days of the month. Probably thinking too hard, there are several no-brainer, high-quality options out there right now. We’ll see, I can be spontaneous on Fridays.
    TGI(almost)F

  19. DW,

    Nice! I need to grab a pair of CAT socks for my lounging around. 🙂

    Could be slow going for a while for CAT, but I can wait. I’m very, very patient when I’m getting paid an attractive yield to wait.

    Thanks for stopping by!

    Cheers.

  20. DC,

    CMI is fundamentally an excellent company. I’ve just never really come around to the idea of investing in a specialized engine company. As always, it’s far more than just the numbers. You really have to think like an owner and make sure that’s a business you want to be in. And that just hasn’t happened for me with CMI.

    Best of luck!

    Take care.

  21. I like the purchase Jason. I bought some earlier this week. There’s a lot of construction on the roads near where I live. All I see are CAT equipment and vehicles. I know they are impacted by the growth of the economies around the world so I expect to see some down years. But this is the time to load up for DGIers. Glad to be a fellow shareholder.
    D4s

  22. Daniel,

    Thanks for stopping by and following from Sweden. Much appreciated! 🙂

    I believe the font you see is Roboto.

    But be careful about using that font. I’ve seen some people copy everything I do. They’ll use the same theme, the same article titles, the same plugins, the same everything. They’ll copy and paste certain sections of the blog. And I just don’t really respect people that do that. Shows a lack of an ability to really think for yourself and go your own way. It’s easy to just copy others, but what does that really say about you? I’ve kind of blazed my own trail and I do things that I like to do. Doing something just because someone else is doing it is probably not the right way to go about it. If I thought like that all along, I’d still be working for a living.

    I personally respect others that do their own thing.

    Best of luck to you!

    Cheers.

  23. Gremlin,

    The colder, the better. Wouldn’t mind seeing CAT break below $70 and the company buying back even more stock. 🙂

    We’ll see, though. I’m not real interested in making this a very large position. I view it as complementary to DE, and I view both as ancillary positions in the portfolio. Either way, happy to be able to snag the stock at a 4% yield here.

    Thanks for dropping by!

    Best wishes.

  24. MMM,

    Ha! No surprises here. If you’re looking for suspense, you’ve come to the wrong place. 🙂

    Analysis paralysis gets the best of us. I hear you. I tend to have the opposite problem where I just don’t have enough cash for all of my ideas. I sit on cash for very short periods of time because of that. I just find the best idea/opportunity I can and buy it when the value is there. Worrying about the rest is just a waste of time.

    Friday is almost upon us. Have a great weekend over there!

    Best regards.

  25. D4s,

    Short-term volatility is a long-term opportunity. You’ve got it! 🙂

    It’s not very often you see CAT with a 4% yield. That’s approaching utilities and some REITs, which is really crazy. But it’s cyclical, so you just have to make sure you’re buckled in and ready to go for something like that. I personally don’t mind.

    Glad to be a fellow shareholder here. I think we’ll be happy we loaded up on CAT here when looking back on it in 10 or 20 years.

    Cheers!

  26. Jason,

    Great buy on CAT. One question on the valuation – how do you come up with the 6.5% long-term dividend growth rate & 10 discount?

    My brokerage account shows
    3yr growth rate = 14.1%
    5yr growth rate = 10%
    10yr growth rate = 12.9%

    Thanks,
    Joel

  27. That’s exactly how we should look at stock. We are investors, not speculators. When the stock price of a good company goes down, it’s the perfect time to invest. It’s too bad I don’t have endless cash flow to keep investing in these great companies.

  28. Joel,

    I include a margin of safety when I’m trying to model dividend growth out to basically infinity. Will CAT be able to grow their dividend at 12% forever? Plausible, but unlikely. I’d rather err on the side of caution. And the margin of safety I shoot for grows when looking at heavily cyclical companies. I think it’s more likely that we’ll see dividend growth in the high single digits over the near term and long term. But if you think that they can grow their dividend at a rate of 10% or 11% or whatever over the next 60 years, then you’d want to model that in to your analysis and go from there. Either way, the stock is cheap, especially when considering that I was being fairly conservative there.

    Cheers!

  29. Joe,

    Definitely. I let value dictate my decisions, not price. And value changes much less often than price, so it’s just using that volatility to your advantage.

    If you do ever end up finding an endless cash flow stream, I’d appreciate you letting me know where it’s at. 🙂

    Cheers!

  30. Thanks, Jason. As you know, I’m new to investing – so your research and explanation is much appreciated by us rookies.

  31. I figured you would ve adding to your CAT position. It fits your style perfectly: dg company, recent purchase, share price has fallen. CAT still looks really good here but capital is very tight right now so I have to be very selective on the companies I purchase. Looks solid though.

  32. JC,

    Hey, what can I say? I do what I do. 🙂

    I hear you on capital, though. Mine is going to be very tight for the rest of the month now after buying DIS on the dip. Might, just might, have enough for one more smaller buy. We’ll see.

    Hope all is well with the family.

    Best regards.

  33. Good buy, Jason. It is great to have an opportunity to average down so soon after initiating a position (at least when you have capital to spare!).

    Should serve you well. As you say, to have increased the dividend for 22 years in such a cyclical industry is a great achievement and says good things about the management.

  34. Dividend Mantra,

    Nice job at averaging down. This stock will do well over time and a company of this caliber will definitely make it easier to sleep well at night for decades to come.

  35. Awesome purchases Jason. Keep it up, the consistency is just wicked. All quality companies under your belt. I love it. Why bother with junk? Thanks for always being an example. Much appreciate it. Take care as always my friend.

  36. TDD,

    Yeah, I’m just fortunate to be in a spot to be able to buy more at a cheaper price. Sometimes I have that opportunity. Sometimes not. But I try to take advantage when I can.

    We’ll see how it goes, but I agree with you in that the dividend growth track record says a lot about the company’s culture and its management. With the recent accelerated buyback, my confidence is further boosted.

    Thanks for stopping by. Have a great weekend!

    Cheers.

  37. DM,

    Great minds again. I FRIP’d 7 shares around the same price for my first purchasing action in several weeks due to life and day job craziness (boo to the latter). While I’m not convinced CAT has bottomed quite yet during this descent, I feel like there’s good value for the long run at current prices. After all, that’s why we’re all in this crazy game 🙂

    Cheers,

    DWC

  38. IP,

    Appreciate it. I share your outlook. Not easy to sleep well at night with cyclical stocks, but CAT is one of the few that gives me no anxiety. 🙂

    Thanks for dropping in!

    Best regards.

  39. Tyler,

    Thanks so much, bud. Appreciate all the support.

    I don’t have your kind of firepower over there, but I’m hustling in my own little way.

    Keep up the crazy activity over there!

    Best wishes.

  40. DWC,

    Sorry to hear about the job craziness over there. I don’t miss those days, but it motivates you that much more to escape the rat race. 🙂

    I hear you on CAT. It’s quite possible it goes lower. Using the bottom end of guidance, a P/E ratio closer to its five-year average would put it in the mid-$80s. But it could very well maintain a low P/E ratio until there’s a serious catalyst at hand, meaning the price could go a lot lower. If it does, though, I’d be interested in adding maybe one more tranche. But I agree there’s a lot of long-term value right here, either way.

    Thanks for stopping by. Hope work takes it easy on you.

    Cheers!

  41. Averaged down on CAT and KMI today. Almost pulled the trigger on OKE but will save for another day. Keep doin what you’re doin. Its much appreciated.

  42. I like this buy down. It’s ballsey in the optimistic commodity sense long term. When others are fearful… I like the DIS buy too. You are averaging up there. You really are a good example of a disciplined investor to your readers. An average down. An average up. Great companies getting your attention and dollars. I like it. That’s just another reason I like reading what you are doing in real time. I get to live vicariously through your smarts. FUN!

  43. No need to convince me of this cyclical dividend giant. It’s on my August potential buy list with some other industrial names such as DOV and EMR too. Great buy. Nice to average down when you can. CAT should do well for you over the long haul.

  44. Good buy, DM. Always interesting to see what others buy. Therefore I’ve set up my own small website where I list the posts and purchases of my favorite bloggers. Here is the link, perhaps it is also interesting for others. Have a great weekend!

  45. Jason, appreciate the write-up.

    Worth noting a little different perspective on your comment of “They’re buying back $1.5 billion worth of common stock (about 3.2% of the market cap of the company), which is three times the amount of money the company spent on buybacks during the first two quarters of the year. I feel that’s being opportunistic, and it appears to be a good use of shareholders’ capital.”

    True… however,

    They spent $3.999B on stock buybacks in 2014, when the stock was most expensive. $1.87B in 2013 when it was less expensive (similar prices to now… high $70s/low $80s).

    So, the $0.49B in Q1/Q2 + $1.5B now = about $2B. That’s only half what they chose to buy at lofty 2014 valuations.

    Not to nit pick a good company buying back stock, but they seem to have gotten it a bit backwards when looking at annual purchases. It’s a rare company that exercises discipline in their stock buybacks – most seem to get it wrong like this. They need to spend some time here reading your blog (or some Berkshire annual letters) and learn how to buy low better. 🙂

    I haven’t looked back beyond 2013. Hopefully purchases didn’t ramp up in 2012 & 2011 for the high prices then.

  46. Ha! I just bought some CAT (initial purchase) on Wednesday! I really like buying near a 52 week low, and a 4% yield seems crazy for this. Good time!

  47. Its a good buy with the numbers being favorable. How the agricultural and construction industries move going forward might impact the company’s long term success. Good luck with the extra shares and income.

  48. Companies are roughly as good timing the market as regular folks are, which is to say, pretty poor at it.

  49. Love the company and considering it myself, but worried about the current headwinds with China crashing 30% so quickly and that being a major factor into people’s thoughts on global growth. I’m hoping for an even better entry point once I’ve built up some more capital. Congrats on the purchase though, I like it long term a lot!

  50. Tom,

    Thanks so much. Appreciate that. So glad you’re enjoying the content. 🙂

    Glad to be a fellow business partner with you. High-quality companies tend to remain high quality far more often than not. The odds are on our side.

    Cheers!

  51. Ken,

    Nice. I think you got in at a solid valuation there.

    Wouldn’t mind seeing CAT go lower. Might have room for one more tranche. We’ll see!

    Best regards.

  52. Henry,

    Thanks, man. I’m definitely giving it my all. I’ll surely make mistakes along the way, but I won’t be able to look back with regret thinking that I could have worked or tried harder. 🙂

    Keep at it over on your end as well!

    Best regards.

  53. divy,

    Thanks so much. Glad you’re enjoying the ride. It’s definitely a lot of fun. 🙂

    It really just comes down to finding great companies and then making sure you’re not overpaying for equity. Hindsight is 20/20, so sometimes you’ll find you didn’t get the best deal you could have had. But all we can do is make the best decisions possible with the information we have at hand. Worrying about what the stock market is going to do is a complete waste of time, so I just exchange capital for high-quality and attractively priced equity that pays and grows dividends whenever I can.

    Hope August is getting off to a nice start for you!

    Take care.

  54. Keith,

    Yeah, I’m loving the Industrials right now. Gotta go where the value is, and there appears to be some very solid value there. Energy seems to be ripe for the picking as well with some names, but I remain cautious about my exposure there.

    Let’s stay busy!

    Best regards.

  55. Stefan,

    That’s incorrect. The company held their dividend static for eight quarters during the financial crisis, but every year’s dividend was higher than the last. So investors were indeed receiving a larger dividend on an annual basis straight through. I’m guessing maybe that site defines years of dividend growth differently than David Fish’s CCC list. But I know of no resource more accurate than David’s.

    Take care!

  56. TDL,

    Thanks for sharing. That’s really interesting!

    I see a few sites are now aggregating stock buys, which is really neat. Gives you a clear picture on where capital is flowing. 🙂

    Keep it up!

    Cheers.

  57. John,

    Right. Like most companies, Caterpillar authorizes repurchasing plans on a certain date and then regularly repurchases stock as time goes on. So it’s less timing the market and more dollar cost averaging, which is, in my view, a successful way to accumulate shares over a long period of time. Unfortunately, cyclical companies are a bit different than average Joe investors in that their cash flow oscillates heavily, and so you’ll sometimes see that repurchasing activity vary as well.

    It looks like they paid about $100/share in 2014 for the amount of money they spent. I’d certainly rather have them be more aggressive here in the mid-$70s, but that’s only in hindsight. If the stock price drops to $50 or $40 from here, then the repurchasing activity here in the mid-$70s won’t seem as intelligent. But just like I don’t worry about Mr. Market’s irrational behavior when buying stock, I wouldn’t propose a company should, either. It’s just unfortunate in that the cash flow oscillates, meaning the ability to be as opportunistic as shareholders would like might sometimes be lacking. Nonetheless, I think they’re being opportunistic right now, and I like that (as I pointed out). Furthermore, this year isn’t over yet, so we’re unsure how much more they’re going to repurchase. If the stock stays low, I hope to see something happen in Q4. We’ll see.

    Thanks for pointing that out!

    Cheers.

  58. Matt,

    Great minds think alike. 🙂

    I’m with you, though. Snagging a 4% yield on a stock like this is really appealing. Cyclical stocks aren’t for everyone, but I’ll gladly collect that nice income while we see how things shake out over the long term.

    Glad to be a fellow shareholder!

    Cheers.

  59. RichUncle EL,

    We’ll see how things go, but I’m pretty optimistic about the future for CAT and DE. Urbanization appears to be a real trend and it’s not like human population growth is likely to slow anytime soon.

    Thanks for stopping by!

    Best regards.

  60. I don’t think I can buy anything for the foreseeable future as my retirement could be as soon as 15-18 months and I want to have at least 150 K in cash for relocation/down payment for home, etc. I only have 70 k in cash now and it will take me that long to save another 80. I am also thinking of taking divis off auto reinvest to accumulate cash but thought makes me cringe. My wife still has Capitol to deploy. I purchased BMO, TD, and WMT for her today, all near 52 week lows.

  61. DD,

    For every headwind I see in China, I see an equal or greater tailwind in India. Well over 1 billion people and a society that is badly in need of basic infrastructure. I think infrastructure (both building it out and replacing it) will be a big story over the next 30 or 40 years. We’ll see, but I think CAT will be plenty busy. 🙂

    Thanks for dropping by!

    Best regards.

  62. DD,

    What an exciting time. 15 to 18 months out. The final countdown begins. 🙂

    I’d probably want to build out the cash a little bit as well before pulling the trigger. Nothing close to $150k, but we’ll be very different positions.

    Enjoy this period. A lot of planning and contemplating, I’m sure.

    Best regards!

  63. Great purchase! I see the bulldozers all the time. There were three of them doing work in a park near my house. Nice to see the city spending money that goes into my pocket (with my tax dollars, but still).

    Sincerely,
    ARB–Angry Retail Banker

  64. CAT is an excellent buy at current price, however, my focus right now is on energy and reits companies. I purchased EMR & BBL this week along with above. I was lucky to get hold of some Shake Shack at $65. GMCR got creamed and good time to buy. Keep racing.

  65. WMT,UTX,CAT,UNP,EPD,BNS,OHI,WPC,EMR,KMI, all on the clearance rack. Just took a position in DOW this afternoon. If I were just starting a portfolio it would look something like this. Quality merchandise on sale.

    Good luck,

  66. ARB,

    Glad to hear that. Love to know some of their machines are out there working hard and wearing down. Replace. Use. Wear down. Replace. 🙂

    Thanks for dropping by. Have a great weekend over there!

    Cheers.

  67. R2R,

    Definitely value there in some energy plays. If I weren’t already quite heavy there, I’d be a lot more interested in some plays there. Still dabbling here and there, however, even with the exposure. Tough to pass up a good deal, even if you already have enough.

    Keep it up!

    Take care.

  68. j-harr,

    Gotta go where the value is. Many of those stocks have recently been receiving some healthy capital from me. 🙂

    Hoping for even bigger and better sales in the future. The more volatility, the better.

    Have a great weekend!

    Cheers.

  69. Btw, how come you haven´t invested in 3M? Dividend aristocrat as well (if i dont remember wrong) and one of the biggest company in it´s sector 🙂

  70. Aktienovisen,

    You could replace 3M with any number of dozens of other companies. Why not BDX or CL? Or DOV? Or LMT? Or LOW? Or PH? Unfortunately, capital is limited. I suspect I’ll own a chunk at some point or another, but it doesn’t strike me as particularly attractively valued right now.

    What’s funny to me is that I hear from a lot of people that think I’m invested in way too many companies. And then others want to know why I haven’t invested in Company X or Y yet. If I had millions of dollars, I imagine I’d have exposure to a few dozen more companies. But there would still then be some people wanting to know why this or that company isn’t there. Meanwhile, others would think it’s too much diversification. Such is life. I follow my own path. 🙂

    Best regards!

  71. Great stock and great price with 4% yield. I’m looking to buy it too but down around 72-75$. DOV, EMR and MMM looks atractive too. Still waiting for better price.
    Today I purchase GSK at 44,63$…5,4 yield! Not bad. NVS in my radar too.

    Cheers from Spain.

  72. Javier,

    Sounds like you’re staying busy over there. That’s fantastic! 🙂

    Definitely value in the Industrials sector. Doing my best to allocate some capital that way while I can.

    Keep it up!

    Best regards.

  73. Wow Jason, I also bought CAT on 8/3. I got 20 shares at 77.7299. With that and our purchase of TRV in June, we’re on the same wavelength!
    I got JNJ, BEN, and PG on my watch list to start a position in and . And looking to add to AAPL, WMT, I want to make my moat so big, Yosemite Sam will fall off the dragon into it.

    Keep it up!

    John

  74. John,

    We’re definitely on the same page. Wish TRV would come down a bit so that I could add more. I may do so anyway. Great company, although it’s unfortunate what’s going on with Fishman. Wish him well.

    Keep up the great work over there. Keep widening that moat. I look at that moat (of dividend income) as that which keeps me free. The wider, the better. 🙂

    Best regards.

  75. Ken, I’m not asking them to time the market. I’m asking them to be better at recognizing value, and being more aggressive (not less) when the value opportunity is better is higher.

    A wise man stated it much better than I: “”There is a pretty significant difference between timing the market and pricing the market. (or a stock/business in this case)
    Refusing to pay for manifestly overpriced goods till you see something sensibly priced shows
    prudence and patience, and is miles away from acting on an opinion of what prices are going to do next. ”

    All the best.

  76. John,

    I think you could say that about most companies and most individual investors. I’m sure I could look at my own activity and others’ activity and point out when some should have been more or less aggressive. But, again, hindsight is 20/20. You can’t predict the future. And, like I mentioned, cyclical companies have oscillating cash flow, and buying back stock is just one way to return value to shareholders. You can argue that wasn’t the best way to do that now, but it might not have been as clear back then. Although, at $100/share or so, it’s not like they did terribly. I doubt that’ll be a bad price a decade or two from now.

    Cheers!

  77. Jason,

    Nice job on the purchase of CAT. I’m looking to make a move there. Just picked up a small position of HSY just under $89 / share and a good chunk of TD in the IRA account.

    One favor to ask- would you mind one day to hyperlink the stocks in your portfolio that link to all the recent buy articles associated with that stock? I’m not sure if you are tagging these articles or if this would be challenging to do? It would be a great way to link the portfolio to the content in each recent buy article, which is just awesome.

    Thanks for doing all that you are doing.

    -Mike

  78. Hey DM,
    Nice work on averaging down CAT is a great company on a short term slide, but I am certain they will bounce back even stronger……as most quality dividend growth stocks do.
    I just picked up some PG on the recent dip….wish I had more US$ capital. I will take the great yield on a sure fire dividend growth stock any day.

    Take care

    Duane

  79. Interesting…I was looking into CAT some time ago, but ended up buying DE instead, and kind of put CAT onto the back-burner. The dividend has gone up, while the share price has gone down, since I last looked at it.

    I was all set to add UNP or ARII next week, but a 4% yield on a company of this quality is difficult to ignore.

  80. Mike,

    Solid buy there with HSY. International was weak, but China sales saw an uptick. Glad to see that. 🙂

    Thanks for the suggestion there. I’ve long thought about a way to organize something like that, but I’d have to really change the way I label posts. It’s something I’ll definitely take to heart. If there’s an easy way it can be done, I’d be happy to put it together. I’ll spend some time this weekend and poke around a bit.

    Best wishes.

  81. Duane,

    Definitely. What’s great about temporary stock price declines is, like I mentioned, you lock in that low price/high yield. So while a high-quality business’s issues are likely temporary (unless there’s something wrong with the company), your price and yield aren’t. 🙂

    Keep it up!

    Best wishes.

  82. Justin,

    Right. Same here. I view DE as, overall, the slightly superior company, all in all. So I went after DE a while back. But the price on CAT has since dropped rather significantly and, when combined with a dividend raise there, the yield is also much higher. So there you go. 🙂

    Definitely tough to ignore that 4% yield, but I still like UNP a lot. Hope to maybe add one more tranche to my position there and maybe call it a day. We’ll see.

    Keep it up!

    Best regards.

  83. Nice call on TD Jason, i am thinking the same. I also have some BMO which has held me in good stead over the years. Also been accumulating some british banks when they get nailed – fairly ‘safe’ bet in the long run i think.

    cheers
    T

  84. T,

    I hear you. These banks should do well over the long run.

    One change in the banking industry that I’m seeing is the increasing proliferation of mobile banking. So it’ll be interesting to see how these larger banks with their legacy branch networks respond to that. And then you have overextended consumers up there in Canada. There are some headwinds, but the need for banking, however that service may come to be, doesn’t seem like something that will drastically change much in the future.

    Best wishes!

  85. Hey Jason,
    funny thing – a CAT bulldozer just broke the main water pipe of our house today, and now nobody’s getting any water =] But it just goes to show how they’re averywhere – on my backyard in Finland also!

    Looks like you made a great deal once again. Maybe I’ll do the same, now that I’m working again and hopefully get hired permanently in a couple of months. You’re on a amazing roll with all the purchases!

  86. Dave,

    Tough to pass up a 4% yield on CAT right now. I certainly couldn’t let it get away without putting a little capital to work there. We’ll see how it goes! 🙂

    Take care.

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