Wal-Mart Stock: Dividend Aristocrat on Sale

After hitting a high of $91 per share earlier this year, shares of Wal-Mart (WMT) have retreated to the below the $60 mark today–trading at $59.37 at the time of writing. That gives Wal-Mart a 34% decline on the year. Given that Wal-Mart makes over $5 per share, the current valuation is between only 11x and 12x earnings.

The stock is now trading at a cheaper valuation than was available during The Great Recession when the stock traded at 13x earnings. The reasons for the cheap valuation has long been evident to long-term followers of the company: (1) it has 2,200,000 employees, and a significant percentage have received higher than usual wage increases in 2015; (2) the company generates 55% of sales outside the United States, and the strength of the U.S. dollar has understated earnings by over $0.30 on a constant currency basis; (3) we are six years into … Read the rest of this article!

Johnson & Johnson: A Merger Lies Ahead

Since Altria stock has crossed the $50 per share mark, I have been critical of the American tobacco giant’s valuation that has put the company at over 22x profits. Altria makes all of its money in the USA, so there is no angle about earnings being misstated due to the strength of the United States dollar in the past year. Even though I still find the stock pricey, I have revised my figure upward in light of the planned Anheuser-Busch takeover of SABMiller. With SABMiller increasing over 50% in the past two months in response to the takeover, the 27.3% Altria stake in SABMiller has increased the value of Altria’s holding by $10 billion. It also has the possibility of owning over 10% of the combined Anheuser-Busch Sab Miller Inbev megabrewery if it chooses to hold onto the stock and reinvest the cash portion in the stock.

Anyway, as I … Read the rest of this article!

The Public Investment of Saudi Arabia’s Ambitious Global Investment Strategy

With everything going on in 2020, it can be easy to ignore one of the biggest storylines that has been somewhat quietly developing–namely, the Public Investment of Saudi Arabia has been aggressively buying up large ownership stakes in many American and British corporations. 

Specifically, in 2020, Saudi Arabia’s investment arm has made the following acquisitions: $828 million in BP stock, $714 million in Boeing stock, $523 million in Facebook stock, $522 million in Citigroup, $514 million in Marriott stock, $496 million in Walt Disney, $491 million in Cisco, $484 million in Royal Dutch Shell stock, $481 million in Suncor Energy stock, $416 million in Live Entertainment, $408 in Canadian Natural Resources stock, and a hodgepodge collection of sub-$100 million investments in Berkshire Hathaway, Qualcomm, Pfizer, IBM, Starbucks, ADP, and Union Pacific. In addition, the Saudi Investment Fund purchased Newcastle United (you know you’re in strong financial shape when a professional … Read the rest of this article!

Stock Market Irrationality in a Bull Market

A reason why index funds that track things like the S&P 500 have become popular in recent years is that each investor is shielded from seeing the volatility of individual components that can promote irrational selling. If someone owned Visa and Chevron outright over the past year, he might discount the excellent performance of Visa and fret over the fluctuation in Chevron that took the price of the stock from over $130 to under $70 at some point in the past few months. And yet, if someone owned an S&P 500 that contained Chevron, they would never actually see the Chevron stock individually swing in stock price because its performance would get blended in with hundreds of other companies. It’s all irrational, yet Dalbar studies show that the typical investor churns over individual stocks at almost triple the rate of S&P 500 index funds.

There are circumstances, however, when it … Read the rest of this article!

My Ten Best Investments – 2020 Edition

In 2014, I published “My Ten Largest Investments” which discussed, you guessed it, my ten largest investments and the basis for why I made the investment. To this date, it is the best selling ebook or piece of intellectual property that I have ever created.

I have always prepared on a follow-up to it, but I did not do so because the holdings were largely the same over time. That is the thing about long-term, buy-and-hold investing. It is inherently boring, stable, and repetitive without much turnover. There is not much to say other than, “Yep, here comes another Coca-Cola dividend, even as the world is falling apart, because people are still consuming beverages and Coca-Cola supplies 3.5% of the total amount of liquid consumed on planet Earth per day.”

But 2020 has brought about some real changes in the form of additions to the portfolio. I entered … Read the rest of this article!