Watchlist July 2018

It’s time for the monthly watchlist report. As always, you can find the updated info at any time here Dividend Income Spreadsheet and the Portfolio Spreadsheet.

Summary

  • Enbrigde is my best buy
  • Swedish investments firms trade at an attractive discount
  • Intrum Justina and Oaktree Capital seems like good choices
  • Swedish banks are priced quite nicely

Living while Saving

Before we move on the watchlist, I wanted to include the Living while Saving part which I always include in my dividend income reports. I do this because I just got back from a trip with my girlfriend to South Korea and Seoul, and there’s a few stuff I want to share.

The adventure started with going to the DMZ – Demilitarized Zone (which ironically is militarized) between the border to South Korea and North Korea.

What you see here is the border. There’s a small river which separates the two countries along with a bridge. One thing I found very interesting is the difference between the infrastructure and how the difference between how they colour stuff. On the south side, the bridge is quite green and nice, but on the north side, it’s dark, heavy and in many ways, just sums up the situation in the country.

The following days were used to eat a lot of food and go hiking. If you ever go to Seoul, you have to check out the national park. Amazing hike with great views.

Stockles enjoying the view

 

Watchlist July 2018

In my watchlist for May I talked about Philip Morris, Altria and mentioned some stocks from watchlist for April such as Enbridge, Oaktree Capital and Kimberly-Clark.

A few months ago we saw a general market decline in consumer staples, reits and utilities. I wrote that I though it was smart to pick up high quality consumer staples and utilities when they were trading at somewhat great attractive prices. Now, most staples, such as KMB and HRL are moving upwards again and utilities such as Dominion and Southern have renounced.

However, I still find value in this market. Here’s what I’m looking at

A la carte appetizers

As appetizers, I think one should look at the swedish investments firms. As you could see in my latest dividend income report, most investment firms trade at a significant discount to NAV. What you do when you buy these firms, is essentially that you buy the swedish index at a discount. You can find a few of the firms holdings in my Seeking Alpha articles about the top nordic companies (on the right sidebar).

I’m just added $3000 to my position in Investor AB B and would not mind adding Latour or Industrivaerden


A la carte main courses

The main course is the most important course. Here, I want to mention Enbridge Inc as my best buy. As mentioned, I’ve said that I looked at Enbridge in both watchlist for April and watchlist for May. 

Enbridge is now up more than 18% since my first watchlist (neglecting the 6% dividend payment which gives a 24% total return). Is Enbridge done? No. Not at all. 

My conviction in Enbridge just got stronger. Here’s why:

The Minnesota Public Utilities Commission voted on two important subjects which effects Enbridge outlook.

  • They got a Certificate of Need (5-0 votes) which means Enbridge can move forward with their Line 3 Replacement Project.
  • Enbridge Inc got the green light (3-2 votes) to follow their own strategic plan
  • Enbridge Inc sells all of its western Canadian natural gas plants… for CAD 4.3 billions

In total, to keep things short, it means that Enbridge will be able to meet the very attractive dividend growth targets and they can continue with their plans at a planned pace. Few things are as important as cost control and reaching targets on time. I’m very happy that Enbridge Inc can move forwards and I still see at least 20% upside, and that’s with a nice margin of safety too.

The other stock I want to highlight is Starbucks. SBUX now trades at a 23.65% discount to my previous target price (will recalculate with respect to lower growth in US and China, but there’s still value in SBUX). I’m planning to write a Seeking Alpha article on this topic, because I don’t think people understand Starbucks plan or position in Asia. I’ve been to every country in south-east asia, and I’ve seen with my own eyes (aswell as talking with Nespresso CEO, Starbucks management and attending presentations) that things aren’t what most people think. Will elaborate on that in my next article.


A la carte desserts

For desserts, it’s worth mentioning two great companies which focuses on distressed debt. Take a look at the following image. It shows national debt around the world.

My thesis is that people spend too much money which they don’t have, and companies and countries do the same. At one point, the debt burden will become a problem (Japan, Italy, Argentina) and some companies who focuse on distressed debt will earn a lot of money. I choose to highlight Oaktree Capital (7.5% of my portfolio) and Intrum Justina as two great high quality companies in this sector. The first one is far less riskier, but investors focusing on dividend income should stay away. This is not an income stock, but rather a value play on a great high quality company.

 

Now back to you

What do you think? What are you looking at? Why do you look at this stock and do you have any special plan for the following year? Please do tell!

 

8 comments

  1. Very nice pictures Stockles.

    I also like ENB and hold a good size chunk of it. I believe it has been trading too cheap and now enjoying some upside momentum. As for SBUX, I would be interested to read your point of view on how they are doing in asia.

    Thanks!

    1. Hi Mr. ATM,

      Glad to hear you own a good size of ENB. It’s a great business which I think will reward us greatly in the long-term. My cost basis is 39 CAD so for now, it seems like I hit the bottom. I’m actually at a starbucks in Tokyo now when I write this, and it’s packed, as always (Got a japanese limited reward card as a gift, so need to spend it while I’m in Japan).

      See you soon and say hello to Duke for me!

      1. Yeah, I think you got ENB at or near bottom. Whereas I bought much higher initially but then bought some more around the bottom. I like the dividend yield and the growth. They are the largest energy company in N.America.

        SBUX is always packed even in the US with all the recent negative news, people still love going there.

        Duke is saying high back to you 😉

        Take care

  2. I think SBUX is an alright dividend stock, which has had increasing dividend payouts the last 7 years. It was actually my first stock, which I bought for fun as my Microeconomics professor at the time had published a book some years prior called “If It’s Raining in Brazil, Buy Starbucks”. The stock has served me well over the years.
    I don’t see significant growth for the company in Europe or the US, as there is a preference for indie coffee places and cafés versus conglomerates now. But the growth potential in South East Asia (SEA) is staggering. Not only is SEA the fastest growing consumer market in the world, they also love recognizable brands and chain stores. No matter where I go, Thailand, Malaysia the Philippines etc. it is always stacked with people in their starbuckeses.

  3. Those views from your hike look amazing! Our preferred family vacations are visiting the national parks here in the US, and we plan to retire to a home in the mountains.

    I’m a fan of SBUX and just added 20 more shares today. Look forward to seeing your thoughts in your SA article.
    DivvyDad recently posted…The Cost of PatienceMy Profile

    1. Hi DivvyDad,

      Very glad to hear that. The mountain is a profound place which brings out many emotions which the daily life stops us from feeling.

      Actually, my father has been drawing his dream cabin which should be placed somewhere in the norwegian mountains every day for more than 20 years. Always something, a pilar or a window that can be fixed. However, I truly believe that the best place for anyone to live would be were one can see mountains and the sea. Atleast somewhere around the nature.

      Great. I’m stoked to write it!

      See you!

  4. Love the pictures as always!

    Hmmm I have been bearish on sbux in various comments but am very interested in you view. I was under the impression that there is a different culture regarding coffee there that would not match sbux. Maybe I’m wrong….
    Mr. Robot recently posted…June 2018 Dividend ReportMy Profile

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