August 2017 Stock Considerations

With the start of a new trading month upon us, it is time, once again, to lay out a plan for my potential stock picks. As many of you do the same, I’m sure you have come to the realization that this current market continues to defy a lot of common sense and logic. We have seen companies reporting great figures for the quarter but they suddenly tank while other seemingly weaker players continue to grind higher. It can be difficult to lay out an accurate road map for the month ahead with all these wild gyrations in stock prices taking place. Of course, this is all part of the investment game we play and we must not get shaken out of certain positions even when double digit declines occur in a single day. You all know the names I’m talking about as we have witnessed W.W. Grainger, Inc. (GWW), Altria Group Inc. (MO), Bemis Company, Inc. (BMS), Johnson Controls International plc (JCI) and even long time favorite Starbucks Corporation (SBUX) among others all suffer double digit declines in a single day last month. These declines don’t phase me as I see them as better buying opportunities for some solid, well known dividend paying stocks. With that being said, let’s take a look at the stocks I am considering for the month of August.

 

First up is a name I bought several months ago and am considering once again, Johnson Controls International plc (JCI). JCI is a solid long term dividend paying industrial that has been lagging a bit post it’s Adient plc (ADNT) spin off and continues to look very good to me at current levels. July was a terrible month for JCI as its stock price lost a lot of ground and is now trading around its 52 week low.

 

Next, I am looking to add to pharmaceutical giant Pfizer Inc. (PFE). This is a new stock in my portfolio and makes up a very small part of my health sector holdings. I wouldn’t mind boosting my share count should prices remain in the low $30s.

 

Finally, I am considering a batch stocks that I have not purchased in a while but feel will do well in the third and fourth quarter this year. These are stocks that do most of their business overseas which up until the start of 2017 was a major headwind because of a very strong dollar. Today, this is no longer the case as the dollar has weakened almost every month since the start of the year. A weaker dollar should translate to better earnings reports for the likes of McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM), V.F. Corporation (VFC), Colgate-Palmolive Company (CL), The Coca-Cola Company (KO), Pepsico, Inc. (PEP), Philip Morris International Inc. (PM), The Procter & Gamble Company (PG) and many more who do a lot of their business overseas. We have already seen a weaker dollar drive up many commodity prices like crude oil, copper and even gold. Should this trend of a weaker dollar persist, I feel we’ll be reading many more very positive earnings reports for the third and fourth quarter from these companies.

 

What do you think about my potential stock buys for the month of August? Do you think the U.S. dollar will remain weak throughout the second half of the year and potentially impact earnings for many companies in a positive way? Please let me know below.

 

Disclosure: Long GWW, BMS, JCI, SBUX, ADNT, PFE, MCD, YUM, VFC, CL, KO, PEP, PM, PG

34 thoughts on “August 2017 Stock Considerations

    • Hi DD,

      There’s no shortage of quality companies trading at attractive prices these days. It’s all about picking and choosing and with earnings still coming out a lot of surprise down days have been occurring. JCI had a rough month or so. It hasn’t traded this low in a while. Thank you for commenting.

  1. I have seen a lot of people talk about MO, BTI, PM, etc etc but I barely ever see anybody talk much about the little guy VGR. Sure its revenue is nowhere close to the big boys but it consistently brings in $1.5B+ a year, it stock always hangs around low to mid 20 range, it currently has a dividend of 7.87% and has a yearly stock dividend of 5% which you do not see often. What is your take on VGR? It definitely on my watch list.

    • Hi MB,

      The little guy VGR does look enticing from a yield perspective. Unless I’m missing something I don’t really like the high dividend payout ratio the stock sports. In terms of price it does seem to be trading at fair value to even less than fair value suggesting more upside than downside. Looks interesting I just don’t like the high payout ratio and would hate to see a dividend cut come because there wasn’t enough free cash to cover it. Thank you for sharing your thoughts.

  2. That’s a good list of stocks Div Hut. I’m currently considering GWW and SBUX, as well as PFE. Sometimes I think it’s hard to find good stocks, and then other times, I can’t decide which stocks to include because there are so many. I honestly have no idea how the US dollar is going to do over the second half of the year. But, it’s good to be investing in companies that have a global reach.
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    • Hi DP,

      Nice to see that you are considering names I recently added to my own portfolio. Of course, no one knows what the dollar or any stock or commodity will do over the next half year but so far I think the weakening dollar has really supported many U.S. domiciled stocks doing a lot of business overseas. It’s a trend I think can continue especially with a Fed that might not be willing to raise rates again this year. Thank you for stopping by and commenting.

  3. Hey DH,

    interesting thoughts about the third and fourth quarter… i like your selection, especially PepsiCo which is on top of my priority list (not counting the stocks i already own). Maybe i add to my position in VFC too.

    I don’t know in which direction the dollar is headed, but it has quite an impact. I’ll monitor that, cause it affects my actions and my income. If the dollar is weak in relation to the Euro i get paid less in dividends but on the other hand i have more buying power. – The reasons behind the weak dollar are the uncertainty caused by US politics in my opinion. (healthcare reform, no reform – how will the tax reform turn out, what about the infrastructure overhaul etc. etc.). The losses of the Dollar in relation to the Euro were a surprise though, because interest rates got up in the US and the EZB changed nothing (which i don’t like at all…)

    We’ll see how it play out in the fall and winter, but your candidates will definitely profit from a weaker dollar. Maybe i pull the trigger on PEP faster than i wanted in the first place;-)

    • Hi DS,

      Sometimes it’s best not to over think a potential purchase when it comes to PEP or VFC and the like. At any time there will always be doubt and negativity for any stock that trades. Buying into quality names that may not be trading at the “best” value can work out well with a long enough time horizon. I just mentioned the dollar because it has been under a lot of pressure in 2017 and I have a feeling that we’ll be seeing better numbers coming out of companies like PEP, YUM, KO, VFC, PG and the like that does a lot of business overseas. Look, as dividend growth investors we invest for decades not months or years. In that time we’ll see many presidents come and go, political changes and reform and re-reform which shouldn’t matter to our bottom line as income investors. Dividend tax rates rise and fall, business climates in the U.S. go from favorable to unfavorable, etc. In other words, ignore the noise, stick with quality, diversify and be patient. Thank you for commenting.

    • Hi IH,

      You and a few others are looking at LB. It’s definitely trading at much better levels not seen in about five years so I can see the allure. For me, it’s all about VFC in the fashion world. I also like SO as it seems to be under a little pressure these days. Thank you for stopping by and commenting.

  4. What’s your thought on HP (Helmerich & Payne, Inc.). I’m thinking of initiating a position in the mid 40s. I have BTI, MO, JCI (initiated a small position), WSM, GPC, NNN in my watchlist as well. All the very best,

    • Hi Harry,

      If you look at my portfolio you will see I own zero energy stocks. It’s not that I’m against energy as I have owned quite a few names in the space in the past, it’s that I do not like the extreme volatility in the space and as such have never considered HP. It does seem a little bit expensive at current levels and I think you have the right idea waiting for better pricing in the mid $40s. I’m still liking JCI at these lower levels. The stock really had a rough July and is trading at more attractive levels. Thank you for sharing some of your names you are considering.

  5. That’s a great list of stock considerations DH. VFC, MCD, and PFE are stocks I already own but would not mind adding more to my position if the opportunity arises. KO has been on my watch list for a long time… I wish I pulled the trigger on that one awhile back, but maybe the opportunity will arise again. So many choices to make and opportunities to be gained. Thank you for sharing!

    • Hi MDD,

      Many of those consumer names you mentioned can potentially be poised for a good third and fourth quarter if the dollar continues to remain weak. Like you, I wouldn’t mind adding to my MCD, KO, PEP, VFC and others as those stocks continue to shine even though they may stumble from time to time in the near term. As always, I appreciate your comment.

  6. All solid stocks. I used to own VFC, I ditched it … since I am planning to invest in mutual funds (only).

    Are you averse to owning international stocks?

    Nestle S.A. is a nutrition, health and wellness company.The Company’s product categories include powered and liquid beverages; water; milk products and ice cream; nutrition and health science; prepared dishes and cooking aids; confectionery, and PetCare.

    https://goo.gl/SNTtcA
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    • Hi dividendgeek,

      Mutual funds, ETFs, individual stocks… whatever the vehicle they each should take us to our desired goal. I love VFC and am happy to have added to the stock when it was below $50 not long ago. I think a weaker U.S. dollar will help that name and others that do a lot of overseas business. I am not averse to owning international stocks. In fact, I own quite a few like ALLE, IR, DEO, UL, JCI, CB, TEVA, BNS, TD, RY and YUMC. I like Nestle and it’s in a sector I favor the most, consumer staples but I do wish they’d pay a dividend more than once a year. That’s one gripe I have about the stock. At least, you can see I am not averse to international stocks by my list of current holdings. Thank you for sharing your thoughts.

    • Hi DD,

      Judging by the comments it seems that many are liking PFE. Not a bad current yield to wait for things to improve which is why it seems to be quite popular. The weaker dollar can translate to some great earnings figures for many dividend stalwarts like YUMC, MCD, PG, CL, VFC and many more. Keeping my eyes peeled for sure! As always I appreciate your comment.

    • Hi MD,

      No doubt there are a lot of interesting opportunities these days especially when companies report earnings. Often, after an earnings call we see stocks reach the sky or fall to the cellar. When these stocks fall they can present some pretty good buying opportunities. As I always say to you, I’m impressed with your continued buying. You always seem to pick up some very solid, well known, long time dividend payers. Thank you for stopping by and commenting.

  7. DH,
    Good solid list. I like PG, PFE, VFC, and JCI. You are correct though, the market is in a weird way right now. It doesn’t scare me though as 90% of my stocks reported very strong earnings. All you can do is block out the noise, keep reinvesting and collecting the dividend checks. This is where a disciplined DGI investor stays the course and finds opportunity. If a bear market happens, roll with it and accumulate more shares. Good luck on your purchases!

    -Brian
    Brian recently posted…2017 July Dividends have arrived !My Profile

    • Hi Brian,

      You said it. Believe me, I’m always blocking out the noise as I continue to make my monthly buys no matter what’s in the (financial) news or happening with individual stocks or the market in general. I’ll continue to stick with the solid, known dividend paying stocks, diversify and “roll” with any bear market as it comes. That’s really all any of us can do being long term dividend growth investors. As always, I appreciate your comment.

  8. DH,
    I agree with those considerations. I am looking at BMS’s competitor – Sonoco (SON) myself. Some stocks have been bashed so hard, its almost impossible to ignore the buying opportunity. Hopefully, the bears and bulls leave open that room for the rest of us to find our value.
    – Gremlin
    Dividend Gremlin recently posted…July Review / August Preview, 2017My Profile

    • Hi DG,

      Glad you like many of my potential stock picks. Clearly, I’m liking the consumer staples again in a weaker dollar environment. If it stays low I think we’ll be seeing names like MCD, YUMC, PG, CL, VFC and more do well in the second half of the year. I never looked at SON in earnest. Just BMS and IP in the packaging space. As you stated, some stocks have been bashed so hard that better buying opportunities continues to present themselves. Thank you for commenting.

  9. DH,
    Some good considerations there. I wasn’t aware of the JCI – you’ve made me curious now.
    As for Pfizer, I have followed this company since way back in 2010-ish, and they were trading around the 30s. The difference from then to now is Zoetis. They spun off their Animal Pharma business. Its a stable dividend provider, but this space is getting highly competitive.
    Phillip Morris, Colgate Palmolive, Coke, Pepsi, all good companies. I like Phillip Morris particularly as they are performing much better than their peers. Btw, have you considered Kimberly-Clark ? That is a solid dividend paying company as well.

    • Hi PAI,

      Glad to have brought JCI to your attention. It’s been lagging since its spin off of ADNT not long ago and July has been an especially cruel month for the stock which is why I’m looking at it once again. With a weaker dollar in 2017 I think many of the consumer related stocks that do a lot of business overseas will be reporting much better numbers going forward. I have KMB in my portfolio and it’s on my radar too going forward. Thank you for sharing your thoughts.

  10. I always love seeing SBUX and JCI move lower for me to scoop up more shares!

    As far as PFE, I have read some things about their pipeline not being as strong? I like them at these levels but just don’t know about the future of drug pricing, their new drugs, and their expiring patents. Would love to hear your thoughts and if you end up buying!
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    • Hi SSDD,

      You said it. Names we all know and like trading at much cheaper prices… yes, please! That’s why JCI keeps popping up on my radar. At any time pharma stocks can always be argued to lack a solid pipeline. That argument has been made with JNJ, ABBV, PFE, GILD, AMGN and more over the years. Frankly, it doesn’t concern me. These companies have such huge and varied drug pipelines that even when patents expire, competition increases, drug prices might come into question, over time they all seem to come through. Stick with known companies, diversify and I think you can do well. Thank you for commenting.

    • Hi ED,

      There are many great individual stocks trading at much better prices these days. JCI, SBUX, BMS, GWW, TEVA, MO, GWW and more have dropped considerably in the last month. I think SBUX will be fine long term. It still trades at a pretty high valuation, but then again, it always has. Sometimes, traditional valuation metrics don’t apply. Just look at AMZN. Thank you for stopping by and commenting.

  11. Good list. Most of my holdings went down 10% due to doller decrease (My home currency is NOK – norwegian). I´m looking at GIS, CVS, CAH, SO, SKT and some nordic companies.

    • Hi Stockles,

      The U.S. dollar sliding in 2017 has definitely made an impact across the globe. I think the weaker dollar will help many American companies doing business abroad and we could see some much better earnings in the second half of the year. I like several of the names you are considering. Thank you for sharing some of your picks.

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