May 2016 Stock Considerations

With a new month upon us, it is time once again, for me to lay out my potential stock buys. Typically, I have a fairly long list of stocks to pick from as values and yields for many names appeared attractive. Those names in the past have also allowed me to average down on my purchase price which I was more than happy to do. Today, for the first time in a very long time I have only two potential stock buys that I am considering.

 

The first stock I am considering in May is The Bank of Nova Scotia (BNS). As many of you already know, I have been slowly adding to my Canadian bank holdings for quite a while, nibbling on positions as prices, values and yields looked too good to pass up. Today, however, after climbing significantly in the last couple of months those once compelling buys don’t look as attractive anymore. The one exception, BNS which seems to offer the greatest reward and potential risk among the large Canadian banks.

 

The second stock I am considering is health REIT giant, HCP, Inc. (HCP). We all saw how HCPā€™s earnings and guidance essentially brought down the entire health REIT sector in February which no doubt created some interesting buying opportunities within the space as stock price swoons gave us some very enticing yields in several health REIT names. A significant bounce since the February lows, however, has made many of the other health REITs less attractive than in days and weeks past. HCP still remains relatively weak for a variety of reasons and presents the best value (and risk) for potential returns today.

 

Of course, I realize that we are in the very beginning of the month and as May unfolds I have a feeling that more names will join the two above as potential buys. April finished on a weak note and I if I had to guess, I would say May will start out weak as well, but it’s just a guess.

 

What do you think about my potential stock picks for May? Are any of the above names on your monthly watch list? Please let me know below?

 

Disclosure: Long BNS, HCP

27 thoughts on “May 2016 Stock Considerations

    • Hi DB,

      Yup, small and simple for sure. I don’t recall having such a small list in my two years of blogging. Of course, this is my list as of today. If May begins with a thud, I know I’ll have a few more names that I’ll consider adding to. Of the large Canadian banks I think TD and RY are the most conservative with BNS still having greater international exposure risk. But, I guess you get paid a generous dividend while you wait for economic conditions to improve. Thank you for stopping by and commenting.

  1. Hi DH,

    BNS and HCP are still good names but I’m going the contrarian route this May. ABT seems like a good risk-reward trade off. After losing 10% of their stock through purchasing St Jude it looks like a good entry point. There will be dilution of shares and massive debt which will probably slow dividend growth to .01 per year but I wouldn’t mind waiting if the price fell down to 3% or $34.67.

    AMGN is another name that peaked my interest. M* has it at 155.2 fairvalue and it has a promising pipeline. Ah so much to buy not enough capital.

    • Hi TBDI,

      Nothing wrong with ABT. It’s been a name that I have held for many years. I agree with you that a yield at 3% or more would make it a lot more enticing than at current levels. You may get that opportunity sooner than later. I have only two biotech names on my watch list. AMGN and GILD. Like you, I am interested in adding either to my portfolio but I’m not too keen on the volatility. AMGN is probably one of the most “blue chip” names within the sector. Thank you for sharing your thoughts for the month of May.

  2. Yeah, the Canadian banks have significantly increased in price of the last few months. Together with the strengthening of the loonie vs de greenback, we completely understand that you have limited deals left. Happy hunting!
    Team CF recently posted…Savings Rate April 2016My Profile

    • Hi TCF,

      The hunt does indeed continue. After climbing quite fast in such a short amount of time you can expect the Canadian banks and other names to pause and take a little breather. I know we are all hoping for that to occur so we can buy at better prices, values and yields all around. Thank you for commenting.

  3. I wish I had more money to invest šŸ˜‰
    BNS looks like a good pick, but for the long term. They will continue to struggle with the activities in Latin America for a while. I recently bought RY instead. I like the fact RBC relies more on capital market and wealth management than credit. I don’t see the housing market in Canada going sky high in the upcoming years šŸ˜‰
    Cheers,
    Mike.
    DivGuy recently posted…If I Was Starting Investing Today for The First TimeMy Profile

    • Hi DG,

      I think every investor wishes for more money to invest. As long as you can continue to put whatever dollars you have to work, you’ll be OK long term. I will continue to watch all the Canadian banks this month. I do feel that a potential breather will take place in the market and we’ll see better prices all around. I bought more RY last month and agree with you regarding its attractive business model. As always, I appreciate your comment.

  4. DH,
    Probably going to add to my BNS sometime soon as well. All the healthcare REITs were fairly attractive, its hard to deny a month ago. I hope they continue to stay that way so I can get a nibble somewhere along the line.
    -Gremlin

    • Hi DG,

      Nibbling is how I make my purchases. As long as values and yields look attractive I’ll continue to add to the Canadian banks and the health REITs. It’s tough watching the market rise and rise when you are looking to jump in at attractive levels but as we all know every cycle has an ebb and flow and I have a feeling we’ll all have opportunities to add to our portfolios at more attractive levels sooner than later. Thank you for stopping by and commenting.

    • Hi IH,

      Like you, I’d also like to see a drop in price for the large Canadian banks. BNS is my worst performer among the three I own and I would continue to welcome the chance to average down on that solid bank. Of course, I have my eyes on TD and RY as well and it will be interesting to see how May unfolds in terms of giving us better prices or not. Thank you for sharing your thoughts.

    • Hi AP,

      For my portfolio those two stocks would allow me to average down in cost and they both still offer good value and relatively high yield. So far the month of May is starting off a little rocky. Other value stocks may also be considered for my portfolio. Thank you for commenting.

  5. I suppose it’s good to have your considerations to such a small list as it focuses your thoughts on one of a few targets. Short term blips make for great long term opportunities.

    Good luck with whatever you decide to choose Keith.

    Tristan
    Dividendsdownunder recently posted…Dividend update: AprilMy Profile

    • Hi Dividendsdownunder,

      Personally, I’d like to have a few more names to choose from for a particular month but I’ll take two to start with. As you know, the market is very fickle and it may present many more buying opportunities not mentioned in this article. For now, The focus will continue to be on the large health REITs and large Canadian banks. We’ll see what I ultimately buy this month. As always, I appreciate your comment.

    • Hi R2R,

      I think we are all waiting for a pullback on many names, not just these. We’ll see how May unfolds but for now the focus will remain on those two names unless we get a major market meltdown. Thank you for stopping by and commenting.

    • Hi EL,

      I like OHI too but for now my focus will remain on the big three health REITs as I feel sufficiently diversified in the space. If I do make both of these buys this month they will go into my retirement accounts. REITs are more efficient in a retirement account as their dividend income is taxed at a higher regular income rate and the Canadian stocks are not subject to a 15% withholding tax if held in a retirement account. Thank you for commenting.

  6. Hello Divhut. I purchased 205 shares of HCP. I believe it is a Dividend Aristrocrat. I hear they are having a spinoff??? Is that a good thing for HCP? Any comments on that Divhut? I am always long term and building up my dividends but after hearing different things on HCP I am not sure….thanks…….

    • Hi JG,

      A lot of people have mixed feelings about the HCP spin off. On the one hand, HCP is shuttling its higher risk lower performing SNF assets, similar to what VTR did with the CCP spin off not that long ago. While the end result might make for a stronger HCP, there is still doubt about how the dividend distribution will proceed in terms of keeping the aristocrat status intact. For now, I plan to keep my HCP and have no intention to sell. Overall, my stake in HCP is quite small relative to my overall portfolio and feel comfortable holding on. I never intended for my REIT holdings to make up a major portion of my portfolio. Thank you for commenting.

  7. HI Divhut,

    Thank you for the comments. I also intend to keep my shares of HCP. Let’s see what happens.The only thing I don’t intend to do is reinvest my dividends. I will take them in cash and build up some funds to purchase something else in the future.

    • Hi JG,

      I’m glad I can share my opinion with you. I still plan to keep my shares and reinvest automatically. As I mentioned, HCP is a small portion of my overall portfolio and I think these near term headwinds will eventually pass. I guess this is what keeps us on our toes being dividend growth investors. Nothing is ever guaranteed, even from the bluest of blue chip stocks. I held on to my GE and WFC after they cut their dividends during the great recession. Prior to the cut it was unthinkable that solid names like GE or WFC would ever have to cut, but they did. This is why we diversify and sometimes hold through the “tough” times, for better or worse.

  8. Good Morning Divhut,

    I agree diversification is very important!!! Who would ever think a company like GE cut it’s dividend.
    But they did! When the market was dropping in 2008-2009(thanks to subprime mortgages) I
    purchased 400 shares at around $14.00 per share. I still own it today reinvesting the dividends.
    I am for the long run and need to sleep good at night! Thanks for your comments.

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