October 2018 Stock Considerations

Here we go again. A new month is upon us which means one thing… time for me to outline my potential stock picks for October. I can hardly believe that we are now entering the final quarter of 2018 but here we are. Where does the time go? Whenever I reflect on how fast the days, weeks and months roll by I am reminded of the importance to always stay “fully” invested in the stock market. By now you know that I make my purchases every single month no matter what domestic or foreign event is taking place. Believe me… nothing you read about in the news matters.

 

Time is fleeting, time is our greatest asset and time in the market trumps all. Just stay invested (always). No one can accurately predict a market crash, correction, run up/melt up/melt down, etc. I will continue to buy as the market marches higher and higher and higher. Am I crazy? We’re due for a correction. Right? We’re overvalued, right? Maybe yes and maybe no. Maybe we see DOW 30K before the year is up? Maybe DOW 12K? No one knows and basically it’s all a guess. Want proof?

 

2017

All Signs Show the Market Is Overvalued. What’s an Investor to Do?

A Closer Look At Valuations: Is The Stock Market Overvalued?

 

2016

By this measure, the S&P 500 is overvalued by 72%

Here’s how you know the stock market is hugely overvalued

 

2015

The stock market is overvalued any way you look at it

 

2014

The Stock Market Is Overvalued By 100%

Is the Stock Market Overvalued? It All Depends on How You Measure It

 

2013

The Stock Market Is Overvalued

It’s not just stocks; everything is overvalued

 

2012

The Stock Market Is Still 33-44% Overvalued

 

2011

Are stocks really overvalued?

 

It took me just a few short minutes to find these articles. Imagine, going back to 2011 and reading about an overvalued market. Imagine heeding the advice from any of these headlines. You would have missed out on some great upside. Everything you read online is an opinion. And financial headlines can be the most influential as they have an aura of legitimacy. Think about it. Pick any stock you want and you’ll find an “analyst” that has a buy, hold or sell rating for the same company. Who is right? They all read the same financial reports and come up with differing opinions which is why I buy every month with blinders on. Building my portfolio, diversifying, collecting and reinvesting my dividends growing my passive income stream and accepting that one day my portfolio value may be cut in half. I’m OK with that as long as my dividends keep rolling in because at the end of the day no one can accurately predict where the market will be in the next year, month, week or day. And so I buy. With that being said let’s take a look at my October 2018 stock considerations.

 

First up, is a name I have bought in August and September. One of my favorite utilities, Dominion Energy, Inc. (D). As the stock continues to languish around $70 it remains an attractive potential buy for my portfolio. Of course, a juicy yield just south of 5% doesn’t hurt either.

 

Next, I’m looking at beaten consumer staple, The Kraft Heinz Company (KHC). An unloved company in an unloved sector sporting a very attractive PE and juicy yield. KHC has a safe payout ratio which should mean the dividend appears to be safe.

 

Finally, like last month I’ll potentially be looking to add to a couple of my health REITs that have been showing some signs of life when compared to their performance in early 2018. These buys will allow me to average down my cost basis while continuing to enjoy some generous yield. It’s been a while since I added to any of my current REIT holdings and HCP, Inc. (HCP) is starting to look OK to me once again. Seeing HCP well below a $30 price could finally compel me to trigger a buy. Also, in the health REIT space I am looking to add to my Sabra Health Care REIT, Inc. (SBRA). The stock has climbed a lot from its lows of 2018 as this skilled nursing REIT play still demonstrates a difficult business environment. Of course, that generous yield, which highlights some of the risk involved with the stock, can justify the risk/reward scenario.

 

What do you think about my potential October buys? Are any of these names on your watch list? Please let me know below.

Disclosure: Long HCP, SBRA, D, KHC

24 thoughts on “October 2018 Stock Considerations

    • Hi Passivecanadianincome,

      I have been seeing a few BNS buys in recent weeks. I’m pretty full of BNS, TD and RY these days which is why I am looking elsewhere. REITs and utilities seem to be beaten down the most because of interest rate hike fears. Just means better prices for us.

    • Hi DD,

      I know KHC has its issues. High debt, slowing sales/growth, etc. But, it still offers a yield that appears to be safe and a generous yield as the stock price has fallen. I get why people don’t like it but that’s usually the best time to pick up a stock for good potential returns. Thank you for commenting.

  1. All solid choices DivHut, although the watch list I just published has different selections. I’ve identified two other consumer staples that are on my watch list–and if I were not focused on adding to existing positions vs. adding new positions, I likely would be considering KHC as well.

    I think the point you opened with about continuing to buy is very important, as I know quite a few are hesitant right now. I don’t think you will find too many people that don’t believe a correction is coming, but nobody knows when and trying to time the market is a losing game. It is critical to have a strategy and stick to it in good markets and bad markets.
    DivvyDad recently posted…October 2018 Dividend Watch ListMy Profile

    • Hi DD,

      People have been worried about a correction coming since 2009. In fact, when the market started to rebound back then there were plenty of headlines questioning if the recovery was real. As you can see from the headlines going back many years there are always negative headlines no matter how good things are. It’s really a testament to the benefits of tuning out the financial noise. Just keep investing… pretty simple. Thank you for commenting.

  2. Keith,

    Good write up – the market is probably overvalued as a whole, but individual parts are not necessarily so. Even the most season professional can miss that fact in their generalizations.

    I am long both KHC and D, and I would add to both. I might increase my stake in D before the year ends as it is near the top of my list for a variety of reasons.

    – Gremlin

    • Hi DG,

      As long as people worry about interest rate hikes the utilities and REITs will continue to get hammered. All that means for us is better buying opportunities in some quality names. The point of mentioning those headlines is the fact the news is always negative no matter how good the times may be. It’s a reminder for us to tune out the talking heads and stick to our own investing plans for the long haul.

  3. Thanks for the list Keith! I picked up a few shares of Dominion towards the middle of September and would love to add to it. I’m interested in both DLR and IRM here too. I wouldn’t mind adding some KHC to the portfolio either so it might be time to look into that. All the best and happy bargain hunting!
    JC recently posted…Freedom Buy(s) Part 2My Profile

    • Hi JC,

      Clearly there are many great individual names on sale these days. Utilities and REITs seem to be getting hammered the most as interest rate hike fears grip those sectors. D around $70 or so still looks good to me. As always, I appreciate your comment.

    • Hi SD,

      Thanks for sharing your consideration. KHC is an interesting name from a DGI perspective. It’s a nice high yield play that still appears to be safe but many don’t like its slow growth and high debt levels. Still, I think some exposure couldn’t hurt in any DGI portfolio.

  4. DivHut,

    I’ve still got my eye on KHC as well as a few others in the same industry, including CPB, SJM, and GIS. For utilities, NGG, PPL, and SO look good and are unloved by many as folks chase charts and hype elsewhere.

    With regards to your discussion overall market valuation – if I was an index investor I would most certainly be concerned with overall market valuation/multiple, however, I would likely still participate through a systematic DCA approach and during market corrections reducing my cash savings and contribute even larger amounts to indexed shares, which was my approach from 2002-2012. Markets will revert to a mean and as history proves, it is not at all unusual for markets to trades at relatively high multiples over extended periods of time.

    Nowadays, I pick individual stocks and even in markets that on the whole, appears fairly expensive, there are individuals companies where valuation appear very reasonable.

    PIV

    • Hi PIV,

      REITs, utilities and many consumer staples have had a tough 2018 so far. It’s enticing to see some high yields as a result of lower stock prices in some traditional quality companies. I still have my eye on PPL too but might wait to pull the trigger there. For now my utility play is D, SO and ED. As you stated, ‘unloved.’ Usually that’s the best time to pick up some shares before everyone else jumps on the bandwagon. Going forward, I still plan to make my monthly stock buys and not worry or concern myself with any of the financial headlines. I realize that a lot of what’s written about is beyond my control so why fret about it. I’ll keep on buying and building up my passive income stream month in and month out. Thank you for commenting.

  5. A lot of people are looking at KHC lately. I also am looking somewhat critical at this company, especially due to the lack of an increase. But still it is an interesting company none the less.

    I might be adding to my utilities this month. Build up my ED and PPL positions. But if I fancy something else last minute I won’t hesitate to switch:-)
    Mr. Robot recently posted…September 2018 dividend reportMy Profile

    • Hi MR,

      People like the yield of KHC which still appears to be safe but many don’t like the debt picture nor the growth prospects of company. I still like it at certain levels and it seems to be trading at a fair price but I get why many don’t like it. PPL is still on my radar as my fourth potential utility play. We’ll see if I add that to my portfolio in 2018.

  6. Hut –

    To keep this short, as it’s easy. They are all looking nice, right now. Just impressive. Dominion’s yield and growth, and HCP & SBRA yields are swelling too. I will tip my cap to any purchase you make on them.

    -Lanny

    • Hi DD,

      So far I went with a couple REITs this month and they still look attractive to me going forward. Interest rate fears have really hammered REITs in 2018 and there is no end to the potential near term negative news for the sector either. Good time to pick up more???

  7. I just made 3 small albeit they were purchases this month i did get a REIT as i love them. I had looked at SBRA but went with a different one. All those are excellent companies and you cant go wrong no matter what you buy.
    Doug recently posted…Sept 18 Dividend reportMy Profile

    • Hi Doug,

      Utilities and REITs still look attractive. I think rising interest rate fear has really hammered those sectors the most. Better buying opportunities for us, right?

  8. Thank you for this article. You make a very good point about constant news about market over valuation. When I started to think about it I don’t I have seen more than couple good articles about “It’s good time to invest” in the past six years.

    Of course the stock market will crash someday. Will it happen in a month or five years, who knows (I don’t think anybody can predict this).

    I’ve been thinking about buying something from the Utilities sector. I am currently leaning towards Fortis inc. (FTS.TO) but I got to say that Dominion Energy also looks interesting!
    Dividend Deluge recently posted…Passive Income Report – September 2018My Profile

    • Hi DD,

      It’s always a good time to invest I feel. You are building a portfolio and passive income stream for the long haul. Why try and time the “best” possible entry points? You can’t. Invest, collect the dividends and hold on tight when the market does crap out eventually. Negative news sells. It’s a fact. It’s more sensational than feel good, warm/fuzzy stories. Financial headlines are some of the worst, always trying to scare the average Joe investor out there. FTS is a popular name in the DGI space. For now, I’ll stick with my D, SO and ED though PPL still looks interesting too in the utility sector.

  9. I have noticed D trading at pretty good levels as well. Although I bought a lot of it earlier in the year so I am holding off on buying more for now. I like KHC but I still feel like there are a few other companies in that sector that may provide a little more value. Either way, still all good long term holds. Good luck in your next purchase decision.

    • Hi DD,

      I still like D going forward. Ideally, at $70ish looks like a good price to jump aboard. KHC is still in the doghouse for many and I can understand why. The yield still looks very compelling though.

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