Sunday, November 27, 2011

NLO Dividend Watch List: November 25, 2011

The S&P closed down 4.7% for the week while the blue-chip Dow Industrial index was down 4.6%. Our dividend list contains 29 companies this week. Those companies within 5% of the 52-week low are listed below.

November 25, 2011
Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
AVP Avon Products, Inc. 16.09 0.00% 9.46 1.70 0.92 5.72% 54%
CCBG Capital City Bank Group  9.65 0.00% 21.93 0.44 0.40 4.15% 91%
FNFG First Niagara Financial Group 8.24 0.24% 12.48 0.66 0.64 7.77% 97%
TR Tootsie Roll Industries Inc  22.88 0.26% 31.78 0.72 0.32 1.40% 44%
WST West Pharmaceutical 35.6 0.28% 19.67 1.81 0.72 2.02% 40%
AROW Arrow Financial Corp.  21.58 0.37% 11.66 1.85 1.00 4.63% 54%
T AT&T Inc 27.41 0.77% 13.91 1.97 1.72 6.28% 87%
BMS Bemis Co Inc 27.62 1.51% 13.88 1.99 0.96 3.48% 48%
MTB M & T Bank Corp. 67.7 1.96% 9.80 6.91 2.80 4.14% 41%
CHRW C.H. Robinson Worldwide, Inc.  63.63 2.13% 24.76 2.57 1.16 1.82% 45%
BDX Becton, Dickinson and Co. 71.11 2.18% 12.65 5.62 1.64 2.31% 29%
BMO Bank of Montreal 53.22 2.68% 10.82 4.92 2.82 5.30% 57%
WFSL Washington Federal, Inc.  12.52 3.05% 12.52 1.00 0.24 1.92% 24%
LM Legg Mason, Inc.  23.31 3.10% 14.21 1.64 0.32 1.37% 20%
AVY Avery Dennison Corp. 24.25 3.10% 9.19 2.64 1.00 4.12% 38%
BCR CR Bard, Inc. 83.37 3.18% 21.43 3.89 0.76 0.91% 20%
BMI Badger Meter, Inc. 27.83 3.42% 17.29 1.61 0.64 2.30% 40%
VNO Vornado Realty Trust 70.73 3.42% 16.96 4.17 2.76 3.90% 66%
HCC HCC Insurance Holdings, Inc. 25.6 3.81% 10.58 2.42 0.62 2.42% 26%
SYK Stryker Corp. 45.52 4.09% 14.45 3.15 0.72 1.58% 23%
WFC Wells Fargo & Co. 23.51 4.12% 8.71 2.70 0.48 2.04% 18%
BXS BanCorp.South Inc. 8.57 4.13% 17.85 0.48 0.04 0.47% 8%
WEYS Weyco Group, Inc.  21.72 4.32% 16.58 1.31 0.64 2.95% 49%
BEN Franklin Resources, Inc. 91.63 4.47% 10.63 8.62 1.00 1.09% 12%
EXPD Expeditors Intl of Washington 40 4.58% 22.10 1.81 0.50 1.25% 28%
CTAS Cintas Corp.  27.63 4.70% 15.44 1.79 0.54 1.95% 30%
SIAL Sigma-Aldrich Corp.  58.89 4.82% 16.36 3.60 0.72 1.22% 20%
GE General Electric Co 14.7 4.85% 11.22 1.31 0.60 4.08% 46%
CWT California Water Service 17.47 4.92% 17.83 0.98 0.62 3.55% 63%


Watch List Summary
Topping our list this week again is Avon Product (AVP). According to IQTrends (http://www.iqtrends.com/), AVP is considered undervalued once it reaches 3.7% dividend yield. The yield rose to 5.7% this week from 5.05% two weeks prior. Any long-term investor would need to do extensive due diligence prior to committing their hard earned capital to this investment opportunity. The current payout ratio is at 54% imply that earnings can fall by half before dividend cut is considered. Please note that thie company is being investigated by SEC.

Another company for yield seeker is AT&T (T).  The current yield of 6.28% is hard to ignore when 10 year T-Bill pays 1.97%.  IQTrends estimated that AT&T is undervalued when yield reach 5.5%. A return to that yield would equate to 14% upside. Payout ratio of 87% is quite high but not somehing AT&T haven't experienced. The recent M&A deal with T-Mobile was broken up and thus would be interesting to see how AT&T would fight off the competition from Verizon.

Disclaimer:
On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period. 

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Saturday, November 19, 2011

In the News: November 19, 2011

The Bear Bust at Forbes
Farmland prices in the Midwest soar at Yahoo!Finance/Money

Thursday, November 17, 2011

Nasdaq 100: November 18, 2011

Below are the Nasdaq 100 companies that are within 10% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

SymbolNameTradeP/EEPSYieldP/B% from Low
CTRPCtrip.com International, Ltd.$25.6522.001.1703.562.25%
BMCBMC Software, Inc.$35.5914.582.4404.064.30%
NTAPNetApp, Inc.$34.8021.131.6503.454.44%
QGENQiagen N.V.$13.7424.980.5501.265.29%
CHRWC.H. Robinson Worldwide, Inc.$66.1325.732.571.70%8.506.15%
NIHDNII Holdings, Inc.$23.4113.211.7701.206.47%
LIFELife Technologies$37.6519.761.9101.506.66%
SIALSigma-Aldrich Corporation$60.0116.673.601.10%3.386.82%
BRCMBroadcom Corporation$32.8119.751.661.00%2.886.84%
MSFTMicrosoft Corporation$25.319.202.753.00%3.627.00%
RIMMResearch In Motion Limited$18.463.375.4800.988.34%
EXPDExpeditors Int'l of Wash.$42.8423.671.811.10%4.639.20%
SRCLStericycle, Inc.$77.8630.902.5205.569.40%
HSICHenry Schein, Inc.$60.9716.013.8102.219.76%
SYMCSymantec Corporation$16.2018.430.8802.629.76%
CACA Inc.$20.4712.011.700.90%1.779.99%


Watch List Summary

On July, 11, 2011, it was announced that SiriusXM (SIRI) would be added to the Nasdaq 100 Index (article here).  Our view, at the time, was that adding SIRI to the Nasdaq 100 wasn’t the best idea.  Instead, we provided four stocks from the Nasdaq 50 alternative group which we felt could have been added to the index. 

Considering that we’re a month away from the Nasdaq 100 re-ranking, we’d like to see if the stocks that we suggested, from the Nasdaq 50 alternative list, actually did any better than SIRI.


symbol
company
15-Jul
18-Nov
% Change
SiriusXM
2.33
1.79
-23.18%
Dish Networks
30.77
24.74
-19.60%
Shire Plc
99.67
95.01
-4.68%
Nasdaq 100
2356.67
2253.95
-4.36%
Discovery Comm.
41.6
40.61
-2.38%
ASML Holdings
34.32
38.07
10.93%

As expected, SiriusXM was the stock that lost the most with a decline of -23.18% in the period from July 15th to November 18th.  In this period of time, SIRI’s P/E ratio improved as a result of increased earnings and total revenue along with a share price decline. The trailing price-to-earnings ratio (P/E ratio) contracted from 221 to the current level of 41. 

Serial bulls of SiriusXM (SIRI) contended that the P/E ratio would contract based on the expected improvement in earnings.  Unfortunately, an improved bottom line did not equate to the expected gains in the stock price.  The stock that was closest to SiriusXM (SIRI), in terms of losses, was Dish Networks (DISH) which declined -19.60%.  On the other end of the spectrum, ASML Holdings (ASML) gained +10.93% in the same period of time.

As the deadline for the re-ranking of the Nasdaq 100 approaches, We’re wondering if the Nasdaq 100 selection committee is willing to reconsider SIRI as a member of the Nasdaq 100 index.  Although we believe the stock should not be included in the index, we understand that membership is contingent upon volume and market cap considerations.  So far, SIRI meets the most basic requirements necessary to remain in the index.  However, if the carpet is pulled from under the stock by dropping SIRI from the index, a sizable decline in the price of SIRI is not out of the question.

In addition to the possibility of SIRI being removed from the Nasdaq 100, however remote, are the following companies:

  • Henry Schein (HSIC)
  • Stericycle (SRCL)
  • Sigma-Aldrich (SIAL)
  • Sears Holdings (SHLD)
  • Qiagen (QGEN)
  • Ctrip.com (CTRP)
  • NII Holdings (NIHD)
  • Warner Chilcott (WCRX)
  • Vertex Pharma. (VRTX)
  • BMC Software (BMC)
  • Life Tech. (LIFE)
  • Illumina (ILMN)
It is noted that many of the companies that are on our current Nasdaq 100 watchlist are also potential candidates for being removed from the Nasdaq 100 Index.  From prior observation, if for any reason these stocks aren't dropped from the index, they are expected to outperform the Nasdaq index by a sizable margin in the coming year.

Watch List Performance Review

In our ongoing review of the Nasdaq 100 Watch List, we have taken the stocks from our list of November 10, 2010 (found here) and have checked their performance one year later. The companies on that list are provided below with the closing prices from November 10, 2010 to November 9, 2011.

SymbolName20102011
% Change
WCRXWarner Chilcott plc$20.89 $17.20-17.66%
APOLApollo Group, Inc.$36.84 $46.1425.24%
TEVATeva Pharma.$50.81 $40.58-20.13%
ISRGIntuitive Surgical, Inc.$277.96 $429.2854.44%
AMGNAmgen Inc.$54.93 $57.514.70%
Average gain9.32%
NDXNasdaq 1002,187.74 2314.105.78%


The black line drawn in the month of February 2010 indicates the period when three of the five stocks had achieved annualized gains of at least 60% or more.  Taken as a whole, the entire portfolio achieved an annualized gain of nearly 40% near the middle of February 2010.  In the end, it was Apollo Group (APOL) and Intuitive Surgical (ISRG) that carried the top five to an average gain of 9.32% over the last year.  The top 5 beat out the Nasdaq 100 by 3.54%.