Deep Value Dividend Growth Index Week 14 Update: Still Plenty Of Buying Opportunities

Posted On February 26, 2017 8:23 pm

Click here to read up on the intro to this portfolio, the theory behind it, and its methodology.

Wow! The markets continue to melt up with the Dow now hitting 11 straight record highs. All told the Dow and S&P 500 were up 0.70% and 0.86% for the week, and are now up 5.28% and 5.91% respectively, Year-To-Date 2017. Historically when the markets have a great January and February the market ends up 24% up for the year. While that is no guarantee, thus far the market has never fallen for the year in the last 60 years or so.

Of course that doesn’t mean that you can just buy anything willy nilly, value still counts. Which is why we continued to add on numerous dips this week, mostly from retailers such as L Brands (LB), as well as Hormel (HRL) and B&G Foods (BGS), which announced disappointing guidance for 2017. In the long-term one year’s guidance (which can always end up proving overly conservative) is no reason for investors to sell, so we happily take the opposite side of the panic trades. That means we had some major shifts in terms of our largest holdings this week.

Meanwhile economically speaking the news remains good. New York Fed NowCast, which tracks economic data in real time to give a forecast of the next quarter’s GDP Growth (historically the most accurate source for such estimates) is predicting 3.1% GDP growth, which is both higher than last quarter’s and signals a continued acceleration of economic growth.

Portfolio Stats:

Portfolio Holdings: 200

Yield: 3.52% (S&P yield 1.93%)

Lowest Yielding Holdings:
MercadoLibre (MELI): 0.29%
Shire PLC (SHPG): 0.44%
NVIDIA (NVDA): 0.55%
MarketAccess Holdings (MKTX): 0.57%
Dr. Reddy’s Laboratories (RDY): 0.69%
Ball Corp (BLL): 0.71%
McKesson Corp (MKC): 0.74%
Perrigo (PRGO): 0.76%
Charles Schwab (SCHD): 0.82%
Dominoes Pizza (DPZ): 0.83%

Highest Yielding Holdings:
Ladder Capital (LADR): 13.24%
Icahn Enterprises (IEP): 10.83%
Dynagas LNG Partners (DLNG): 10.17%
Golar LNG Partners (GMLP): 9.80%
KNOT Offshore Partners (KNOT): 9.27%
Sprague Resources (SRLP): 8.45%
Starwood Property Trust (STWD): 8.38%
PennantPark Floating Rate Capital (PFLT): 8.35%
GasLog Partners (GLOP): 8.35%
Sunoco Logistics Partners (SXL): 8.27%

Valuation Metrics

PE: 15.41 (18% below S&P 500)

Price/Fair Value: 0.92

FCF Margin: 16.93% (vs S&P 500’s 14.16%)

Return on Assets: 7.82% (18% above S&P 500 average)

Return on Equity: 28.31% (32% above S&P 500 average)

Market Cap: $15.8 billion (81% below S&P 500 average)

Smallest Market Cap Holdings:
Jernigan Capital (JCAP): $185.7  million
Medequities Realty Trust (MRT): $351.7 million
Farmland Partners (FPI): $367.0 million
PennantPark Floating Rate Capital (PFLT): $367.6 million
Westwood Holdings Group (WHG): $551.5 million
Sprague Resources (SRLP): $584.0 million
Dynagas LNG Partners (DLNG): $590.6 million
Easterly Government Properties (DEA): $739.0 million
KNOT Offshore Partners (KNOP): $795.8 million
GasLog Partners (GLOP): $909.8 million

Largest Market Cap Holdings:
Apple (AAPL): $717.6 billion
JPMorgan Chase (JPM): $320.4 billion
Wells Fargo (WFC): $286.6 billion
General Electric (GE): $268.6 billion
AT&T (T): $262.7 billion
Bank Of America (BAC): $239.5 billion
Procter & Gamble (PG): $232.6 billion
Anheuser-Bush InBev (BUD): $212.5 billion
Verizon Communications (VZ): $207.5 billion
Pfizer (PFE): $205.1 billion

Projected 5 Year EPS growth: 8.2% (13% below S&P 500 average)

Projected Annual Total Return: 11.7% (29% above the market’s historic CAGR since 1871)

Portfolio Composition: 

Consumer Cyclical:         21.05%
REIT:                                     13.57%
Healthcare:                         12.95%
Industrials:                          12.53%
Consumer Defensive:      10.65%
Energy:                                   9.06%
Finance:                                 6.56%
Tech:                                        6.11%
Utilities:                                  2.74%
Basic Materials:                   2.73%
Telecom:                                 2.03%

Smallest Holdings
Kimco Realty (KIM): 0.23%
Delta Airlines (DAL): 0.24%
Prologis (PLD): 0.24%
Marathon Petroleum (MPC): 0.24%
Booz Allen Hamilton (BAH): 0.26%
Host Hotel & Resorts (HST): 0.26%
Spirit Realty (SRC): 0.26%
Anheuser-Bush InBev (BUD): 0.26%
Ramco-Gershenson Properties (RGC): 0.26%
Farmland Properties (FPI): 0.27%

Largest Holdings:
L Brands (LB): 3.41%
DineEquity (DIN): 2.85%
Teva Pharmaceuticals (TEVA): 2.78%
HollyFrontier (HFC): 1.53%
Gilead Sciences (GILD): 1.50%
Hanesbrands (HBI): 1.49%
Lockheed Martin (LMT): 1.27%
B&G Foods (BGS): 1.25%
Qualcomm (QCOM): 1.23%
Perrigo (PRGO): 1.21%

Worst Performers:
Helmerich & Payne (HP): -8.21%
DineEquity (DIN): -7.35%
Phillips 66 (PSX): -7.08%
Dr. Reddy’s Laboratories (RDY): -6.61%
Toyota Motor (TM): -6.12%
Air Products & Chemicals (APD): –5.34%
Kimco Realty (KIM): -4.90%
Icahn Enterprises (IEP): -4.49%
L Brands (LB): -4.21%
Robert Half International (RHI): -3.95%

Best Performers:
NetEase (NTES): 37.70%
MercadoLibre (MELI): 31.66%
Phillips 66 Partners (PSXP): 28.80%
MarketAxess Holdings (MKTX): 27.66%
Valero Energy Partners (VLP): 24.41%
Broadcom (AVGO): 23.36%
Skyworks Solutions (SWKS): 23.23%
Huntington Ingalls Industries (HII): 22.91%
Apple (AAPL): 22.22%
NextEra Energy Partners (NEP): 21.26%

Portfolio Performance:

Portfolio Annualized Total Return: 11.94%
S&P 500: 9.10%
Outperformance (Alpha): 2.84% (14 straight weeks of beating market,  by 31% so far)

What I’m Watching Next Week

By far the biggest economic news will be Tuesday’s second reading (updated) Q4 GDP figures, as well as Consumer Confidence. Then on Wed we have personal income and spending, PCE pricing (Fed’s favorite inflation metric), and the Fed’s beige book (national economic summary).

As for important earnings? Well earnings season is now winding down, with 90% of companies having reported and so it’s a quite week, with just DineEquity (DIN) reporting on Wed.


About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis

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