After reading our 6 Days to Dividend Growth Investing Series, I thought of giving you a great starting point. I’ve decided to create my own “buy list”.
Before we start with our buy list, first I wanted to share a few thoughts on how the list was created. When we built our DSR portfolios back in 2013, it was a good time to buy most companies in our portfolios. You can see by our strong results that we did a good job picking the right stocks at the right time. On the other hand, the market is up remarkably from 2013 to early 2015. Now that the easy money is gone, it doesn’t mean that it’s not the right time to invest. However, it is definitely time to become picky before you make each purchase. This is why I’ve personally handpicked a short list of stocks that I would buy today if I had extra cash in hand.
How the list was built
First, all stocks in each of our portfolios are picked because they share several metrics in common. At DSR, you know we focus on strong companies showing the ability to grow their revenues, earnings and dividend payments all at the same time, preferably for many years to come. We find these companies using our proven 7 Investing Principles.
Now, these principles are the foundation of our investment strategy to select strong companies according to our investing goals. And it doesn’t cover the question of when to trade. When do you chose to buy shares of a stock is a difficult science to master. Since we follow our stocks on a daily basis and review our portfolios monthly, we know which companies show the best short term potential. While we believe all companies in our portfolios deserve their place, some are more attractive than others at certain points in time.
The list has been built choosing stocks with strong fundamentals with an additional edge. I looked to find something more interesting about a single company compared to all the other great picks we own in our portfolio. This is the edge that could boost the stock price to a whole new level over the next two years. It could be several things:
- A recent competitive advantage that was developed internally,
- An acquisition opening doors to new markets,
- Temporarily bad news dragging the stock price into undervalued territory,
- New products/markets with huge future potential,
- Possibility of upcoming acquisitions/mergers,
- Favorable environment for the upcoming years,
- Incredibly strong business model showing success year after year,
How to use this list
Then again, at DSR, we don’t make stocks recommendations. I’m not your personal broker and I can’t tell you how to make a trading decision. However, we are sharing this list to share our thoughts with you and how we would manage extra money in our account if we had to purchase shares tomorrow morning.
The list is not built according for a specific portfolio. You could find growth stocks that will be included in a portfolio for a 18 to 36 month strategy to benefit from its short term upside potential. You can also find core (conservative) stocks that are currently undervalued and you will probably hold in your portfolio for the next ten years. It’s just a matter of buying the right stock at the right time.
The list hasn’t been built around a specific sector allocation either. This means you could find 4 stocks from the same sector at one point. If several companies in the same sector are attractive (I’m thinking about the oil industry two months ago for example), I will pick amongst them. My first criterion for a decision to include a stock in this list is to find a company with an edge. It doesn’t mean you should buy all of them if they are coming from the same sector. This would greatly unbalance your portfolio and your overall returns could suffer over the long haul. I will rely on your good judgement to make the right trade for your portfolio, your personal situation.
How the list will be updated
The list will be updated monthly through the DSR premium newsletter. Each month, the newsletter will include the latest news around stocks I’ve picked to be on my buy list. If the short term profit is materialized or events change the upside potential of a company, there will be another company picked to replace it.
If you have any questions regarding the list, please send me an email at firstname.lastname@example.org
I guess you will understand that this list is available for DSR members only. However, I wanted to give you a quick peek at what the list looks likes in term of data:
|Ticker||5yr Rev Growth||5 yr EPS Growth||5yr Div Growth||Current Div Yield|
|DSR Member Only||18,71%||24,84%||19,86%||2,44%|
|DSR Member Only||6,19%||17,52%||19,70%||1,11%|
|DSR Member Only||8,81%||12,99%||7,53%||2,67%|
|DSR Member Only||-0,52%||-11,70%||20,30%||3,87%|
|DSR Member Only||39,18%||6,13%||11,37%||7,42%|
|DSR Member Only||29,09%||37,83%||17,23%||3,39%|
|DSR Member Only||4,42%||4,80%||9,86%||3,84%|
|DSR Member Only||14,91%||13,34%||7,45%||3,81%|
For the first issue, I’ve also made a special play. I decided to share it with you as well…
Mike’s Special Play of the Month…
I will end this newsletter with a special play. Not to be included in our list for the future, but I find this situation interesting. I’m talking about the beating in the market that SNC Lavalin (SNC.TO) suffered. The stock price dropped by 35% since August and there was an additional drop after more fraud accusations were levied by the RCMP.
The stock is currently trading at a P/E ratio of 4.27. The market cap is $5.69B while its 17% share of the Ontario Highway 407 is worth $3B alone. Other infrastructures are worth about $1.2B and the company shows an order book worth of $12.3B. Oh… and did I tell you SNC has $1.7B sitting in their bank account. This stock will either soar to $55 or will be declared a value trap shortly. As there are several uncertainties around the fraud lawsuit, the market will remain highly pessimistic for the moment. This trade is not for the faint of heart but could pay well.