Sometimes is seems like all anyone ever writes about are those stocks that investors should buy, but not every stock is going to make the average investor money. This can happen for a number of reasons but if the companies have a history of being great companies, then the probable reason is that they're currently being priced at a level that fully expresses their future potential.
For the most part, that's what's happened to the fifteen companies listed below. Each of these companies individually are great companies but analysts currently think they're overpriced based on today's fundamentals. They estimate that they're priced more appropriately for the projected fundamentals to be realized next year. Notice in the table below that the one year estimated capital gain for these stocks is so negative that even their expected dividend yield won't compensate for the pullback in the price. The result is an overall loss of wealth. This is not the kind of investing that I'm personally interested in.
Currently I'm avoiding the following companies, but only in the short term. These are great companies but I will refrain from putting any money into these stocks until either the price pulls back or the analysts estimates increase. If I can't expect to get a total return of at least 8.00% by combining both the capital gain plus the dividend yield, then I'm generally just not interested. There's always alternative investments that will provide 8% and more.
Company Cincinnati Financial Brinker International WalMart Casey's General Store Cintas Sysco Genuine Parts Air Products Automatic Data Processing Clorox Target Chubb Group Leggett & Platt Family Dollar Store CR Bard
1 Yr Est CapGain -3.64% -2.63% -3.46% -2.44% -3.75% -6.23% -5.74% -5.98% -6.22% -7.30% -7.52% -6.79% -7.87% -7.95% -7.00%
1 Yr Est Net Loss -0.18% -0.61% -1.20% -1.49% -2.59% -3.33% -3.49% -3.86% -3.91% -4.33% -4.64% -4.84% -4.92% -6.38% -6.48%
I intend to continue to monitor these stocks monthly and when it becomes advantageous to once again invest in these companies, I'll be the first in line to do so. For now, these are great companies but bad investments.
If you needed a reason to be thankful this Thanksgiving, here's a chart of the Dow Jones Industrial Average for the first 11 months of 2014. The DJIA finished 2013 at 16,576.66 and today, November 25, it stands at 17,814.94 for an increase of 7.47%. And while this wouldn't be considered a banner year, it is a very nice year.
I would like to wish everyone who's visited this website "A Very Happy Thanksgiving".
One of the most valuable tools I use for finding great stocks is a stock screener. Another way, and a much easier way is to let someone else do the work for you. While this is not always the best idea, it is the easiest way. And the easiest place to start looking for great stocks with solid dividend growth characteristics is by reviewing the list of Dividend Kings or Dividend Aristocrats. These companies are solid companies listed as part of the S&P500 index and have been increasing their dividends for a minimum of 50 and 25 years, respectively. That achievement by itself is reason to save yourself a lot of work researching hundreds of companies and give these companies a look first.
Companies that grow their dividend are extremely important to me when I'm doing stock selection and two of the most important things about Dividend Growth Stocks are (1) they pay dividends, and (2) those dividends grow. Simple, right? The advantages of Dividend Growth Stocks are pretty obvious. An investor simply buys stock in a company and that company in turn pays that investor a periodic distribution. When the distribution become large enough, the investor buys some beach front property and stares at sunsets the rest of his life.
At this point every investor needs a series of thresholds to cull the good from the bad. I personally like to see a dividend of at least 2.00% and a PE ratio of less than 20. Digging deeper I like to see a payout ratio of less than 50% and sufficient cash flow to cover the dividends. I also like to see revenues and earnings increasing and I like to see the dividend growing at a rate faster than inflation. Beyond this, different investors look at additional fundamental indicators and pare down the number of candidates for consideration.
Once I've identified a number of companies that fit my requirements I investigate the stock's price chart. The first things I look at are the 5, 10, and 20 period moving averages. I prefer to see all three of these averages moving in sync with each other and moving in a relatively similar direction. I use Bollinger Bands to discover the variability from the mean of the price action. In addition to this price chart action, I look at several momentum indicators. I use the RSI to determine if a stock is overbought or oversold and if it is beginning to reverse direction. I use the MACD to look for moving average crossovers which alert me to a change in direction. Finally I use the Direction Movement (with ADX indicator) to identity the direction, change and intensity of the company's stock price movement.
“Look to add quality, dividend-paying, blue chips when they become irrationally oversold and undervalued. That is how and when experienced investors create blue chip investment portfolios which serve them well throughout their entire lives with growth of capital and growth of dividend income.” -- Kelley Wright, Managing Editor, Investment Quality Trends
When all of this things line up I execute the trade. If everything is correctly in place, I am now the proud owner of stock bought on sale and a company that will hopefully pay me an increasing stream of dividends for years to come. By doing this I have provided myself with an investment that will pay me on a regular basis and increase that payment over time. Hopefully I am not only ensuring a constant and reliable stream of income well into the future but one that provides me with a raise each and every year.
Finding great stocks and owning stocks that grow their dividend provides me a portfolio that gives me a raise each and every year for years to come. That's nice information to know and a great place to be in life. I hope one day everyone finds that place in life. Good Luck and Good Trading!
Ford Motor Company's Ford Focus is now the most popular selling car in China with sales in excess of 403,600 units. Those sales include both the sedan and the hatch back versions of the Focus. In addition, Ford has started selling their newly redesigned 2015 Mustang, the No. 1 selling sports car in the US. Finally, Ford will begin selling, in the next few months, it's all aluminum body F-150 Truck, the number one selling vehicle in the United States for the last decade.
Ford Focus at China's AutoShow
Ford Motor Company (F) develops, manufactures, distributes, and services vehicles, parts, and accessories worldwide. The company operates through two sectors, Automotive and Financial Services. The Automotive sector offers vehicles primarily under the Ford and Lincoln brand names. It markets cars, utilities, trucks, service parts, and accessories through distributors and dealers in North America, South America, Europe, Turkey, Russia, and the Asia Pacific region. This sector also sells vehicles to dealers for sale to fleet customers, including commercial fleet customers, daily rental car companies, and governments, as well as provides maintenance and repair services. The Financial Services sector offers various automotive financing products to and through automotive dealers. This sector provides financing products, which include retail installment sale contracts for new and used vehicles; leases for new vehicles to retail customers, government entities, daily rental car companies, and fleet customers; wholesale financing that comprise loans to dealers to finance the purchase of vehicle inventory; loans to dealers to finance working capital, purchase dealership real estate, and other dealer vehicle program financing; and other financing products, as well as provides insurance services. Ford Motor Company was founded in 1903 and is based in Dearborn, Michigan. (Daily Chart) (Weekly Chart)
Price $15.43 1yr Target $17.21 Analysts 17 1yr Cap Gain 11.53% Dividend $0.50 Yield 3.24% 1yr Est Tot Return 14.77%
Market Cap $59.39 Bil Beta 1.43 EPS (ttm) $1.53 Payout Ratio % EPS next yr $1.61 P/E 10.08 PEG 0.91 Forward P/E 9.60
Debt/Equity 4.56 ROA 3.00% ROE 23.30% ROI 4.00% Sales $145.24 Bil Income $6.17 Bil Profit Margin 4.24%
Revenues, Earnings and Dividends
Like every automobile manufacturer in the US, revenues, earnings and dividends were severely affected by the recession in 2008/2009, as can be seen by the data below. Ford Motor Company was the only US automobile company that didn't ask for nor needed to be bailed out by the US Government during that period. Consequently Ford has recovered more successfully and quicker than any of the other US automakers.
And while mostly profitable, they continue to struggle with sales and profits (see below). Analysts estimates are finally moving in an upward direction and from an investing point of view, this is probably the best information that can be gathered from this data. The predictability and reliability of those estimates will greatly influence the future price of the stock and the amount of future distributions.
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Revenues $145.95 Bil $137.04 Bil $146.91 Bil $133.55 Bil $135.60 Bil $128.95 Bil $116.28 Bil $146.27 Bil $172.45 Bil $160.12 Bil $176.89 Bil $171.65 Bil $165.06 Bil
Revenue Growth Rate 1 yr = 10.00% 2 yr = 4.08% 3 yr = 4.39% 4 yr = 6.01% 5 yr = 0.08%
Earnings Growth Rate 1 yr = 23.94% 2 yr = -40.32% 3 yr = 1.94% 4 yr = 19.60% 5 yr = N/A
Dividend Growth Rate 1 yr = 68.00% 2 yr = 189.82% 3 yr = N/A 4 yr = N/A 5 yr = N/A
Any investment in Ford Motor Company has to be based more on the "story" than the facts listed above. I believe that Ford is positioning itself to be the uncontested leader in automobile sales in China in the years ahead by concentrating today's sales on the Focus and then as the population's income increases, expanding their product mix with their other models.
I believe Ford will be able to sell the Mustang for as long as they want and it will continue to increase in sales almost indefinitely. I also believe that the Ford F-150 will eventually be not only the best selling vehicle in the US but the best selling vehicle in the world.
I also think that despite all the technology going into alternative fuels, Ford will eventually be the manufacturer of volume, along with Toyota. Other companies may have more advanced technologies but Ford has the manufacturing prowess to produce those technologies at the most affordable price.
As a conservative investor I don't see this security becoming a significant part of my portfolio but I do see it becoming an essential part. Automobiles are a critical part of the modern world and Ford has proven that it can survive and thrive in a world of stiff competition. I have started a position in this company and I will continue to add to that position as funds become available in the future.
Every day every investor is presented with hundreds of opportunities to invest in every possible kind of company traded on the US stock markets. And every investing opportunity begs the potential investor to gather as many facts about the business as possible. This process is often referred to as due diligence among investors.
Most successful investors succeed or fail by whether they know “the company's numbers”. Depending on an investor’s depth of knowledge of accounting procedures, this can often get complicated and extensive. For others, this can be a quick look at the important numbers and then making assumptions from there.
I tend to put my initial emphasis on four things - revenues, earnings, dividends, and the dividend payout ratio. If those numbers look good, I dig deeper into current and future P/E ratios, the PEG, the current and future earnings growth rates, dividend growth rates, etc.
I can’t begin to understand a company until I see at least the last 5 years revenues, earnings and dividends. Ten years of information is even better. I tend to drill down and look at growth rates and put more emphasis on the more recent years’ data because older numbers may not accurately reflect the company’s business prospects. For future data I look at brokerage analyst’s projections. I generally look for companies that several analysts are following so I can look at the average projections. I tend to believe that a sample of at least 5 analysts are needed to get a useable average but like data, more is better.
This seems obvious but any investment I enter into I expect it to increase the value of my portfolio. This means that the future projections must be pointing upward. I don’t have a specific increase expectation but instead I use those expected increases for comparison and prioritization.
I also like to read the biographies of the senior management personnel. Hopefully management has extensive experience in the industry that the company operates in, are high achievers, are highly motivated and are honest.
Another item I look at is whether the company has a unique position in the industry. I want to know if the company produces a unique product or service and if there’s a high barrier to entry for other companies. This is often referred to as having “a moat”.
In the end I need to know how to monetize the investment. I need to know my return on investment and how that return stacks up against other investments. I need to know if that return is a growing dividend or a specific capital gain. And I need to know how and when I'll need to exit the position.
I used to do all of this work in spiral notebooks, and the more extensive research is still done that way. But today I do most of the front end analysis and publish it here on this website. The reason is because this way it'll reside in the cloud and I can then review this information at any time from my desktop, laptop, tablet and smartphone. It’s a tremendous asset.
The exit strategy is always a mandatory precondition for any trade I enter.
All other strategies will have disaster embedded at their core. All other strategies are simply an emotional reaction to events external to the markets. All other strategies will accentuate a reward while ignoring the damage that's incurred by accepting such an extensive implied risk. These are the strategies that I personally refuse to implement into my trading strategy.
My trading and investing success is simple and it's based on controlling risk, preserving capital, and increasing gains where possible. It's a strategy based on level of maturity that can only be acquired through pain and persistence. Once I survived the freshman errors of the beginner trader, I began to survive and prosper as an investor.
Novice traders are initially emotional creatures as they begin their trading career, regardless of how long or short their trading career lasts. It’s not their fault. It happens to everyone. It’s caused by the excitement of “easy money”. Most beginner traders worked hard to put together a sum of money to afford them the ability to establish their first trade and what they discover that by simply clicking a mouse a few times they can open a brokerage account, buy a stock and, if they’re correct in their decisions, sell their stock realizing both a profit as well as the excitement of receiving the easiest money they’ve ever made in their entire lives.
That type of situation is extremely addictive to the novice trader. It provides an emotional high and an enormous boost to their self confidence. It enhances their self image, and it's an enormous and transformative ego boost. Finally it's a confirmation that they are smarter than the average trader. They conclude that trading is easy, obvious, and they wonder why they hadn’t done this long before now. But like most things that are addictive, the emotional high only lasts so long before an ugly reality begins to set in.
As a stock moves up in value, greed begins to creep into the psyche of the novice trader. He begins to calculate how many years will it take before he’s a millionaire. He begins to calculate how he can double down on his investments to speed up this accumulation of wealth. Greed becomes the single most important factor in his trading decisions while risk is ignored. It isn't long before disaster arrives.
Sadly many novice traders will eventually lose all their capital and exit the market forever. They'll end up blaming the markets for what was actually their own inability to control risk. They'll let their emotions control their trading decisions because they don't have a plan to control the risk associated with even their smallest trade. As much as their greed encouraged increased trading when the trades were successful, fear now discourages their trading when their trading becomes unsuccessful.
Trades that are going poorly bring to the surface of the trader’s psyche his inherent fear of bankruptcy and a life of poverty. As much as greed makes the novice trader dream of becoming a millionaire, fear makes the novice trader anxious over losing everything and falling into that abyss of poverty. It’s the natural psychological conclusion for a trader whose trades are based on emotions and his emotions are out of control.
An experienced and much wiser trader would simply accept the loss, sell the position, and move on to the next trade. A novice trader who had been bolstered by earlier successes would interpret this situation as the market being wrong, that he is still right, and that the market will eventually understand and correct itself.
His fear traps him into holding onto a losing trade until his account is completely decimated. In the end these stocks often lay dormant in accounts for years because investor’s unwilling to declare defeat and sell. It’s a sad situation but it occurs everyday in the markets. The only value these trades may ever have will be as a tax offset for future successful trades.
There is only one way that I know of to stop this disastrous style of trading based on emotions. That’s having a trading plan in place before the initial trade is executed. A good trading plan will have specific conditions for entering a trade as well as the resultant specific conditions for exiting a trade. A good trading plan will have a back up plan for when the trade acts differently than originally expected. A good trading plan will be simple, and it should be written down as a set of simple rules and conditions. And finally it’s one that can be executed successfully.
It is this exit strategy of how and when to exit a trade that makes a trader successful. It’s this exit strategy that keeps a trader trading for decades instead of weeks. It’s this exit strategy that eventually turns the mediocre trader into the successful investor.
It's always informative to compare a company's numbers today to some earlier period and fortunately I have that information. It was laid out very clearly in an article I wrote on Ecolab Inc. earlier this year on 11 May.
Ecolab is a specialty chemical company disguised as a cleaning company. The company develops products and services for hospitals, hotels and water treatment facilities everywhere in the world. It's also recently introduced anti-microbial fruit and vegetable treatments for the food industry and waste water treatments for the oil and gas extraction industry.
10 May 2014 Price $104.75 1yr Target $117.94 Analysts 16 1yr Cap Gain 12.59% Dividend $1.10 Yield 1.05% 1yr Tot Return 13.64% 3yr DGR 14.31% 5yr DGR 12.61% Payout Ratio 30.37% Beta 0.64 EPS (ttm) $3.25 EPS next yr $4.82 P/E 32.23 PEG 2.28 ROE 14.30%
16 November 2014 Price $112.41 1yr Target $122.64 Analysts 14 1yr Cap Gain 9.10% Dividend $1.10 Yield 0.97% 1yr Tot Return 10.07% 3yr DGR 14.31% 5yr DGR 12.61% Payout Ratio 29.17% Beta 0.64 EPS (ttm) $3.77 EPS next yr $4.78 P/E 29.82 PEG 2.03 ROE 15.60%
Ecolab Inc. (ECL) develops and markets programs, products, and services for hospitality, foodservice, healthcare, industrial, and energy markets worldwide. It operates through four segments: Global Industrial, Global Institutional, Global Energy, and Other. The company offers cleaners and sanitizers for washing dishes, glassware, flatware, foodservice utensils, kitchen equipment, laundries, and general housekeeping functions; food safety products and equipment, water filters, dishwasher racks, and related kitchen sundries; pool and spa treatment programs; janitorial cleaning and floor care products; chemical dispensing device systems; and dishwashing machines, detergents, and rinse additives. It also provides lubricants, animal health products, cleaning systems, electronic dispensers, chemical injectors, and antimicrobial products; clean-in-place process control and facility cleaning systems; hard surface cleaners, degreasers, polishes, hand care products, and assorted cleaning tools and equipment; and infection prevention and other healthcare related products. In addition, the company offers textile care products and services; pest elimination services to detect, eliminate, and prevent pests; food service equipment repair and maintenance services; products and programs for water treatment and process applications, including cooling water and boiler water applications, raw water/potable water preparation, and wastewater applications. Further, it provides paper services for the papermaking process and across various grades of paper; and energy solutions, including well stimulation and completion, oilfield, enhanced oil recovery, downstream refining, downstream chemical processing, and water treatment solutions. The company sells its products through field sales personnel, distributors, and dealers. Ecolab Inc. was founded in 1923 and is headquartered in St. Paul, Minnesota. (Daily Chart) (Weekly Chart)
The strongest segment of Ecolab's businesses is the Global Energy segment where sales grew 78% last year. Acquisition-adjusted Global Energy sales, however, rose 12%. The Company's upstream energy business saw further double-digit growth in the fourth quarter, resulting from strong international performances in onshore, deepwater and oil sands.
Global Food & Beverage Sales are increasing at a rate of 9% and is led by the beverage and brewing, dairy, and agribusiness segments. Global Food & Beverage continues to benefit from its total plant assurance approach to customers in which they combine industry-leading Cleaning & Sanitizing, water treatment and pest elimination capabilities to deliver improved food safety, lower operating costs and better product quality assurance for their customers.
Global Water sales are increasing at a rate of 5%. Gains in this sector were led by good growth in the heavy, light and mining businesses.
Global Paper sales continue to increase at the rate of 5% per year and are expected to show modest sales growth going forward as the penetration of new business and technology more than offset the challenging paper market conditions.
Global Institutional sales are increasing at the rate of 4% but the end markets remain tough as modest growth in global lodging demand remains a challenge for the food service industry across both North America and Europe.
Comparing Then and Now.
Since 10 May the stock price has moved up from $104.75 to $112.41 today for an increase of 7.31% in six months. During that period the company also paid two dividends for a total of $0.55 or a yield of 0.52% making the total ROIC of 7.83%. From here it looks like the typical investor is estimated to receive another 10% over the next year.
In addition I would expect this company, based on its history, to announce this month or next month an increase in their dividend for next year to near $1.25 per share. This would be a very nice increase and welcome news to all those dividend growth investors.
Las Vegas Sands Corp. (LVS) develops, owns, and operates integrated resorts in Asia and the United States. The company owns and operates The Venetian Macao Resort Hotel, Sands Cotai Central, the Four Seasons Hotel Macao, the Plaza Casino, and the Sands Macao in Macau, the People’s Republic of China. It also owns and operates the Marina Bay Sands in Singapore; The Venetian Resort Hotel Casino, The Palazzo Resort Hotel Casino, and Five-Diamond luxury resorts on the Las Vegas Strip; the Sands Expo and Convention Center in Las Vegas, Nevada; and the Sands Casino Resort Bethlehem in Bethlehem, Pennsylvania. The company’s integrated resorts comprise accommodations, gaming, entertainment and retail facilities, convention and exhibition facilities, celebrity chef restaurants, and other amenities. Las Vegas Sands Corp. was founded in 1988 and is based in Las Vegas, Nevada. (Daily Chart) (Weekly Chart)
Price $62.83 1yr Target $73.65 Analysts 20 1yr Cap Gain 17.22% Dividend $2.00 Yield 3.18% 1yr Est Tot Return 20.40%
Market Cap $50.39 Bil Beta 1.68 EPS (ttm) $3.32 Payout Ratio 60.24% EPS next yr $3.79 P/E 18.92 PEG 1.40 Forward P/E 16.56
Debt/Equity 1.43 ROA 12.00% ROE 36.20% ROI 18.40% Sales $14.82 Bil Income $2.70 Bil Profit Margin 18.21%
Sheldon Adelson, Richard Katzeff, Irwin Chafetz, Ted Cutler, and Jordan Shapiro founded the company and bought the famous Sands Hotel in Las Vegas in 1989. One year later, in 1990, they opened the Sands Expo and Convention Center directly across from the hotel. The Convention Center is a 1.2-million-square-foot facility and is currently the largest privately owned convention facility in the world.
In 1996, the Sands Hotel was imploded it to make room for The Venetian Hotel. Construction of the Venetian began in 1997. Modeled on Venice, Italy, it joined Excalibur, New York-New York, Paris Las Vegas and other themed hotels on the Las Vegas Strip.
As the trend in Las Vegas shifted to a more "elegant" type of hotels on the strip, construction of The Palazzo began in 2005. Together, the Palazzo, Venetian and Sands Expo make up the world’s largest integrated resort, with 7,100 all-suite rooms, 2.3 million square feet of convention and exhibition space, and an array of shopping, dining and entertainment options.
In 2004, the Venetian Hotel’s parent company went public and Las Vegas Sands Inc. became Las Vegas Sands Corp. This new company focused their hotels on courting the convention and trade show industry rather than simply gambling. Traditional Las Vegas based companies were based on keeping hotel rooms to a minimum so as to encourage guests to spend as much time as possible in the casino. LVS designed their hotel rooms as luxury suites adding in mini-bars and big screen televisions creating comfortable work spaces in every room. By doing all this, he counted on business from the Sands Expo and Convention Center to keep mid-week occupancy strong. This proved correct and the company now makes more money in Las Vegas from conventions than gambling.
LVS was also among the first to foresee the financial potential of Asia. LVS was the first to move to locate part of the company closer to the Asian market. The decision was to construct properties in Macau, the former Portuguese colony turned over to China in late 1999, because it's the only place on mainland China where casino gambling is legal. Las Vegas Sands opened it's first property, the Sands Macao, in 2004. LVS realized that the company's future was in establishing an entire strip of properties similar to the Las Vegas Boulevard featuring many hotels of various styles and price ranges. But Macau's total area consists of the one small peninsula and two islands and is less than 12 square miles.
So LVS created the land by filling the bay between the Coloane and Taipa islands and calling the area the Cotai Strip. He then began construction of the largest inhabited building in the world - the Venetian Macao. The hotel was completed and officially opened on August 28.
The resort is twice the size of its Las Vegas counterpart. It will seat 15,000 people and is one of the largest exhibition centers in Asia. The resort receives between 70,000 and 100,000 visitors each day and has a staff of approximately 12,000 on site. The 550,000-square-foot casino is also the largest in the world.
In 2008, Las Vegas Sands opened a Four Seasons hotel next to the Venetian Macao, as well as Paiza Mansions, which are “for invited guests only.” The company is also building resorts in Macau for a number of brands---The Holiday Inn, Intercontinental, and Sheraton Hotels---when they open on the Sands Cotai Central in the first quarter of 2012.
Despite its successes, Las Vegas Sands hit hard times in 2008 during the world's financial crises. At one a point the company was losing $1,000 per second and the stock price ended up falling 97 percent within a 52-week period.
LVS opened a $5.6 billion resort, the Marina Bay Sands, in Singapore in April, 2010. The resort quickly posted a $600 million operating profit in just the first eight months of business, a record in the industry. The Marina Bay Sands has three 55-story sloping towers with approximately 2,600 rooms and suites. A year after Marina Bay Sands opened, tourism to Singapore shot up 20% and the economy expanded by 15%.
Las Vegas Sands continues to look for new expansion opportunities in area like Japan, Korea, Vietnam, Taiwan and Thailand. In the US, the company continues to expand its 2009 resort in Bethlehem, Pennsylvania, which opened in 2009 to compete with Atlantic City for some of the New York market. Las Vegas Sands has also talked about the possibility of a Florida resort.
Revenues have increased for the Las Vegas Sands Corp at a very robust pace during the last 8 years as can be seen in the chart below. This is best illustrated by viewing the revenue growth rates. Revenue growth rates above 20% per year and at times approaching 30% per year are very rare in any industry and something that any investor will notice quickly. Looking at the revenue growth estimates going forward, those rates won't continue at those rates but they are expected to continue to increase.
Earnings were on track until the world's recession occurred in 2008/2009. As discussed above, that period was extremely difficult for LVS and the entire market. Fortunately LVS was able to continue to increase revenues despite the hit it took to its earnings. In 2010, as the overall economy began to recover, earnings once again expanded. These earnings are continuing to increase today and estimates have earnings continuing upward through 2015.
Dividends, which began in 2012, have continued for the last three years. Estimates for future dividend growth, however, show a slowing of the dividend rate going forward which would be more in line with growth rates estimated for revenues and earnings.
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005
Revenues $15.63 Bil $14.98 Bil $13.76 Bil $11.13 Bil $9.41 Bil $6.85 Bil $4.56 Bil $4.38 Bil $2.95 Bil $2.23 Bil $1.74 Bil
Revenue Growth Rate 1 yr = 23.62% 2 yr = 20.92% 3 yr = 25.88% 4 yr = 31.79% 5 yr = 25.72% 8 yr = 29.49%
Earnings Growth Rate 1 yr = 50.81% 2 yr = 33.73% 3 yr = 75.20% 4 yr = N/A 5 yr = N/A 8 yr = 16.89%
Dividend Growth Rate 1 yr = 40.00% 2 yr = N/A 3 yr = N/A 4 yr = N/A 5 yr = N/A 8 yr = N/A
I think that the gambling, convention and hotel businesses are thriving businesses and Las Vegas Sands Corp, by virtue of it being in all three at the same time, has the advantage of benefiting from the synergy that naturally occurs between the three businesses. Th history of this company also reminds me that the success of this industry can also be dependent on a good world economy. LVS appears to be a solid investment but it's not one of those companies that an investor can buy and ignore.
I like this company and this industry and I am beginning to accumulate shares in LVS. I like its rich dividend, it's expected one year estimated ROIC, and its moderate P/E ratio. While I tend to invest in companies with a longer history of paying dividends, it appears that dividend increases will continue in 2015 and beyond.
In an era of fracking oil wells and horizontal drilling, the availability of oil is no longer the world's biggest problem. The world's number one problem today is maintaining market share in an extremely competitive environment and as new oil is brought to market. This is no more truer anywhere than it is in the US oil market.
Most of the new oil being found now is located within the territorial boundaries of the United States and Canada. That's putting a lot of pressure on foreign countries to lower their oil prices in order to maintain their market share. Countries in the Middle East that have lower costs of production are being forced to reduce their prices below the costs of bringing oil to market in the US in order to force the oil companies to cap off their oil wells. Their intent is to reduce the availability of oil to raise the price per barrel (supply and demand) but the price cuts are also reducing profit margins for OPEC. With the OPEC countries fixed commitments, the shrinking profit margin is forcing them to produce and sell even more. The overall result for Americans has been lower gas prices. It's something we all see at the local gas stations each day.
While this strategy may or may not make sense to most investors, the result has been that oil companies are beginning to cap those oil wells that have high production costs and to limit new drilling in areas that would result in high the cost of production. And that result has been hurting the Oil and Gas Equipment and Services Industry.
A quick look at the stock charts will show any investor that the companies have been under duress for the last few months. And this has probably been a less than desirable time for shareholders of these companies. But for all others who have been sitting by the sidelines, this just may be the time to start a position in one of these stocks.
The demand for oil is not going away any time soon and I don't think the oil producing countries are going to flood the market with oil indefinitely. As the flow of oil begins to slow, additional oil wells will be drilled and these companies will at top capacity once again. So I've decided to take a look at the fundamentals of the six largest companies in this industry to see what the numbers look like.
Below is a quick look at the largest six companies in the Oil and Gas Equipment and Services Industry to see which companies are worthy of additional research. This is the first step for me when buying shares of any company. The second step is always looking at the technical indicators on the price chart to determine the best price to pay. The final step is to determine if selling cash secured options and covered calls is a financial benefit I can take advantage of by owning shares of the company. Being able to accomplish all three of these things is the real trifecta of investing.
1. Schlumberger Limited
Schlumberger Limited (SLB), together with its subsidiaries, supplies technology, integrated project management, and information solutions to oil and gas exploration and production industries worldwide. It operates through three groups: Reservoir Characterization, Drilling, and Production. The Reservoir Characterization group provides reservoir imaging, monitoring, and development services; wireline technology that offers open-hole and cased-hole services; exploration and production pressure and flow-rate measurement services; information solutions, such as software, consulting, information management, and IT infrastructure services that support oil and gas industry; data interpretation and integration services; consulting services; and industry petrotechnical training solutions. The Drilling group designs, manufactures, and markets roller cone and fixed cutter drill bits, and drilling fluid systems; geo services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; provides bottom hole assembly drilling tools, borehole enlargement technologies, impact tools, and tubulars and tubular services; and dynamic pressure management solutions. The Production group provides well services comprising pressure pumping, well cementing, stimulation, and intervention; well completion services and equipment, such as packers, safety valves, and sand control technology; artificial lift; coiled tubing equipment and services; slickline services for downhole mechanical well intervention, reservoir monitoring, and downhole data acquisition; subsea solutions; and geological storage solutions, including storage site characterization for carbon dioxide, as well as engages in the development, management, and environmental protection of water resources. The company has a strategic cooperation agreement with Anton Oilfield Services Group. Schlumberger Limited was founded in 1926 and is based in Houston, Texas. (Daily Chart) (Weekly Chart)
Price $98.36 1yr Target $120.54 Analysts 28 1yr Cap Gain 22.54% Dividend $1.60 Yield 1.62% 1yr Set Tot Return 24.16%
Market Cap $126.57 Bil Beta 1.68 EPS (ttm) $5.33 Payout Ratio 30.01% EPS next yr $6.35 P/E 18.45 PEG 1.14 Forward P/E 15.49
Debt/Equity 0.32 ROA 10.10% ROE 16.90% ROI 13.70% Sales $47.95 Bil Income $7.01 Bil Profit Margin 14.61%
2. Haliburton Company
Halliburton Company (HAL) provides a range of services and products for the exploration, development, and production of oil and natural gas to oil and gas companies worldwide. The company operates in two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment offers production enhancement services, including stimulation services and sand control services; and cementing services comprising bonding the well and well casing, and casing equipment. It also offers completion tools that provide downhole solutions and services, including well completion products and services, intelligent well completions, liner hanger systems, sand control systems, and service tools. This segment also provides well intervention services, pressure control, equipment rental tools and services, and pipeline and process services; and oilfield production and completion chemicals and services that address production, processing, and transportation operations. The Drilling and Evaluation segment offers drill bits and services, including roller cone rock bits, fixed cutter bits, hole enlargement, and related downhole tools and services, as well as coring equipment and services; wireline and perforating services, such as open-hole logging, cased-hole and slickline, borehole seismic, and formation and reservoir solutions; and testing and subsea services comprising acquisition and analysis of reservoir information and optimization solutions. This segment also provides drilling fluid systems, performance additives, completion fluids, solids control, specialized testing equipment, and waste management services; drilling systems and services; integrated exploration, drilling, and production software, as well as related professional and data management services; and oilfield project management and integrated solutions. Halliburton Company has a strategic agreement with Gazprom Neft. The company was founded in 1919 and is based in Houston, Texas. (Daily Chart) (Weekly Chart)
Price $53.72 1yr Target $72.52 Analysts 27 1yr Cap Gain 34.99% Dividend $0.72 Yield 1.34% 1yr Set Tot Return 36.33%
Market Cap $45.53 Bil Beta 1.63 EPS (ttm) $3.88 Payout Ratio 18.55% EPS next yr $4.84 P/E 13.85 PEG 0.69 Forward P/E 11.09
Debt/Equity 0.50 ROA 11.30% ROE 23.70% ROI 11.60% Sales $31.74 Bil Income $3.31 Bil Profit Margin 10.42%
3. National Oilwell Varco, Inc.
National Oilwell Varco, Inc. (NOV) provides equipment and components for oil and gas drilling and production; oilfield services; and supply chain integration services to the upstream oil and gas industry worldwide. The company’s Rig Technology segment offers offshore and onshore drilling rigs; derricks; pipe lifting, racking, rotating, and assembly systems; rig instrumentation; blowout preventers; coiled tubing equipment and pressure pumping units; well work over rigs; wire line winches and trucks; cranes; flexible pipe; turret mooring systems; and other products for floating production, storage, and offloading vessels, and other offshore vessels and terminals. Its Petroleum Services and Supplies segment provides consumable goods and services to drill, complete, remediate, and work over oil and gas wells; and service drill pipe, tubing, casing, and flow lines; other oilfield tubular goods; rents and sells drill pipe, wired drill pipe, transfer pumps, valves, solids control systems, drilling motors, drilling fluids, drill bits, reamers and other down hole tools, and mud pump consumables for drilling operations. This segment’s oilfield tubular services include inspection and internal coating services, and equipment for drill pipe, line pipe, tubing, casing, and pipelines; and the design, manufacture, and sale of coiled tubing pipe and fiberglass composite pipe for highly corrosive environments application. Its Distribution and Transmission segment provides pipe, maintenance, repair, and operating supplies and spare parts to drill site and production locations, pipeline operations, processing plants, and industrial facilities; procurement, materials management, and logistics services; and produces water transmission pipe, fabricated steel products, and specialized materials and products used in infrastructure projects. The company was founded in 1862 and is headquartered in Houston, Texas. (Daily Chart) (Weekly Chart)
Price $73.10 1yr Target $81.48 Analysts 23 1yr Cap Gain 11.46% Dividend $1.84 Yield 2.51% 1yr Set Tot Return 13.97%
Market Cap $31.47 Bil Beta 1.94 EPS (ttm) $5.85 Payout Ratio 31.45% EPS next yr $6.35 P/E 12.50 PEG 1.10 Forward P/E 11.52
Debt/Equity 0.15 ROA 7.40% ROE 11.70% ROI 9.50% Sales $21.90 Bil Income $2.51 Bil Profit Margin 11.46%
4. Baker Hughes Incorporated
Baker Hughes Incorporated (BHI) supplies oilfield services, products, technology, and systems to the oil and natural gas industry worldwide. The company offers drilling and evaluation products and services, which include drill bits for performance drilling, hole enlargement, and coring; conventional and rotary steerable systems used to drill wells; measurement-while-drilling and logging-while-drilling systems to perform reservoir navigation services; drilling optimization services; tools for coil tubing drilling and wellbore re-entry systems; coring drilling systems; surface logging; emulsion and water-based drilling fluids systems; reservoir drill-in fluids; and fluids environmental services. Its drilling and evaluation products and services also include wire line services, such as tools for open hole and cased hole well logging to gather data to perform petro physical and geophysical analysis; reservoir evaluation coring; casing perforation; fluid characterization; production logging; well integrity testing; pipe recovery; and seismic and micro seismic services. In addition, the company provides completion and production products and services comprising completion systems used to control the flow of hydrocarbons within a wellbore; wellbore intervention products and services to enhance the performance of existing wellbores; intelligent production system products and services to monitor and control the production from individual wells or fields; artificial lifts, such as electric submersible pump systems, progressing cavity pump systems, gas lift systems, and surface horizontal pumping systems to lift oil and water; chemicals and chemical application systems; and cementing, stimulation, and coil tubing services. Further, it offers industrial products and services to the downstream chemicals, and process and pipeline industries. The company operates in approximately 80 countries. Baker Hughes Incorporated was founded in 1972 and is headquartered in Houston, Texas. (Daily Chart) (Weekly Chart)
Price $51.48 1yr Target $70.67 Analysts 24 1yr Cap Gain 37.27% Dividend $0.68 Yield 1.32% 1yr Set Tot Return 22.2738.59%
Market Cap $22.27 Bil Beta 1.59 EPS (ttm) $2.96 Payout Ratio 22.97% EPS next yr $4.85 P/E 17.39 PEG 0.59 Forward P/E 10.61
Debt/Equity 0.24 ROA 4.60% ROE 7.30% ROI 6.10% Sales $23.78 Bil Income $1.30 Bil Profit Margin 5.46%
5. Oceaneering International, Inc.
Oceaneering International, Inc. (OII), together with its subsidiaries, provides engineered services and products primarily to the offshore oil and gas industry worldwide. The company’s Remotely Operated Vehicles (ROVs) segment offers submersible vehicles that are operated from the surface to support drilling; and vessel-based services, including subsea hardware installation, construction, pipeline inspection, survey and facilities inspection, maintenance, and repair services. As of December 31, 2013, it owned a fleet of 304 ROVs. Its Subsea Products segment constructs various subsea hardware products, which include various types of subsea umbilicals utilizing thermoplastic hoses and steel tubes; tooling, and ROV tooling and work packages; production control equipments; blowout preventer control systems; installation and workover control systems; clamp connectors; pipeline connectors and repair systems; subsea and topside control valves; and subsea chemical injection valves. The company’s Subsea Projects segment performs subsea oilfield hardware installation and inspection, maintenance, and repair services; serves deepwater projects and shallow water projects; and performs subsea intervention and hardware installation services, including subsea well tie-backs, pipeline/flow line tie-ins and repairs, pipeline crossings, umbilical and other subsea equipment installations, and subsea intervention, as well as inspection, maintenance, and repair services. Its Asset Integrity segment provides asset integrity management and assessment services, and nondestructive testing and inspection services. The company’s Advanced Technologies segment designs, develops, and operates robotic systems and ROVs for non-oilfield markets; performs commercial theme park animation and civil works projects; and designs, develops, and fabricates spacecraft hardware and high-temperature insulation products. Oceaneering International, Inc. was founded in 1965 and is based in Houston, Texas. (Daily Chart) (Weekly Chart)
Price $71.15 1yr Target $80.82 Analysts 17 1yr Cap Gain 13.59% Dividend $1.08 Yield 1.51% 1yr Set Tot Return 15.10%
Market Cap $7.47 Bil Beta 1.62 EPS (ttm) $3.87 Payout Ratio 27.90% EPS next yr $4.42 P/E 18.39 PEG 0.84 Forward P/E 16.10
Debt/Equity 0.12 ROA 12.80% ROE 20.10% ROI 18.30% Sales $3.64 Bil Income $419.30 Mil Profit Margin 11.51%
6. Superior Energy Services, Inc.
Superior Energy Services, Inc. (SPN) provides specialized oilfield services and equipment to oil and gas companies in the United States, the Gulf of Mexico, and internationally. The company operates in four segments: Drilling Products and Services; Onshore Completion and Workover Services; Production Services; and Subsea and Technical Solutions. The Drilling Products and Services segment manufactures and rents bottom hole tools, including stabilizers, non-magnetic drill collars, and hole openers; and rents tubulars, such as primary drill pipe strings, tubing landing strings, completion tubulars, and associated accessories, as well as temporary onshore and offshore accommodation modules and accessories. The Onshore Completion and Workover Services segment offers pressure pumping services consisting of hydraulic fracturing and high pressure pumping services used to complete and stimulate production in new oil and gas wells; fluid management services used to obtain, move, store, and dispose of fluids that are involved in the exploration, development, and production of oil and gas reservoirs; and workover services comprising installations, completions, and sidetracking of wells, as well as support for perforating operations. The Production Services segment provides intervention services, such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, production testing and optimization, and remedial pumping services; and specialized pressure control tools used to manage and control pressure throughout the life of a well. The Subsea and Technical Solutions segment offers pressure control services, completion tools and services, subsea construction, end-of-life services, and marine technical services. The company was founded in 1991 and is headquartered in Houston, Texas. (Daily Chart) (Weekly Chart)
Price $24.33 1yr Target $32.84 Analysts 19 1yr Cap Gain 34.97% Dividend $0.32 Yield 1.31% 1yr Set Tot Return 34.15%
Market Cap $3.70 Bil Beta 1.70 EPS (ttm) $-0.66 Payout Ratio NA EPS next yr $2.33 P/E NA PEG NA Forward P/E 10.90
Debt/Equity 0.40 ROA -1.60% ROE -3.00% ROI -0.20% Sales $4.51 Bil Income $-106.10 Mil Profit Margin NA
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