Re: Old Folk Portfolio ... Buys
Today I added to the following positions:
AMGN .. ORI .. PRU .. LEG .. TXN .. EIC .. GOF.
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I like adding to companies on strength and AMGN has some of the strongest criteria I look for in an asset.
According to Jefferson Research, AMGN is a BUY due to its Low Risk valuation, a strong balance sheet, and they give a rating of STRONGEST for Earnings Quality, Cash Flow Quality and Operating Efficiency. The earnings quality is such that earnings revisions have been upgraded and carry an A- rating.
Argus Research, The Street and CFRA all give AMGN a BUY rating as well. I call this buying on strength.
AMGN comes with a 3.68% yield, a dividend safety score of 74 Safe and a 5 year dividend growth rate of 10%. The latest dividend increase was also 10%.
CFRA says this:
We think that AMGN shares, trading at 11.5x our 2022 EPS, have room for appreciation. We favorably view the long-term opportunity offered by AMGN’s pipeline and newer products. AMGN’s late-stage pipeline assets, sotorasib and tezepelumab, are particularly promising. In May 2021, AMGN received FDA approval for Lumakras (sotorasib) in advanced non-smallcell lung carcinoma, which we believe will be a key driver of AMGN’s top- and bottom-line outperformance relative to consensus expectations. Based on recent data, we believe sotorasib to be quite similar to Mirati’s adagrasib, but AMGN has a head start and a stronger marketing organization. We also look forward to the FDA approval of tezepelumab in severe uncontrolled asthma, expected in 1Q22. Finally, we have high expectations for AMGN’s biosimilars business, which could be worth over $2 billion in annual sales in 2021
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ORI isn't as widely covered by analysts and in fact I have very little to go on. The Street gives them a BUY rating. Here is what they say:
RECOMMENDATION
We rate OLD REPUBLIC INTL CORP (ORI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
ORI comes with a 3.58% yield, a dividend safety rating of 73 Safe, and a 5 year dividend growth rate of 3% but that's not counting special dividends. The latest dividend increase was 4.8% according to Simply Safe Dividends.
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PRU according to FAST Graphs is considered Undervalued at this time. PRU normally trades at 11.07x earnings and is currently trading at 7.8x.
Argus Research and The Street give PRU a BUY rating. Credit-Suisse gives then an OUTPERFORM rating. As far as earnings go, they have been revised upward and rate out at A+ so my thinking is that with them only selling at 7.8x earnings, they should trade higher at their normal rate.
PRU comes in at a 4.34% yield, a dividend safety rating of 75 Safe, and a 5 year dividend growth rate of 13%. The latest dividend increase was 4.5%.
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LEG isn't a widely followed company so there isn't much in the area of analyst coverage. The Street gives them a BUY rating and the few analysts that do follow them call them a Moderate Buy. My main reason for adding to them is the report put out by Jefferson Research.
LEG's earnings quality gets a STRONGEST rating. Operating Efficiency and Balance Sheet both get a STRONG rating. As to valuation they get a Low Risk rating indicating it is undervalued. Their cash flow quality earnings is their only weak point but that did improve over the previous quarter.
LEG comes in with a 3.83% yield, a dividend safety rating of 70 Safe, and a 5 year dividend growth rate of 5%. The latest dividend increase was also 5%.
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TXN ... What's not to like about TXN. According to Jefferson Research, they give Earnings Quality and Cash Flow Quality their STRONGEST rating. They assign a rating of STRONG for Operating Efficiency and the Balance Sheet. As to valuation it gets a Low Risk rating indicating it may be undervalued, all leading up to a BUY rating.
Argus Research and The Street give TXN a BUY rating. Credit-Suisse gives them an OUTPERFORM rating.
The Street had this to say:
RECOMMENDATION
We rate TEXAS INSTRUMENTS INC (TXN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, reasonable valuation levels and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
TXN comes in with a 2.3% yield, a dividend safety rating of 90 Very Safe, and a 5 year dividend growth record of 22%. The latest dividend increase was 13%
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EIC is a CEF. -- This fund pursues an investment strategy focused on investing primarily in junior debt tranches of CLOs. The CLOs that are primarily targeted are securitization vehicles that pool portfolios of primarily below investment grade U.S. senior secured loans. Such pools of underlying assets are often referred to as CLO “collateral.”
A collateralized loan obligation (CLO) is a single security backed by a pool of debt. The process of pooling assets into a marketable security is called securitization. Collateralized loan obligations (CLO) are often backed by corporate loans with low credit ratings or loans taken out by private equity firms to conduct leveraged buyouts. A collateralized loan obligation is similar to a collateralized mortgage obligation (CMO), except that the underlying debt is of a different type and character—a company loan instead of a mortgage.
With a CLO, the investor receives scheduled debt payments from the underlying loans, assuming most of the risk in the event that borrowers default. In exchange for taking on the default risk, the investor is offered greater diversity and the potential for higher-than-average returns. A default is when a borrower fails to make payments on a loan or mortgage for an extended period of time.
These types of assets usually do well in an inflationary environment and I am expecting inflation to continue rising.
The fund is trading at a slight premium to NAV but I'm ignoring that due the the current market conditions indicating more inflation. EIC carries an 8.94% yield and pays their distribution monthly. They raised their distribution by 33% earlier this year.
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GOF is primarily a bond CEF with 87% of its holdings in bonds, some stocks and preferred stock. The fund went public on 7/27/2007 and since inception it has never had a distribution cut, one of few CEF's to have that honor.
Although GOF usually sells at a hefty premium to NAV the fund recently merged with two other Guggenheim funds, GPM and GGM, which sent the valuation lower by 13%.
One thing about GOF management is that they really use leverage how it is supposed to be used. For example, going into the Covid Crisis back in February 2020, the fund employed no leverage. The semi-annual report from then stated how they saw valuations as too rich across all assets. They trimmed down their risk exposure in response to what they saw.
Shortly after the Covid Crisis hit, they then began levering up the fund. By the end of May they were at 9% and by November had hit 27%. By the end of May this year, they were still at 30%. However, between May 31, 2021 and today, leverage has been reduced significantly since assets have appreciated materially and have arguably become overvalued again.
For those that want a slightly more risky “bond fund” that pays you handsomely, this is a fund to take a look at.
The yield comes in at 11.49% and is paid monthly. |
