If you look up summary data on a given ticker symbol on a broker’s webpage or say, Yahoo! Finance, you’ll encounter various statistics on the price, price ranges, volumes, earnings, outstanding shares, dividends, etc. Here’s a look at the summary data for American States Water [AWR] on Yahoo! Finance, after trading hours on August 9, 2022.
Most of these are either self-explanatory or easily understood with context. There is one item, however, that offers no real clues as to what it is and what it says about the stock you’re looking at: Beta.
You can save money by doing nothing. Or at least by doing less. When you commit to having a yard that looks like a putting green, you’re undoubtedly spending far more money and energy than you need to. I am not a lawn expert, but I do know that outside of preparation for sporting events, there is no call for short grass. Instead, try setting your lawnmower to cut grass at the highest level and bask in the ease of maintaining a healthy lawn in the cheapest way that still satisfies your sense of aesthetics, persnickety neighbors, and HOAs.
There has been much discussion over the past few months of whether we’re heading into a recession or are already in a recession. You might be wondering why we don’t know the answer. There is an official definition, but it is subjective in nature. The Business-Cycle Dating Committee of the National Bureau of Economic Research (NBER) officially certifies and dates our business cycles. Their definition: a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” That does leave a bit to the imagination and so economists rely on various indicators.
One common rule of thumb: If the gross domestic product (GDP) declines two quarters in a row, you have a recession. The GDP has fallen two consecutive quarters. But countering that has been the pronounced uptick in our latest jobs report. And there are time lags in the reporting of most economic indicators that adds to the confusion. There is another indicator that economists and investors alike use. It is routinely described as a harbinger in articles and the news, but it is seldom explained why it is used. Those sources typically avoid showing what it looks like. It is the yield curve.
My market order to purchase 7 shares of ABBV executed at market open today for the price of $138.04, unchanged from Friday’s closing price. I updated the portfolio which includes a summary by sector. Also, check out the portfolio’s performance to date. These exhibits will be updated periodically and will have more meaning as the portfolio grows.
This week’s Dividend King is a bit of a surprise. It spent the first three months of 2022 ignoring the rest of the market and soared from $135 to $175. Eventually, the market got to it. The market considered the last two quarterly earnings announcements to be underwhelming, and the price has come nearly all the way back down. I’m very excited about this. Last week I mentioned that the Utility sector was overpriced on the whole, but I found one utility out of six that was attractively priced, Black Hills Corporation [BKH]. The same can be said of the Health Care sector. There are four Dividend Kings in the Health Care sector as of the time of this writing. Three of them seem to be a bit above their fair value. This isn’t a surprise.
When inflation runs hot and money gets tight, people think twice about pulling the trigger on getting a new mattress or taking a vacation. But the demand for certain services is inelastic. Consumer staples, utilities, and health care services are must-haves. Investors migrate to companies in these sectors as the economy slows down or enters a recession. It’s the smart thing to do. The Dividend King of the Week is really more of a Prince. It is the offspring of another Dividend King, Abbott Laboratories [ABT]. So, get your knees oiled, get your waist oiled – you’re going to be doing an awful lot of bowing . . . to Abbvie Inc [ABBV].
If someone puts their money in an index fund or similarly, a target retirement date fund, they are passive investors. If someone purchases stocks and bonds directly, they’re considered active investors. But people can buy and sell stocks willy-nilly. Maybe because Jim Cramer is hyping a stock. Maybe because they like the product made by a certain company. Perhaps they have FOMO on some new fad. That’s not real investing. That’s more speculative in nature or just trading.
Someone might argue “Hey, Warren Buffett owns Coca-Cola [K], why is it investing if he does it, and speculating if I do it.” Comparing yourself to Buffett huh? Listen, I suppose it isn’t about the stock, but the person. If you bought K because Warren Buffett has it, then you just might be a speculator. Stock ideas come to us from all over and honestly, I’m not judging. Speculation has its place, as does options trading, etc. I enjoy both. There are many approaches to making money in the stock markets, but in every case, one must be a risk manager and exercise some discipline, or the approach will falter over the long haul. Discipline and risk management are a topic for another day. Back to investing: if you really want to be an active investor and feel engaged, you should do at least two things.
On April 7, 2003, the Syracuse Orangemen defeated the favored Kansas Jayhawks 81-78 to claim the Division I Men’s College Basketball championship. Certainly, future NBA Hall of Famer Carmelo Anthony, did his part putting up 20 points and collecting 10 rebounds, but it was the freshman Gerry McNamara that made the difference for SU that day. He hit 6 of 8 three pointers in the first half putting Syracuse up 53-42 at the break. Kansas played catch-up the rest of the game and couldn’t quite get there. Of course, making only 12 of 30 free throws is a surefire way to lose most ball games, let alone a championship against a talented team.
How unlikely was G-Mac’s first half performance? Well, it stands as the record for threes made in a half of a championship game. G-Mac was able to hit 6 or more threes in a game a total of 9 times in 135 games. I do not believe he ever hit 6 in a single half before or after the game against Kansas. So that’s once in 270 halves. In fact, the odds of making exactly 6 of 8 threes for a player whose ultimate success rate turned out to be 400 of 1,131 (35.4%) is 2.3%. That means if you turned G-Mac loose into 135 games and he took exactly 8 threes in every half, you’d expect him to hit 6 in a half a total of 6 times.
My market order to purchase 13 shares of BKH executed at market open today for the price of $77.00. I updated the portfolio which includes a summary by sector. The portfolio’s performance to date can be found here. These exhibits will be updated periodically and will have more meaning as the portfolio grows.
There are six Dividend Kings in the Utility sector as of the time of this writing. On the whole, the Utilities are a bit overpriced. This is partly due to the fact that they are Dividend Kings, which tend to trade at a premium to their fair value. The other reason is that with inflation at its highest level in 40 years, the markets have moved towards defensive and inflation-protected sectors such as Consumer Staples, Health Care and Utilities.
When money is tight, people can put off discretionary items such as a new car, new furniture, or the latest iPhone. However, groceries, medical care, heat, and electricity are essential. Thus, utilities have very reliable revenue streams, and this allows them to pay consistent dividends. It is no surprise then, that we have six utilities among the 45 Dividend Kings. But only one is attractively priced right now: Black Hills Corporation [BKH].
I was kicking around on Yahoo! Finance, trying to tie back to their calculation of Beta for one of my holdings, Federal Realty Investment Trust [FRT], when I stumbled across a free article by Motley Fool on FRT. It was published on July 23rd, just a few hours before my own post where I stated my intent to acquire some shares of FRT. It’s always nice, when a respected institution confirms your thoughts on a matter. We’re on the same page with FRT.
Come back this weekend to find out which Dividend King I’ll be acquiring this coming Monday.
