The Dow Jones Industrial Average is back to 13,250 again but for some reason it doesn't strike me as unreasonable this time around. I've been scanning my watch list the past few days trying to find companies trading at attractive prices. I just don't see it. The market as a whole might seem reasonable, but the individual companies I want to buy are looking a little pricey. Hmm
At this point I'm honestly not sure if I'll make a purchase in December. It wouldn't really bother me since I went on a shopping spree the past two months. At the same time I do intend to make monthly purchases and have done so every single month starting November 2010. That's over two years straight which started well before I was blogging.
I was planning on picking up some INTC the other week, but just as I was getting comfortable with the price sub $20 it shot back up. That ship has sailed. Oh well.
I'll likely hold out for better prices, but here is what I'm considering:
13.9 P/E / 13.5 P/E (5Yr Avg) / 8.7% LT Growth (projected)
5.3% Yield / N/A Yield (5Yr Avg) / 71.1% Payout Ratio
Tobacco stocks in general dipped the past week. The current news in the tobacco industry is two fold. The first is that the EU has proposed stricter warnings on cigarette packs. The new legislation would force 75% of the packaging to be warning pictures and text. Lorillard doesn't sell products in the EU or anywhere else outside the US however. It's a moot point for LO, but the nanny state mentality could spread. Wow you mean to tell me cigarettes are unhealthy? I would have never guessed without the new packaging. Haha!
The second news story is cigarette manufacturers (including Lorillard) will have to release settlement money they have been withholding. However, they will be able to claim credits since smoking use has decline over time. LO will be able to claim about $200 mil over the next 5 years.
What I like about Lorillard is that it has a blockbuster brand in Newport, it has branched out into electronic cigarettes, the yield is fantastic, and it comes with nice growth prospects all at a reasonable valuation. The debt load is a bit concerning, but you'll see a lot of that in the tobacco industry.
14.1 P/E / 14.3 P/E (5Yr Avg) / 7.4% LT Growth (projected)
3.9% Yield / 2.6% Yield (5Yr Avg) / 49.6% Payout Ratio
I'm looking at Hasbro for a couple of reasons. First off I need more holdings from the consumer discretionary sector. HAS fits the bill. Secondly I like the value this stock offers. I have a fair value of $42 on HAS, it's currently trading at $36.57. That's a discount of about 15% which is quite attractive. A huge negative with buying shares of Hasbro right now is the accelerated dividend which already went ex. If I bought shares today I would have to wait all the way till May to get paid. Bummer.
I think Hasbro has done a good job managing its brands. My Little Pony made a resurgence the past few years, GI Joe and Transformers have surely benefited from Hollywood movies, and now that Star Wars is set to make additional movies I think toys from that brand could be a source of growth in the future. A subset of the population goes absolutely nuts for Star Wars. Perhaps I should load up before the mania returns.