Tuesday, April 9, 2013

New Purchase - APD

I scooped up 15 additional shares of Air Products which will pay me $42.60 per year based off the current dividend.  APD has recently been a popular purchase among internet bloggers including Dividend Mantra and Passive Income Pursuit.  After recalculating APD's fair value, I decided to join the party.  My previous buy target of $83 has been increased to $86 which I believe is a nice discount to what this dividend champion is worth.  Using DDM, DCF, average p/e, and average yield; I calculated a fair value of $96.  I chose a $86 target buy price because I want a decent margin of safety since APD is quite volatile.  APD is not a bulletproof consumer staples stock that sells toilet paper and razors.  No, it relies on a favorable world economy to fuel growth.  I believe that is exactly what will happen long term.  We may fall into a recession again, I don't know, but I do think economies will advance over time. 

Capitalism is a powerful force.  Very powerful indeed.  Case in point: S. Korea vs. N. Korea.  They used to be one in the same, one embraced capitalism the other didn't.  The difference is literally night and day:

Stone age vs. modern technology: the Korean peninsula at night.  Progress.  I believe it will continue over time and companies like APD are necessary for it to happen.  This is where my conviction in companies like Air Products comes from.  Have fun with your communism N. Korea.  Fools!

I have confidence that the world economy will continue to grow long term, and confidence that APD will be around to supply me with rising dividends.  31 straight years of dividend increases impresses me.

New Purchase - EMB

I also bought 2 additional shares of EMB to strengthen my bond holdings. 


  1. I like APD even though it isn't even close to being a consumer staple. When I looked at it back in June of last year I had a fair value price of around $94.50 with a buy target around $81 but that was before the last increase. I think it currently has a pretty nice margin of safety although I'd love for a dip down below $80 to average down.

    I love the FI/DGI community that's forming. There's been several times where I've had a similar thing happen where I noticed someone else make a purchase and it just reminds me that the stock price is around where I'd like to purchase. It's getting easier to keep up with the watchlist now that I've converted it to Google spreadsheets. Since it automatically updates I can quickly see where it's currently at compared to my valuations targets.

    Also, thanks for the mention.

    1. Yeah when something seems to be a good deal we all notice. It makes sense since we are all more less doing the same thing. I'm confident Air Products will treat us well long term!

  2. Regarding the image of the Koreas, I think that has as much to do with authoritarian vs democratic regimes as with economic models. You'll notice other nations with similar dark satellite photos which aren't communist but which are run by authoritarian or corrupt governments (Africa for example). However it's interesting to note that many of the countries which embraced communism in the 20th century also embraced authoritarian styles of rule.

    Some of the brightest spots on the world map at night are countries in Europe which have strong socialist tendencies, but very democratic governments.

    Also, the country just to the north and west of N Korea in that photo is China, which is still "officially" 100% committed to communism. Lots of bright urban centers on their nighttime satellite photo.

    1. You make a good point. Keep in mind I'm very close to the Korean DMZ and all the "sabre rattling" is a pain in the butt for me. It means waking up ealier than I want to, base restrictions, and a host of other things. We must be prepared even if the threats are empty. In 2 months I go back home and don't have to deal with the extra crap in Korea anymore. I'm headed to Colorado next, wooohooo!

    2. Lots of Korea in the news lately. Thanks for your service! We are all hoping that hostilities do not escalate further.

  3. Compounding Income,

    Glad to see you're also confident in the future of this company, as you increased your position. You got in at a better price than me too. Awesome!

    I'm a little concerned about the FCF, but everything else actually looks very solid. Looking over the last few annual reports also sheds a lot of light on management's strategy moving forward, and they appear to be executing well. The dividend growth has been very solid.

    Thanks for the mention!

    Stay safe over there!!!!!

    Best wishes.

    1. Good point about the FCF. It is worth paying attention to the debt load here. I don't see APD being a core position, but I do think it will do well over the long term.