#1) Automatic Data Processing
ADP looks especially hideous right now. At 22.8 times forward earnings, it's pretty hard to justify buying new shares of this business. ADP recently lost its AAA credit rating which didn't seem to phase the stock price one bit. I was hoping the credit downgrade might spook investors into selling (so I could pick up some shares). Guess I'll have to keep waiting for an opportunity to add this one. That day may never come...
#2) Colgate
CL is a fantastic company, and you can expect to pay a premium if you want to own shares of this business. At 20.6 times forward earnings the premium price is getting a bit stretched... even by CL standards. I already own PG & UL and don't have room for this one anyways.
#3) Aqua America
Man, I'd really really like to grab shares of WTR, but at 19.7 times forward earnings, that dream will not become a reality anytime soon. I'm saving a spot in my portfolio for WTR, and if it declines 10-15% I might get interested.
#4) American States Water
This company is slightly cheaper than WTR with a 19.6 forward p/e, but then you have to consider its PEG ratio is an absolutely terrible 20.6. That's outrageously bad. Apparently water utilities will have to be put on hold for a while. Yuck!
#5) Sysco
A 19.5 forward p/e for SYY? No thanks. The only saving grace here is that it does have a juicy yield of 3.1%, unfortunately that's really low by Sysco standards.
#6) Air Products & Chemicals (APD) 19.4 times forward earnings
#7) Walgreens (WAG) 19.1 times forward earnings. Does have a PEG ratio of 1.5 to make up for it.
#8) Compass Minerals (CMP) 18.7 times forward earnings
#9) Dominion Resources (D) 18.7 times forward earnings
#10) Coca-Cola (KO) 18.3 times forward earnings
I didn't include REITS or MLPs in this list.
Hey CI,
ReplyDeleteVery nice article and I agree with you. I am hoping their is a dip on some of these in the future. I did recently buy a few shares of (DPS) Dr Pepper Snapple because Coke seemed a little expensive.
I'm very interested in WTR, APD, ADP, and KO as long term holds but yeah they are really expensive right now. Hopefully better entry prices will come along soon!
DeleteI recognize KO and ADP are always overvalued, yet ADP seems kind of excessive right now.
Hi CI,
ReplyDeleteMost stocks really seem to be quite expensive at the moment. I was really close to add AWR at around $28. I hope to have it in my portfolio some day. Water is something we can't live without, which could make this a sustainable investment. Colgate is another very interesting company, but personally I have PG and UL higher on my watchlist.
Best wishes,
TheDividendWay
I'm a huge fan of water utilities. AWR has a really impressive streak, but long term earnings growth is only supposed to be 1% per year... have to wonder exactly where dividend growth will come from beyond payout ratio expansion.
DeleteHopefully AWR will do better than 1%. Unfortunately the current valuation is truly absurd based on company guidance and analyst expectations!
Doesn't mean the stock price will actually go down. It just doesn't seem like a reasonable purchase right now.
I'd really like to own some ADP but I have a feeling I'll be waiting until the next recession to become an owner. It's a shame how richly valued a lot of the great companies are and it's making it difficult to put new capital to work. I'm sitting on a bunch more cash than I'd like so I'm trying to selectively invest a bit of capital but nothing major.
ReplyDeleteADP... The price will go down during a correction/recession, but so will everything else. It will seemingly never be a bargain compared to other companies, so the only question left for me is how much of a premium I'm willing to pay. I'm not opposed to paying up for quality, but will wait for a better time for ADP.
DeletePerhaps I'm too picky and will never own it? That's a problem I need to think about!
CI,
ReplyDeleteI hear you on the ADP valuation. I am in the same boat with PAYX as the PE is always hovering between 20 and 25. Hopefully shares of both companies will come down for the both of us.
MDP
I've been waiting for years with ADP and have seen the price appreciate a good 60% or so. Have to pay up for it, it's a fact. The valuation just seems way overboard at the moment, especially since it's not AAA rated anymore.
DeleteI hear ya on CI. I've had some of these on my watchlist for months but cant bring myself around to spend so much on stocks. I will be waiting on the sidelines for a better entry point.
ReplyDeleteR2R
The good news is that stocks went down a little bit this week. Only a percent or two, but it's a start!
DeleteThanks for the list. Overall p/e are quite high for the whole market. Overspending a lil bit for a good quality company still not a bad idea if it is a long term hold. But definitely good bargains out there are slim pickings!
ReplyDeleteGood Day and Grind On!
Yes I agree the market is expensive as a whole, but other asset classes seem even less attractive. I plan to stick with stocks. It's the only place I can build a decent income stream growing faster than inflation. At some point fixed income yields will make up for the lack of dividend growth, but not right now!
DeleteNice list! I have been looking at water utilities to round out my utility holdings, but haven't pulled the trigger for similar reasons.
ReplyDeleteSYY is in the process of acquiring US foods and it appears that will be good from the start. We shall see.
Take care!
Thanks for sharing your list...I think the consensus is that stocks are on the higher end right now and you need to look far and wide to find value. P/E is a good start but value can also be found through 5yr growth projection, consistent dividend increases, low payout ratios, etc. Value is still out there, just not as easy to find as they were a few years back and definitely not at the same bargain basement prices.
ReplyDeleteWishing you continued success in your journey. AFFJ
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