The Underdogs

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The market has been pretty volatile over the last few months. A good number of companies have come back to equilibrium, but there are still a few depressed companies that I have my eyes on. These stocks have had a rough year, and as I’m starting to have more investing opportunities, it’s good to have a plan.

IBM

IBM has seen a few choppy years recently while trending down. However, their dividend growth has been maintained, as well as a healthy payout ratio. At the current valuation, IBM has a PE ratio of 9.2 and a yield of 3.85% which is beautiful. It’s not especially popular with 12 quarters of lower revenue. However, Warren Buffett is stockpiling IBM shares right now, which makes me think he knows something we don’t.

WMT

Walmart recently announced a bleak future for the company’s earnings in 2016 and 2017, in combination with their performance, this means WMT is down 30% for the year. This puts the PE ratio at a very attractive 12.6, and the dividend yield around 3.2%. The earnings growth potential over these next couple years isn’t going to be great, but if the price gets depressed further, the dividends will be reinvested at a discount. I’m liking the idea of stockpiling WMT over the next couple years to make bank when they recover and return to growth.

These are the opportunities I have my eyes on currently. I’m also watching Starbucks (SBUX), Yum Brands (YUM), and Whole Foods Market (WFM). How about you, what companies are on your watch list?

Comments


suredividendben said:

Wal-Mart is certainly an underdog right now. I think it’s a great value at current prices. Aside from WMT, I like CMI and GWW (among others) right now.

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Kevin said:

I haven’t looked into either of those before. Thank you for the ideas!

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I agree with you, WMT and IBM are interesting right now. I’ve added share of both recently and hope to add more on the next dip.

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Kevin said:

I expect we’ll see plenty of dips/opportunities on Walmart over the next couple years.

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