We were reminded of some good news from Intel and General Motors, but the time has come to part with Procter & Gamble. We may have included it in the simulated Dividend Growth Newsletter portfolio too long.
By Brian Nelson, CFA
Hope you all had a warm holiday weekend. It was pleasant this morning to be reminded that simulated newsletter portfolio idea Intel (INTC) increased its dividend 10% when it reported quarterly results January. The dividend will be payable on June 1 to shareholders of record on May 7. The enthusiasm behind our call on Intel and our article in the April edition of the Dividend Growth Newsletter was a bit short-lived given the recent rumors in the PC market, but we’re not reading too much into it. We think Intel remains a solid dividend growth consideration. Our analysis is based on hard numbers, not rumors or speculation of what may or may not happen in 2020 on less than 1% of Intel’s profit stream. It’s so important to keep a level head.
We’ve been very disappointed with newsletter portfolio idea General Motors’ (GM) stock-price retracement since the mid-$40s late last year, but you have to understand that the market has been under tremendous stress the past two months. Generally speaking, as much as 40% of any equity’s performance can be attributed to market action, and this rule-of-thumb is more than a decade old now. It’s possible that given the proliferation of index investing, an even larger percentage of each stock’s return today may be driven by broader market performance. In any case, General Motors posted a solid 16% jump in US sales (the best March in GMC’s history), far better than what many were expecting. We think the market’s concerns about a “trade war” between the US and China are overblown.
It has been long overdue, but we’re finally pulling the trigger on removing Procter & Gamble (PG) from the simulated Dividend Growth Newsletter portfolio. Shares surged to the mid-$90s last September, and our fair value estimate never caught up with them, unfortunately. We continue to value P&G in the low-$70s, and we probably should have removed the company from the coveted simulated Dividend Growth Newsletter portfolio when shares broke down earlier this year. It’s price just got too far ahead of its estimated value. We’re removing the company from the simulated Dividend Growth Newsletter portfolio today at $77.93 per share, still for a nice “gain.” We really can’t pick fault at ourselves when we’ve nailed 6 out of the top 7 performers of the Dow Jones Industrial Average (DIA). We plan to announce our replacement dividend growth ideas for Boeing (BA) and Procter & Gamble later this week.
We hope you’re loving our service!
P.S. We’re still watching shares of Facebook (FB) very, very closely, “Value Investors Starting to Salivate Over Facebook’s Fall.” We’re thinking shares of Facebook could be the next Valuentum stock, after Michael Kors’ (KORS) incredible run. We’re being patient for Facebook’s shares to turn meaningfully higher.
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Brian Nelson does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.