Weekly Bargain Bin Blue Chips Update Q3 Week 1216 views 2012-07-07 08:20 Tags: blue chip dividend bargain bin
Blue Chip Stock (my def.) = Minimum market cap 1B + Minimum 10 continuous years of dividends.
Market Price = Book Value + Premium for future growth.
The Dow closed at 12772.47 today, down -0.84% from last week. The DJIA is up +92.74% from its 5-year low on March 6, 2009 and down -4.24% from its post '09 high of 13,338.66 on May 1.
Today marks the first Friday of Q3 2012. The financial news is dominated by the Euro crisis, the coming slowdown in China, the maybe/maybe not slowdown in the U.S and various scandals such as $2B derivatives trading losses and LIBOR manipulation. The Dow is basically still near all-time-highs though, so that is all I need to know. Now is not the time to buy stocks. Now is the time to keep examining those 10 - 20 companies I will put my capital into during the next major downturn in the markets.
The low price-to-book stocks are more or less going sideways, with the banks, oil & gas companies and Nokia continuing their relative declines. Guangshen Railway shares keep falling and price-to-book is now at 0.54. I still have not made the time to examine this Chinese railway's fundamentals but will do so in the near future.
When I started buying shares of NOK back in February at $5 I asked myself "what is the downside?" Well, as of today the answer is -62%. LOL! The reason? Nokia has failed to deliver mobile handsets better than either Apple or Samsung and continues to post operating losses. Meanwhile, the stock is finally within the $1 range with price-to-book ratio of 0.55; a bargain blue chip stock that continues to pay dividends responsibly. Tangible book value is 1.60 per share.
Blue chips below 0.5 price-to-book are still European banks. The crisis in Europe continues to simmer and will not end until sovereign leaders exercise their authority and agree to implement a Glass-Steagall-type legislation to end the banking crisis. The problem is that banks/financial institutions/wealthy private individuals have become more powerful than sovereign nations themselves. This is an interesting development to witness. Another point to note is that the U.S. has given up a lot of moral leadership by abandoning Glass-Steagall over a decade ago. These days the morality bar seems to be going lower and lower. Whether people acknowledge it or not, this sad fact must change if people want improving economic conditions. You can have all the technological progress you want, but it is no use if the people are given the example of pillaging and marauding banks and politicians.
The following blue chip stocks currently trade below half of book value per share. While these stocks may be cheap relative to the worth of their assets, they are not necessarily good investments due to the presence of impaired fundamentals.
The following blue chip stocks deserve honorable mention for their proximity to 0.5X book value. This week's list contains 6 stocks from the Americas, 13 from Asia and 11 from Europe. Of these, 8 are within 0.5-0.6 of price-to-book: HNP, HLDCY, MTU, NTT, SNE, DEG, NOK and REPYY.