I really enjoyed Conseulo Mack’s interview with contrarian investor Steven Romick this week, particularly his thoughts on large cap dividend stocks CVS Caremark (CVS, Financial), Walgreen (WAG, Financial), Walmart (WMT, Financial), Microsoft (MSFT, Financial), and Occidental Petroleum (OXY, Financial).
Some key takeaways regarding the aforementioned dividend stocks, all of which Romick’s FPA Crescent Fund currently holds:
Some key takeaways regarding the aforementioned dividend stocks, all of which Romick’s FPA Crescent Fund currently holds:
- CVS Caremark (and rival Walgreen, which FPA also owns) stands to benefit from an aging population and the wave of branded drugs set to go generic (making them more profitable for pharmacies).
- Occidental Petroleum “has a million and a half or so acres in California” and is “pulling up oil from the ground at $8 a barrel.” And by producing on domestic land, Oxy isn’t vulnerable to foreign dustups or offshore rig explosions. Perhaps that’s why, according to Romick, Oxy was also the only large integrated oil company to meet its own reserve replacement forecasts from five years ago.
- Walmart is seen by Crescent almost as an “infinite-duration bond with a rising coupon.” The stock is actually cheaper now, on a P/E multiple basis, than it was at the market’s bottom in March 2009. Romick also commends the retails giant’s dividend growth and aggressive buybacks.
- Microsoft is a “cheap stock” and a “good business” with “a ton of cash flow” and “a ton of cash on the books.” The company’s “lost its way under current management,” which could create huge upside down the road: “Any change in management would be viewed positively by (Wall Street).”
