Here’s a quick summary of recent stock purchases and other areas of the market I have my eye on. I almost always build positions in multiple steps to create a better average price but this has especially been the case lately as I’m starting small and hoping for an opportunity to buy more at lower prices. All new buys have only been 1/3 or 1/2 of the target position I’d like to hold.
- Dollar General (DG) – I started a position in the low 70’s last month after the stock got hammered following a revision lower to prior guidance. It’s now trading at a valuation that has tended to hold as a low point, historically, and acted as a nice long-term entry. I view Dollar General as a similar thesis as Ross Stores in that the low price retailers should continue to do well in a sluggish economy.
Dollar General (DG) – 3 years
- I just added to Cal-Maine Foods (CALM). They expect the egg market to balance at some point next year. I view this as short-term concerns of low egg prices creating a wonderful long-term opportunity. This is the type of company I look to partner with for the long haul.
Cal-Maine Foods (CALM) – 3 years
- Earlier this week the precious metals (gold, silver, platinum) got knocked down pretty hard and the miners even harder with most down 10% or more in a single day. I used this as an opportunity to buy call options on the gold miners ETF (GDX) and start positions in Agnico Eagle (AEM) and Pan American Silver (PAAS). These two both offer some of the best balance sheets, best mines and lowest cost of production. It’s hard for me to chase strong rallies as I prefer to buy on big dips so I was reluctant to jump on board the miners earlier this year (choosing to just own gold instead). This week finally gave me that opportunity to start some positions. We could see further weakness in the near term but I think we see gold go much higher in the years ahead.
Gold Miners ETF (GDX) – 3 years
- Oil Refiners – I haven’t purchased any yet, but I’ve sold put options under 3 different refiners – Valero (VLO), Phillips 66 (PSX) and PBF Energy (PBF). The refiners have come under pressure from falling crack spreads (difference between oil and gas prices) but look pretty cheap here and are sporting attractive yields. I’ve chosen to sell puts rather than buy the stock just yet as a way to earn a solid return but also have a margin of safety as our potential entry price is 10% to 15% below the current prices just in case crack spreads continue to tighten, which I could see happening with the amount of gasoline stocks in inventory.
Valero (VLO) – 3 years
- Asset Managers – A lot of the asset managers are also looking cheap. There are some very high quality companies (rock solid balance sheets, great history of dividends increases, etc.) that have come down in price. I’ve sold put options under Lazard (LAZ) and chose to buy Franklin Resources (BEN), the Franklin-Templeton family of funds, given their exposure to Emerging Asia. Another one I have my eye on is T Rowe Price (TROW). The weakness is across more than just the traditional mutual fund families so it’s not just a concern about investors moving money from mutual funds to ETF’s. At this point, as far as I can tell, I think it’s mainly concerns about the potential for falling asset markets (which directly lowers the assets in a fund and leads to investor withdrawals) since most of these companies make money based on assets under management (AUM). This is where we’ll have to pick the right companies and where I think BEN has a long-term advantage as capital continues to shift to Asia in the decade ahead.
Franklin Resources (BEN) – 3 years
Thanks for following and have a great weekend!
-Nick