Warren Buffett June Update: 46 Equities Show 10 To Buy And Hold Now


Foreword

James Brumley says in Kiplinger Investing:

Rich people often get perpetually richer for a reason, so it could be worthwhile to study what billionaires and high-asset hedge funds are plowing their long-term capital into.”

Any collection of stocks is more clearly understood when subjected to yield-based (dog catcher) analysis, this Buffett/Berkshire batch is perfect for the dogcatcher process. Here is the May 22 data for 30 dividend-paying stocks in the Kiplinger-documented collection of 46 now owned by Buffett’s Berkshire-Hathaway firm.

Another resource consulted for this article was dogsofthedow.com; they also keep an ongoing spreadsheet of the Buffett/Berkshire stocks updated quarterly per BRK SEC filings.

The Ides of March plunge in the stock market took its toll on Buffett’s batch and made the possibility of owning productive dividend shares reflecting his collection more viable for first-time investors. Heading into June, the following ten stocks still live up to the idea of having their annual dividends from a $1K investment exceed their single share price: WFC; STOR; KHC; USB; SYF; BK; SU; BAC; OXY; SIRI.

Actionable Conclusions (1-10): Analysts Estimated 21.14% To 38.14% Net Gains For Ten Top Buffett-Held Dividend Stocks Come June 2021

Six of these ten Buffett-held top dividend stocks by yield were also among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below). Thus, this yield-based forecast for these Buffett dogs was graded by Wall St. Wizards as 60% accurate.

Source: YCharts.com

Projections were based on estimated dividends from $1000 invested in each of the highest yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts. Note: one-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to May 22, 2021, were:

STORE Capital Corp. (STOR) was projected to net $381.36, based on dividends, plus a mean target price estimate from fifteen analysts, less broker fees. The Beta number showed this estimate subject to risk 4% under the market as a whole.

Synchrony Financial (SYF) was projected to net $310.81, based on dividends, plus the median of target price estimates from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to risk 66% more than the market as a whole.

Wells Fargo & Co. (WFC) was projected to net $307.50, based on dividends, plus the median of target price estimates from twenty-seven analysts, less broker fees. The Beta number showed this estimate subject to volatility 19% more than the market as a whole.

U.S. Bancorp (USB) was projected to net $285.46, based on the median of target estimates from 26 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 18% more than the market as a whole.

M&T Bank Corp. (MTB) netted $272.14 based on a median of estimates from twenty-two analysts, plus dividends. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

Bank of New York Mellon (BK) was projected to net $261.58 based on a median of target price estimates from nineteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 12% more than the market as a whole.

JPMorgan Chase & Co. (JPM) was projected to net $218.14, based on a median of target price estimate from twenty-six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 20% over the market as a whole.

Sirius XM Holdings Inc. (SIRI) was projected to net $217.11, based on the median of target price estimates from nineteen analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to risks 22% more than the market as a whole.

Suncor Energy Inc. (SU) was projected to net $213.60, based on a median of target price estimate from twenty-six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risks 46% more than the market as a whole.

Mondelez International (MDLZ) was projected to net $211.36, based on the median of target price estimates from twenty-one analysts plus annual dividend, less broker fees. The Beta number showed this estimate subject to risk 38% under the market as a whole.

The average net gain in dividend and price was estimated at 26.79% on $10k invested as $1k in each of these ten stocks. These gain estimates were subject to average risks 19% greater than the market as a whole.

Source: wallpapersafari.com

The Dividend Dogs Rule

Stocks earned the “dog” moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as “dogs.” More precisely, these are, in fact, best called, “underdogs.”

Source: YCharts.com

46 Buffett Holdings By Target Gains

46 Buffett Picks By Yield

Source: YCharts.com

Actionable Conclusions (11-20): 10 Top Buffett-Held Stocks By Yield

Top ten Buffett-held stocks selected 5/22/20 by yield represented five of eleven Morningstar sectors.

First place, fourth through seventh, and ninth places were claimed by six financial services representatives, Wells Fargo & Co. [1], U.S. Bancorp [4], Synchrony Financial [5], M&T Bank Corp. [6], PNC Financial Services Group, Inc. (PNC) [7], and JPMorgan Chase & Co. [9].

The lone real estate sector representative in the top ten placed second, STORE Capital Corp. [2]. Then one dog from the consumer defensive sector placed third, The Kraft Heinz Co. [3].

The eighth slot was claimed by the lone industrials sector representative, United Parcel Service (UPS) [8]. Finally, one representative from the consumer cyclical sector placed tenth, Restaurant Brands International Inc. (QSR) [10] to complete the June Buffett/Berkshire top ten batch of dividend dogs, by yield.

Actionable Conclusions: (21-30) Top Ten June Buffett/Berkshire Dogs Showed 19.89-86.83% Upsides And (31) No Down-Siders Emerged

Source: YCharts.com

To quantify top dog rankings, analyst median price target estimates provide a “market sentiment” gauge of upside potential. Added to the simple high-yield metrics, analyst mean price target estimates became another tool to dig out bargains.

Analysts Forecast A 26.06% Advantage For 5 Highest Yield, Lowest Priced Of 10 Top Buffett-Collected Dividend Stocks To June 2021

Ten top Buffett/Berkshire batch dogs were culled by yield for this update. Yield (dividend/price) results provided by YCharts did the ranking.

Source: YCharts.com

As noted above, top ten Buffett-chosen dividend dogs screened 5/22/20 showing the highest dividend yields represented five of eleven Morningstar sectors.

Actionable Conclusions: Analysts Predicted 5 Lowest-Priced Of The Top Ten Highest-Yield Buffett-Held Dogs (32) Delivering 28.72% Vs. (33) 22.78% Average Net Gains by All Ten Come June 2021

Source: YCharts.com

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten dividend Buffett-selected kennel by yield were predicted by analyst 1-year targets to deliver 26.06% more gain than $5,000 invested as $.5k in all ten. The second-lowest priced selection, STORE Capital Corp., was projected to deliver the best estimated net gain of 38.14%.

Source: YCharts.com

The five lowest-priced top-yield Buffett-Picked dividend dogs as of May 22 were: Synchrony Financial; STORE Capital Corp.; Wells Fargo & Co.; The Kraft Heinz Co.; U.S. Bancorp, with prices ranging from $17.85 to $32.93.

Five higher-priced Buffett-picked dividend dogs as of April 27 were: Restaurant Brands International; JPMorgan Chase & Co.; United Parcel Service; M&T Bank Corp.; PNC Financial Services Group, Inc., whose prices ranged from $53.02 to $104.81.

The distinction between five low-priced dividend dogs and the general field of ten reflected Michael B. O’Higgins’ “basic method” for beating the Dow. The scale of projected gains based on analyst targets added a unique element of “market sentiment” gauging upside potential. It provided a here-and-now equivalent of waiting a year to find out what might happen in the market. Caution is advised, since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change.

The net gain/loss estimates above did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of “dividends” from any investment.

Stocks listed above were suggested only as possible reference points for your Buffett/Berkshire batch stock purchase or sale research process. These were not recommendations.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb; YCharts; finance.yahoo; analyst mean target price by YCharts. Dog photo source: wallpapersafari.com

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.





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