Investing Wisely -- Dow 30 Industrials - Week #3
Investment Course (a freshman - year Course of Study ) Week # 3
This is week number three and is your freshman year of learning to Invest Wisely. As you know, by now, we are using the Dow Jones 30 Industrial Companies in the pursuit of learning / applying analytics and of course - the art and science of making money.
Note: Starting this week and for the next three weeks I will cut back on the supportive notes, information and data. So at the beginning of my six week rotation of 5 Dow components per week I will provide the longer version. To review my latest 'long version' click on the following URL.
For this week, I am continuing to walk you through the Dow 30 component companies. You should be studying each of them thoroughly and learning the basics for each. It is likely you will get sick of the repetition and feel like this is not necessary. I will repeat what I have shared before. I still go through the basic analytics of these companies and many more every single week. I am also profitable for every single year, and that is a lot of years. Few financial analysts whom I know go through this discipline, and I know of no investor that even comes close to "do his or her" homework - thoroughly.
I repeat, it is a boring process for many investors, but it is also accurate and profitable.
General Market - Current Perspective
The following will be repeated each week: Within my work / analytics it is important to take into account the current position of the general market and the economy as it relates to the companies that are being valuated. This is one of those - first things first situations. It is a fact that 60% of the influence of the direction of any security is that of the general market - bullish or bearish. A 20% influence is on the Sector and Industry Groups. That leaves only 20% for the Companies itself. I suggest that when you invest that you had better - be in phase - with the bullish or bearish direction of the general market and sectors / industry groups. Then it is up to you to have done your homework well and be very selective in the companies you take positions in.
The general market is currently over-valued, over-bought and is showing serious signs of deterioration, especially in the area of breadth. Interest rates are on the rise, and inflation is already an acute problem. These Dow 30 Industrials along with many other companies are quite vulnerable to a meaningful general market pullback. That means that you should strongly consider holding cash or perhaps taking bearish positions. I do not recommend taking short positions in any of these securities.
So - what is new to consider in the marketplace for this past week?
For me that is an easy question and will be for you, if you do your homework. The rally this week was right on schedule and should continue to do one of two things. The first is what most investors think and that is to assault the previous highs and create what is often called a break-out. I agree that this is a possibility. However, I have been waiting for a General Market Bearish Inflection Point for three plus months. So, as of this posting, I believe that we are much closer to a meaningful pullback than going higher. Yes the strongest Companies and Sectors are already higher but the vast majority is Not! This is particularly true with the Dow 30.
My focus for all companies, Dow 30 or others, is - Investing Wisely. My methodology of taking advantage of the bull / bear fundamental 'rotation,' technical 'cycles,' and 'inflection points' are especially critical in this marketplace and to your annual profitability. I believe, most every investor I have ever met can profit from this course. That is if you / they do your homework well. This is a vital discipline in today's marketplace.
Companies - Current Perspective
A Ranking, using each of my three (weighted disciplines) -- Comments for each Company -- and current Numeric Ranking of the position of each Company within the Dow 30 Industrials should give you plenty hard analytics homework every single week, but soon you will be doing it like a professional.
Grouping Three: (see below for a list of the six groupings of five - Dow 30 Industrial Companies.)
|Symbol and Current Numeric Ranking within the Dow 30 Industrials||Category||Fundamental
|(CAT) Ranked: # 1||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $109., the company is currently carrying the very highest Ranking against its Dow peers. ( please remember my strong emphasis on owning companies that are within the top 5% on my 'Bell Curve' -- if you compare the performance of CAT with other Dow 30 companies you will understand. My ranking within the S&P 500 places CAT as # 18 - that should be an eye-opener for many of you ). Next year, earnings' growth falls back to be negative but then grows again the following year. That too should be an eye-opener for Buy and Hold investors! Fundamentally, there appears to be consolidation of this "spurt" of growth, and I am not impressed with the intermediate-term. It is a hold but I would take profits at the first sign of weakness. Technically, it looks like it is topping. However, it definitely remains a hold. Consensus wise, it is only "good."|
|(HD) Ranked: # 10||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $38., the company appears to be improving and should climb up the Ranking list against its Dow peers. This is again a company with conservative but positive 'numbers." I do see a pullback in price on the near-term horizon. Fundamentally, clearly Home Depot is looking much better than some of its peers - but not enough better to invest at this price level. Technically, it looks like it is topping. Should it "break out" on the upside, I believe the upper targets are not worth the risk? Consensus wise it is only "good."|
|(KO) Ranked: # 11||Bellwether||Good||Very Good||Good|
|Comments: Currently, at $65., the company has been in the mid 60s three times over the past three months. Will it break out? It is definitely trying! This year, earnings' against next years earnings' are negative and yet earnings growth remains in tack for the coming years. That is a reason to be cautious. Remember, KO is a very slow mover and definitely a conservative investment. Fundamentally, KO is ahead of the curve, but I do not like next few years earnings pictures. Technically, on a more near-term basis it is looking tired at the current top. Is there more life in it for the near term? My work says no. My asset management says - it is just not a competitive investment. Consensus wise it is one of the strongest. You should know that Consensus Analysis is very important but often not all that accurate. The financial analysts have their favorites and are paid to say good things about - companies that are - undeserving.|
|(DIS) Ranked: # 9||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $43., there is nothing but positive data for the now and the coming years. Personal Note: I really can be positive about a security if the Company will give me positive information and data. The Media Industry Group is still doing well but many component companies have started to pull back. The "numbers" definitely support the price growth of DIS. However, the price will likely, in time, have a pullback along with some peers. Remember, these are "Bellwether" companies that are not supposed to be volatile. Fundamentally, I like Disney. Technically, it looks strong but be careful. Consensus wise the 'Street" is not doing it justice - that is not a positive.|
|(DD) Ranked: # 2||Bellwether||Very Good||Very Good||Very Good !|
|Comments: Currently, at $54 the company looks healthy for a big Chemical company, but is not one of my favorites for longer-term price appreciation from this level. At this time, it is Ranked very high however, I am not at all positive about the coming years, please note the following numbers. Earnings Growth is low compared to the above companies.. Current 2011: 12%; 2012: 12%; 2013: 7% and 2014: 9%. The projected five year earnings' growth rate is only 7.7%. The Basic Materials Sector is and has been a very compelling story but is often subject to high volatility and is led by the metals, not by chemicals. Dupont is not historically a great mover, but 30% plus price appreciation since September is nothing to sneeze about. Don't be greedy. Fundamentally, the near-term looks quite positive, however, the above numbers signal you do not want to remain too optimistic about the coming years. I do not like the current high PEG and earnings do not appear to be all that strong to reduce the PEG to more acceptable level. Technically, this is an excellent example of a chart picture that looks like a Bearish Inflection Point is in the making. There is very positive Consensus picture and that surprises me.|
In my 'Longer Version I have five Notes: Again, click on the above URL to visit my last 'Longer Version' of this Course of Study.
You can find all Dow 30 Industrial Companies and a number of other supporting Bellwether and High Profile charts amongst the 100 or so in:
The Prof's Six Groupings of the Dow 30 Industrials
Grouping One: BAC, CSCO, GE, BA, XOM
Grouping Two: HPQ, AXP, KFT, TRV, CVX
Grouping Three: CAT, HD, KO, DIS, DD
Next Week -- Grouping Four: T, IBM, JNJ, AA, JPM
Grouping Five: VZ, MRK, PG, MCD, MSFT
Grouping Six: PFE, , MMM, UTX, WMT, INTC
Source information and data:
The Bottom Line
Your 'bottom line' will depend on just how proactive you are about doing your homework on the above Companies and perhaps asking questions of the Prof. (that's me!)
This Week's Home Work Assignment: (Same as last week) Study at least 3 of my "Source information and data" (see above) and learn to Navigate through all that is offered. (the above will be your - on going homework assignment and will require many hours if not months - these sites offer much information - some good and some worthless - but can be very rewarding if you are willing to learn)
Next read up on each of these companies and make some notes from your favorite sources of information. You may even want to make file folders for each company. Referring back to your notes can be a valuable learning experience. Remember, this is boring "stuff" to many investors, but it will provide you accuracy and profitability in your investment strategy.
More Notes about this Course of Study
Visit the 'Longer Version' URL for this information:
You may want to review my 38-week course - Investment Basics with SafeHaven.com. (see the sidebar on the SafeHaven.com home page or Authors and my name.)
Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.
Learning how to consistently profit in the Stock Market, in good times and as well as in not so good times requires education, experience, time and unfortunately mistakes which are called losses. I believe if you will work ast it, you can be profitable while you are learning?
Let me know if and when I can help and tell a friend about this Course of Study.
Thanks for your interest in my work / analytics and possible my professional asset management / consulting / mentoring services.
Smile, have fun - Investing Wisely,