April: Investment Analyses Edition

Hello Readers,

In this article, I evaluate the stock market for the month of April, offering insight on my portfolio and this month’s picks. Additionally, analyzing oil futures pricing, and stock buybacks.

Key Points

  • Snapshot of my portfolio for April.
  • Evaluating the stock market and my picks for the month.
  • Oil futures, how they work, and insight from Kyle Bass.
  • Increase in stock buybacks, what does this mean?

My Portfolio (April)

As promised in my first portfolio snapshot, I am continuing with the same layout for the month of April. If you are new to the blog, I am an avid supporter of long term growth.

My investment strategy is focused on long term and high dividend yields. My goal is to have my dividends become a passive income stream, capable of replacing my base income.

Sounds enticing, yet with this in mind many practitioners of investing fall short of prioritizing dividends as a means of reinvesting. Instead, many would take out their dividends early on, rather than reinvesting to accelerate growth.

M1 Finance Portfolio Snapshot

My primary brokerage is M1 Finance, there are plenty of other online brokerages available with their own benefits and perks.

M1 Finance benefits:

  • Offering retirement accounts, trust and joint accounts.
  • Offering fractional shares.
  • Borrow against your portfolio for low rates.
  • Automated portfolios (Similar to acorns investing pies).
  • Automated share buy and sell based on your pie
  • $10 referral program, “Give $10, get $10”

This month, I was able to deposit $750 into my portfolio, raising my stakes in Comcast, NextEra Energy Inc, T. Rowe Price Group Inc, and Chevron.

Here is a snippet of my portfolio,

Source: M1Finance purchases for the month of April
Source: M1Finance Portfolio
Dividend payments for the month

My Stock Picks For April

Comcast (NASDAQ: CMCSA)

As unemployment continues to rise, many families will be expecting high quality internet services to remain entertained and productive. Comcast’s services will be a lifeline for many households as shelter in place orders remain in effect.

Source: TradingView for CMCSA

As of 4/27/2020, Comcast was priced at $37.16 comparing to it’s February valuation which is a 15.25% decline. Comcast is reasonably priced at this level as their entertainment and internet services are strong competitors.

Source: SeekingAlpha for CMCSA

Comcast’s dividend growth history has a long track record, dating back to 1990. Comcast’s management is committed to continuing a dividend growth plan that is expected for years to come.

The current dividend yield of 2.36% is above it’s 5 year average of 1.80%. Indicating that it might be a reasonable time to invest in this company.

Source: Simplysafedividends for CMCSA

Simplysafedividends rated Comcast an 89 which is a very safe score. The likelihood of Comcast cutting their dividends is significantly lower than their competitors.

To reiterate, Comcast is reasonably priced, capable of withstanding this pandemic, and it is an essential service for many consumers. It’s valuation is a moment worth capitalizing on as well.

For more info on their action plan read here.

NextEra Energy Inc. (NYSE: NEE)

NextEra Energy Inc is the world’s largest renewable energy company covering wind and sun. They operate under two types of utility services, NEER and FPL, both offering renewable energy.

NEE is one of the harder companies to find on sale, but in times of uncertainty they are one of the safer and better picks. Management at NEE is prioritizing long term growth and reassuring investors that their production has not been affected drastically.

Source: Tradingview for NEE

Considering that they are a leader in their industry, many people who are not in the investing scene will find them as an attractive company to start their investment endeavors.

NEE’s current price valuation is $235.13 per share, which is a 15.58% decline since February. Despite the big price tag, it is a worthwhile investment for your portfolio.

Source: SeekingAlpha for NEE

NEE has developed a long track record of dividend growth history, dating back to 1990. Yet again, this data reassures me that they will continue to payout their dividends consistently.

NEE’s current dividend yield of 2.38% is below its 5-year average of 2.71%. This might make it look overvalued but with the management and business plans it is a decent price.

Source: Simplysafedividends for NEE

Since NEE is a renowned dividends company to own, I see it as a no brainer in times of crisis to continue investing in one of the safer companies as many begin to cut their dividends.

Simplysafedividends rated NEE a 99, which is the highest dividend safety score provided for a company.

Although I would have prefer to purchase NEE a month ago when it was priced at 188 per share. I believe that this company has tremendous value when it comes to long term investing.

Management and it’s business structure is paving the way for renewable energy. Industry leading companies like NEE should be sought after during times of crisis, as they are capable of surviving for a longer period.

I encourage you to check out this article for a thorough analysis of NEE as the author does a fantastic job at detailing out their operations, business plans and future earnings.

T. Rowe Price Group Inc. (NASDAQ: TROW)

T. Rowe Price Group Inc, is a global financial investment firm that has been around since 1937. They are one of the leading investment firms that are renowned for consistently beating their indexes.

Source: Tradingview for TROW

It is currently valued at $113.36 per share, 22.68% decline from February. This is a great time to purchase TROW as they are a debt free company, incredible management and their balance sheet reassures new investors that they are capable of withstanding downturns.

Although we are seeing a resurgence in the stock market, TROW is in a comfortable position given current events. Their firm is a strong competitor for dividend payouts and has remained that way for many years.

Source: SeekingAlpha for TROW

One of my better picks for dividend investing, it has no debt and a solid history of dividend payouts. TROW has continued to raise their dividends even in recessions, such as 2008, they continued to payout consistently.

TROW’s current dividend yield of 3.08% is slightly above its 5-year average of 2.83%. Suggesting that the stock might be reasonably valued today.

Source: Simplysafedividends for TROW

TROW was rated 94 on simplysafedividends which is still a very safe score, reassuring investors that their dividends will continually be paid out.

TROW’s firm specializes in long term growth and consultation for its consumers. As the stock market’s volatility remains apparent, I believe many investors will seek out professional assistance from companies like TROW.

If you are looking for an in depth analysis for TROW, feel free to read more here.

Chevron (NYSE:CVX)

Chevron, is a renowned oil company that has been around since 1879. Despite its public image as an oil company, they have made substantial efforts in developing alternative renewable energy services.

Source: TradingView for CVX

The chart above is the valuation of CVX in the past 6 years, as we can see CVX has just rebounded to its former 2016 valuation. Comparing current valuation of $94.55 to February, it is a 15.31% decline.

Source: SeekingAlpha for CVX

CVX’s current dividend yield of 5.45% is above its 5 year average of 4.02%, which indicates that now might be a reasonable time to invest in this company.

Looking back into CVX’s dividend growth history, we can see that they are raising their dividend payouts each quarter. This information reassures investors that they can expect their dividends even in times of recession.

Amidst the pandemic, there is an oil war occurring as well. Production in Saudi Arabia and Russia is accelerating at alarming rates to eliminate competition. Which is why I have chosen Chevron as an oil company to invest in.

Source: Simplysafedividends for CVX

It is worth mentioning, that on March 24th, CVX announced that it will focus on protecting the dividends, further solidifying confidence for investors. Read more here.

Despite having a lower dividend safety score than the other stocks, Chevron’s balance sheet, dividend history, and current price point is a reasonable time to purchase.

Consider investing in well-established companies that are going to survive the pandemic, rather than aiming for speculative practices to potentially lose money.

Disney (NYSE:DIS)

I would like to quickly mention Disney in this piece as well. Disney has recently been re-evaluated by Simplysafedividends, dropping their score significantly.

Source: Simplysafedividends

I think it is important to be transparent in my investment endeavors while preaching about long term investing. Disney’s dividend payout is currently unknown, due to a majority of its business being shut down.

In the case Disney does cut it’s dividends, I will not be selling the company just because of that. Disney has a strong business model, it is a leader in innovation and creativity, I find it hard to believe that this company will succumb to this pandemic.

To reiterate, the stocks I have chosen this month are focused on having secured dividend payouts while showing signs of long term dividend growth. The valuation of these companies are reasonably priced as well.

When I am deciding which companies to buy, I refer to simplysafedividends and seekingalpha for vital information before purchasing.

April’s Stock Market Trend

Some would think that the sudden increase in stock prices is shocking, as unemployment levels continue to rise substantially. Instead, this is just the natural course of the stock market. History has shown that unemployment and the stock market have an inverse relationship.

To keep it simple, stocks are on sale during recessions, which drive investors to purchase more stocks than usual.

April has been an interesting month for investors, as many Americans are receiving their stimulus checks, including unemployment benefits. They might consider investing that money as the market’s confidence continues to rise.

As the stock market continues to stay afloat amidst this pandemic, there is a lot of business related news that I believe should be addressed.

Oil Stocks Tanking

The headline for many business related websites, talking about oil prices and stocks plummeting to all time lows.

Essentially, there is an increase in production for oil among countries, competing to eliminate their competitors. Russia and Saudi Arabia being the two major competitors on the world scene have affected our oil companies by offering cheaper oil.

Since they are selling their oil for significantly cheaper prices, our smaller oil companies are at risk of being wiped out.

Investors who are seeking to capitalize on the low priced stocks are purchasing futures. Oil future contracts are what the headlines have been indicating, not actual companies worth investing in.

It is also worth noting that speculating is what drives these stocks after supply and demand. Speculating is not investing and should not be taken as credible advice from anyone.

Source: Marketwatch Crude Oil WTI

To reiterate, the list above is futures contracts for oil. All you are doing is purchasing the next front month futures. This will develop a rollover effect, causing you to pay more than what you are expecting.

In an interview with hedge fund manager Kyle Bass, he expresses his concerns with new investors purchasing futures. He highlights the issue that retail investors are investing into something they have no understanding in, especially related to oil.

Kyle encourages investors to go with larger oil companies with strong balance sheets, capable of withstanding this pandemic.

The longer this goes on, more smaller companies will be wiped out, with the investors who chose these risky endeavors. While the winners will be the larger oil companies, surviving and coming out on top.

If you are curious as to what stocks to purchase during this oil war, I recommend choosing companies with large balance sheets.

Take this information however you would like, but I agree with his sentiment on current events. Our economy has come to a standstill with shelter-in-place orders in effect, many of the smaller companies will have a rough time.

Stock Buybacks

Stock buybacks is when publicly traded companies are purchasing their stocks from shareholders, reducing the amount of shares within the public, driving up the stock’s price in the end.

The main concern behind this is the compensation for executives and the use of revenue to repurchase stocks, rather than investing in long term growth, such as training and R&D.

When a company experiences a drop in net income, they might not meet their expected earnings per share. In turn, the company’s executives can issue a stock buyback to meet their EPS.

Effectively, compensating senior level executives for their hard work in raising the EPS, while having a decrease in net income.

Stock buybacks from the company’s point of view, is that the company is cheap, it’s on sale, great time to purchase. Yet, executives have been known to sell their shares after issuing stock buybacks. This is contradicting their company’s perspective, while increasing their personal wealth.

In a study performed by the SEC in 2018, they were able to find that in many cases that companies were issuing buybacks, their executives would sell their shares shortly after.

If we look into this chart, we can see that before every recession corporations are issuing stock buybacks at all time highs while executives sell for huge gains.

To make matters worst, these same companies that are taking advantage of stock buybacks, are now asking for bailouts from the government. This is where the underlying issue continues to be prevalent with greed in these corporations.

Companies that are using all of their revenue to repurchase their stocks in order to raise the prices, meeting EPS for compensations, then selling privately is upsetting to many. Instead of prioritizing higher wages, retraining, or long term growth related, they are raising their stock prices for future debt loss increases.

How can companies that abused stock buybacks ask for bailouts when they used their revenue unnecessarily? To me it simply does not make any sense as to why they are begging for more money after poor management decisions.

For more information on stock buybacks refer to this article.

Disclaimer: This is intended for entertainment purposes, not financial advice.

As always, I hope you found my article informative or entertaining. Feel free to reach out to express concerns, questions or feedback as I am reading through them to improve my writing. Thank you for your time and stay healthy!

Published by Steven Mai

Hello! My name is Steven Mai and I am currently enrolled at University of Washington. My interests are business, investments, financing, and personal development. I hope through this journey I will be able to enhance my skills as a writer and share my ideas on a public platform and gain the necessary skills in life through interactions with the community.

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