I took a week’s break from looking at the stock market and it experienced a pullback. Maybe I should take breaks more often. Jokes aside, I reviewed my watchlist, and picked out some that are worth further investigation. Of course, you as your own portfolio manager should determine whether these companies are a right fit to your portfolio based on diversification and allocation needs.
I have shortlisted my watchlist for the month of August, looking for income growth and growth for my portfolio in general. Here is the shortlist:
- Realty Income (NYSE:O) – $39.29
- Yamana Gold (NYSE:AUY, TSE:YRI) – $11.33 USD, $11.74 CDN
- Exxon Mobil (NYSE:XOM) – $86.92
- Coca-cola (NYSE: KO) – $38.78
Since Realty Income is an US REIT, there will be a withholding tax on its distributions no matter which account (TFSA, RRSP, non-registered account) I place it in. My research shows that the withholding tax should only be 15%. On the perspective of holding it long-term, it makes sense to place it in the RRSP or TFSA. Holding it in the non-registered account would incur the marginal rate on the distribution instead, which in my case is higher than the 15%. In addition, holding a REIT in the non-registered account will probably increase the complexity of tax reporting.
If I buy a position in Yamana, it’d be for capital appreciation. Expect to experience volatility, as the miner’s price would be more or less co-related to the precious metal. From my painful experience in buying Teck Resource (TSE:TCK.B) without a margin of safety, I have learned to be patient with any miners. So, I will only buy low for such companies. Right now, I believe it’s low. As noted below, there’s 36% of margin of safety. In addition, it seems to have broken out of the downtrend. So, I may initiate a position under $12 on the Toronto Stock Exchange. Miners will only be a small part of my portfolio. I’m using it for short-term capital gain to grow my portfolio a little faster.
If I had the funds, I would initiate a position because I have no shares right now. I do however hold some Chevron shares. If I do buy some, I will initiate a partial position, and wait to see how it reacts after breaking the major support. For the long-term, I think Exxon Mobil is a good investment. Also, its yield is currently at its historical high.
I already hold some Coca-cola shares. However, I might add a small block of it around 3% yield.
Valuation, Upside, and Technicals
These are just some quick numbers I bring up from Morningstar. The technical comment is just my quick opinion after I look at the Finviz charts. In other words, this is a quick and dirty analysis. Remember to perform your own due diligence before investing.
|Ticker||* Price||Morningstar stars||Morningstar Fair Value Estimate||Upside to Fair Value||Finviz Technicals|
|O||$39.29||3||$44||12%||Heading to support line at $38.50 area|
|NYSE:AUY, TSE:YRI||$11.33 USD / $11.74 CDN||4||$15 USD / $16 CDN||32% / 36%||Bouncing off from double bottom earlier this month, and broke the downtrend.|
|XOM||$86.92||4||$97||11.6%||Breaking a major support in the $87 area.|
|KO||$38.78||4||$45||16%||Breaking 200-day moving average.|
* Closing Prices of August 19, 2013.
I feel most inclined to initiate a position in Yamana first because it is the only one showing a positive sign technically. In addition, I have no other precious metal exposure except a small position in Silver Wheaton (TSE: SLW). Next, I would most likely add Realty Income and Exxon Mobil because I don’t own any shares in those blue chips. I would probably add to Coca-cola last because I already have some shares.
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Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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