Weekly Review, a Sell and a Big Thank You!

As each year winds to a close, we spend extra time thinking of the year that was…..and all we have to be thankful for. 2014 is no different. I won’t bore you with all the details, but suffice it to say that we have much to be thankful for this year. Not the least of which are my email subscribers and the financial blogging community at large. Through this blog I have made a couple dozen friends, engaged scores of passionate investors, and exchanged some pretty amazing investment ideas. Just this morning I was emailing with two readers who wanted to discuss the oil super majors and the oil/gas industry as a whole. Continue reading

Some Thoughts on Berkshire’s P&G, Duracell Swap

Earlier this year Procter & Gamble (PG) expressed interest in selling (or spinning off) dozens of it’s smaller or slower growing brands……in order to focus on and reinvest in its remaining businesses. In October P&G said that Duracell would be one of the brands that the parent company wanted to unload. Then in mid November it was announced that Berkshire Hathaway (BRKA, BRKB) would swap it’s shares in P&G, in exchange for outright ownership of a recapitalized Duracell company. Below I’ll explain my thoughts on the deal, and why it may be a negative commentary on P&G shares or even the broader US stock market. Continue reading

Recent Stock Purchase…..and a Weekly Update

“YUK! Why is the bathroom that horrible blue-green color?” I know that’s what my wife was thinking, when she admired the “progress” on our bathroom remodel project. As you can see from the picture below, it does look fairly hideous. Now let me explain.

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This weekend I finished taping the seams on the Hardi-backer, set the marble window sill (photo below), and coated all the surfaces with a waterproof sealer. The waterproof sealer, called Mapai Aqua Defense, is the horrible green/teal color you see in the photo above. My biggest problem this weekend, was that the sealer stunk horribly. In hindsight I should have suspected as much. This had the only product label that I’ve seen, which suggested that the product be STORED in a well ventilated area. All in all, I am happy with the progress this weekend. I am very happy with how the marble sill installation turned out, see the photo below. I was very fortunate it didn’t take much work to make the sill level and square. Next weekend, I may finally get to tile. Oh boy!

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Now on to the investments. The talk among the dividend blogging world has been the recent sell off in oil, or more particularly……the increased yields offered by companies whose shares have sold off along with oil. Of particular interest is the oil/gas services sector. Many of these companies have seen their shares sell off 50% or 60%. I continue to study and research this sector, but have trouble finding companies that fit my investment criteria. As I mentioned back in October, when WTI had fallen all the way to $85 per barrel, my preference would be to increase my stakes in the two supermajors I own…..and expand from there. Since that time, the price of oil has continued to slide. What has not decreased substantially is the share price of many of the supermajors. We have owned shares of Chevron (CVX) and ConocoPhillips (COP) for the past 6 years. I understand that Chevron’s upstream and downstream business units provide some financial flexibility, because as the price of oil declines the production business unit likely saw a reduction in profitability……..but the downstream business units should have seen a slight increase in profitability as their input costs decreased. In the case of ConocoPhillips, which spun off its downstream operations a few years ago, I can’t imagine why shares aren’t trading in the mid to upper $50 range. We will look at adding to our position in that range, but for today I just don’t see the risk/reward balance.

Yesterday we purchased 100 shares of BHP Biliton plc (BBL), just below $47 per share.

Instead, we began acquiring shares in the natural resource behemoth that is BHP Biliton. This was just a small position, but one we’d be interested in adding to……if prices continue lower. We sold all of our mining positions nearly two years ago, so we are underweight the natural resources sector…..or so the conventional thinking goes. Regular readers of this blog know that we invest more as a “go anywhere, do anything” fund, than as a diversified portfolio. Well we have begun to nibble at the sector again. Below are some of my thoughts on BHP Biliton.

-With assets located around the world, BHP’s Australia and South American assets leave it well positioned to feed Asian markets.

-BHP currently sports a 5.2% dividend, which is well covered at 46%. Although I expect sales/margins to remain under pressure, chances are good the dividend will be secure.

-BHP seems reasonably valued with a PE (price to earnings) ratio around 9. Additionally share prices have fallen 45% since the summer.

-While we rarely invest in commodity businesses, BHP successfully mines and pumps a variety of natural resource products including oil, metals, and minerals. With oil production representing less than 1/5 of revenues, such a significant selloff on the back of declining oil prices seems overdone.

What are your thoughts on BHP Biliton’s BBL shares? Where are you finding compelling values in the global equity markets?

Disclosure: I own shares of all companies mentioned in this post. Please do your own research before investing, because this post is for entertainment purposes only…..and not a recommendation to buy, sell or hold any investment. I am not a licensed financial professional, please seek one before investing.