67 WALL STREET, New York - July 10, 2013 - The Wall Street Transcript has just published its Investing in Dividend-Paying Companies and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Bottom-Up Stock Selection - Cyclical Sectors, Exposure to Emerging Markets - Large-Cap, Deep-Value - Value Oriented Strategy - High-Quality Companies - Value Investing, Deep Value - Longer-Term Investing
Companies include: Procter & Gamble Co. (PG), Johnson & Johnson (JNJ), General Electric Co. (GE), Cracker Barrel Old Country Sto (CBRL), Union Pacific Corp. (UNP), Boeing Co. (BA), Lockheed Martin Corporation (LMT), Duke Energy Corp. (DUK), Centerpoint Energy Inc. (CNP), Geo Group Inc. (GEO), Corrections Corp. of America (CXW), Marriott International, Inc. (MAR), Verizon Communications Inc. (VZ), AT&T, Inc. (T), JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC), International Business Machine (IBM), Microsoft Corporation (MSFT), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM) and many more.
In the following excerpt from the Investing in Dividend-Paying Companies and Other Strategies Report, an expert portfolio manager discusses his portfolio-construction methodology and his investment philosophy:
TWST: Are there particular sectors you find most promising today?
Mr. Bradshaw: Some examples of stocks that we like would be Lockheed Martin (LMT) and Boeing in the defense area and aerospace, respectively, both of which are in our top 10 holdings. Lockheed Martin is a defense contractor, and they make the F-35 Joint Strike Fighter that is going to replace the F-15 and the F-16. We think Lockheed is in the very early innings of producing the F-35 fighter for not only the U.S. Air Force, Marines and Navy, but seven or eight other countries. So we think there's a lot of growth in front of them, even in spite of sequestration.
Here's a company that today yields 4.43%, that raised their dividend 15% in 2012, and I think they will raise it at least 10% this September. So you have a 4.43% yield today, they'll earn around $9 a share, and the stock is at $103.67, so it trades at 11.5 times earnings. In addition, Lockheed is buying in shares each year, so their share count is obviously getting smaller. We think Lockheed could trade 13 times earnings, so we see appreciation in the share price. We think it could go to $130 over the next 12 months or 18 months, but we see the dividend increasing on top of the 4.43% yield, and it should continue to be a very good total-return vehicle for the Hodges Equity Income Fund.
Its kissing cousin in a way is Boeing, which we like and continue to add to in the Hodges Equity Income Fund portfolio. This is a company that has a long history of producing fuel-efficient airplanes, whether it's the 737, the 777 or the new 787, and we can see Boeing's business being good for the next 20 years. Even though the stock has done very well recently, it was only three or four months ago when Boeing was having the battery issues, when the stock was around $74 and we were adding to our Boeing holdings. It closed today around $98.67, and yet we still think it's a great buy, because earnings, which were $5.11 in 2012, we think will go to $6.47 this year and $7.22 in 2014.
The stock trades at 13.7 times next year's earnings. Airlines want to replace the older airplanes that they have and Boeing is the premier company to do that. Boeing recently raised their dividend 10%, and they started a $3.6 billion share buyback, so we see earnings continuing to grow. Additionally, Jim McNerney has done a great job in managing Boeing. They've obviously had glitches with the batteries, and any time you start up a new project of this magnitude there are going to be hiccups. Yet they've overcome them in good fashion and the stock has done well. The dividend is not big currently. The yield is 1.96%, so it's a bit different from Lockheed Martin. We think, looking out, it's going to continue to be a winner for the Hodges Equity Income portfolio.
Another type of company like Boeing that doesn't pay a big dividend but that we see doing really well in this environment as the U.S. economy continues to grow is Union Pacific, the railroad company. Their dividend isn't big, yielding 1.8% currently, but they raised it 15% this year. Union Pacific's earnings are...
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- Utility Industry
- Lockheed Martin
- Union Pacific