5-Bullet Sunday

5-Bullet Sunday – #36

This week was a very interesting week for me. Time passed by so quickly that it made me realize that I need to slow down a bit as well.

Luckily I am spending most of my time this weekend in the garden and besides that I will be watching the Formula 1 Monza grand prix this afternoon (#lazytime). Let’s cross fingers that Max Verstappen will get a podium place this year. It’ll be hard, because he’s starting from the 5th position on the grid.

This week I was also busy with content creation and feel free to read / listen if you haven’t done so yet. Feedback is always welcome 🙏

Microsoft – Stock Analysis
Dividend Talk – Episode 12 – How to value and choose growth stocks (with Investment Talk)

I would especially recommend to listen to the latest Dividend Talk episode. I personally find growth stocks really hard to analyze from a valuation perspective and I found that Investment Talk was able to explain his approach in a simple and plain manner. I learnt a lot and made several notes that I will need to study further on.

Having said that and without further ado, enjoy this week’s 5-Bullet Sunday 👌


5-Bullet Sunday is a weekly blog post with 5 topics that were on my mind this week related to Financial Independence and Dividend Growth Investing or something that just fed my curiosity. An overview of earlier posts can be found here

🌟 Recent purchase

It may come as no surprise for the listeners of last week’s Dividend Talk podcast, because Danone was our stock pick for the week. Hence, I was able to pick up some additional shares on Wednesday at 54.50 Euro.

I’m still very much in an accumulation stage for this stock and this addition increased my stake to 33% of my desired Tier-1 portfolio position. This means that you can still expect me to buy more of the stock over the upcoming months.

Just as a recap:

  • the company has been increasing their dividends at least since 1988 (32 years).
  • it currently yields 3.74% before tax (French dividend withholding tax).
  • it has a P/E ratio of 19, because their earnings are currently suppressed due to covid-19 impacting their packaged water sales.
  • my fair value estimate is 68.50 and it currently trades at an 18% margin-of-safety
  • their main catalyst is their product portfolio that targets the health-conscious consumer.

🌟 Good old stock market wisdom

Sell in May and go away, but remember to come back in September.

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We all know this quote, so I won’t go to deep into it. But what I can say is that it’s September again 😉

So, let’s do a quick check: was it a good idea to have sold back in May and to re-enter now?

To answer that, let the below chart speak for itself 👇

Price Chart (Yahoo Finance) – EuroStoxx 50

As you can see, it would’ve been unwise this year to have sold in May. This is the case for all major indexes which I’ve checked.

Off course, we just came out of the midst of a stock market crash, but it’s always easy to look at it like that in hindsight.

Honestly, I just prefer the following stock market wisdom:

Time in the market beats timing the market

Ken Fisher

🌟 Innovation Matters

Innovation is an important key-enabler for long-lasting future dividend growth, hence why it’s wise to at least once a year keep an eye on the latest trends in Technology.

This applies as well to my holdings in my dividend growth portfolio. Ideally, every holding is somewhere on the s-curve and they should be continuously trying to find the next one.

S Curve - does your business need to jump to a new model?

As an example:

  • Bayer is spending lots of money on data science to make Personal Healthcare a reality.
  • British American Tobacco is innovating and investing heavily in e-cigarettes to appeal to the younger generation.
  • Ahold Delhaize is innovating a lot in Artificial Intelligence to optimize their flow of goods to keep having an industry superior supply chain.

In this regards, Gartner is a great source for me. Every year they release dozens of reports for many different industries and they’re probably mostly known for the “Magic Quadrant” series (see an example below).

Gartner 2020 Magic Quadrant for Cloud AI Developer Services
Gartner’s Magic Quadrant for Cloud

These reports are costly, but luckily Gartner also publishes some of its contents via blogs.

If you are interested to understand a bit more about what technology could be interesting for some of your portfolio positions, but if you don’t know where to start, then I would definitely recommend to have a look at Gartner’s top 10 Strategic Technology Trends for 2020.

🌟 Recommended Reads

Financial Samurai wrote a very interesting post about the proper safe withdrawal rate. He makes a strong case for why it should be 0.5% instead of the good-old 4% rule. This downward reduction to 0.5% makes me remember why I choose dividend growth investing as a strategy. Yes, generally dividend yields are suppressed for similar reasons as outlined in his post and he actually makes a case for dividend investing as an alternative to the 4% rule. Rightly so, he highlights that it may come at an increased risk.

Engineer My Freedom shared his own story as a dividend growth investor in the latest FI Europe podcast. I know EMF already for quite some time due to our collaboration on the Dividend Talk podcast, but it stays interesting to hear him explaining his journey and his approach to investing.

Dividend Wave is not a having a blog, but he does create very interesting content on Twitter. I just love his one-pagers and this week he tweeted a very interesting one-pager about PepsiCo. $PEP is a tier-1 portfolio position for me so this one-pager definitely grabbed my attention.

🌟 Recommended Video

Can RobinHood investors really influence and drive the market?

Aswath Damodaran gives his unsalted opinion about this and he doesn’t hesitate to criticize the “so called professionals”.

It was a quick one this week. I kept it a bit more to the point to give you bite-size pieces of information.

Like always, I hope that you enjoyed today’s edition.

For now, have a lovely week ahead!

Yours Truly,

European Dividend Growth Investor

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Phil S.
Phil S.
13 days ago

Good thoughts for a Sunday! Timing the market: Can’t agree more – I think one can make more mistakes by trying to time the market vs. just staying in the market with having homework done properly before investing! Innovation: It’s an equally important and difficult topic. Quantifying innovation is not very straight forward, but an essential topic to have a solid pipeline of growth engines. It is part of my Stock-Check-Sheet (qualitative rating) and some do a good job showing innovation projects on their page! If your book bag allows another title, maybe check out Bill Gate’s review on Vaclav… Read more »

Tiago
Tiago
13 days ago

Great content. Thanks

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