The stock markets are down quite significantly since the start of this year and several elements are driving an increased volatility. Whether it’s the threat of Russia invading Ukraine or whether this high inflationary period is there to stay.
Honestly, I don’t know what will happen going forward and some of this stuff really creeps me. As an example, I’m not living too far away from the border of Ukraine (3 hr drive) so it’s really front in mind with many folks over here. At the same time there is this lingering feeling whether Europe is really going to show solidarity if it spills over from Ukraine to some of the former USSR states which are currently part of the EU.
But well, I don’t have influence on it and so far I only know that the stock market has been one of the best hedges to protect our wealth. Even during war times.
At the same time, I’m a capitalist and I’m investing for our family future and and for financial freedom.
That’s why I simply can’t ignore the many opportunities the stock market started to present itself to me. And I’m very lucky with this timing, because not too long ago I realized that I still need to invest more into the stock market.
Hence, a 10% buy-the-dip opportunity to buy high quality dividend growth stocks is something I take any time.
And speculating on whether it will stay a buy-the-dip opportunity or whether it turns into a severe market crash is something I leave up to our beloved CNBC meteorologists.
What I do know is that consistently dollar-cost-averaging and reinvesting dividends works for me.
Having said that, let’s get into the core of this post and let me share with you 4 stocks I purchased so far in February.
Texas Instruments Inc. ($TXN)
I’m so happy with this new addition to my portfolio!
This is really one of those stocks which I really misunderstood a few years ago. I still saw it as a company which produced calculators and who still uses such calculators nowadays?
Oh boy, what have I been wrong! And credits also here to you, the European dividend community, because several of you have really explained very clearly to me what this company is all about.
Having said that, Texas Instruments is one of the largest analog chips manufacturers and a top 10 semiconductor producer in the world. Honestly, it took me some time to understand what analog chips are, but I found the following explanation very useful:
Analog semiconductors condition and regulate “real world” functions such as temperature, speed, sound and electrical current. Digital semiconductors process binary information, such as that used by computers.
I believe that the whole semiconductor industry is having a very strong catalyst with the move to “everything-digital”. Industry predictions are that this industry will continue to outperform other sectors over the next 10 years.
Texas Instruments are also quite optimistic themselves and they continue to invest decent CAPEX to secure future cash flows. I can really advise to have a quick look at the following investor presentation . Few highlights that caught my attention:
- 12% annual free cash flow growth between 2004 and 2021
- 18 years of consecutive dividend growth with a 22% 10 year compounded annual growth rate (CAGR)
- 46% of reduction in shares since 2004
Besides this the company has a 54% debt to equity ratio and a A+ credit rating. This tells me that their balance sheet is sound which should give the company flexibility during times of distress.
Having said that, I see Texas Instruments as a high quality company at a fair price (see picture below). I initiated a position by buying 10 shares at $166 and these shares should give me a $46 in additional annual dividends going forward (2.78% dividend yield).
Last but not least, I aim to buy more if the share price drops another 10% or so as part of a dollar-cost-averaging strategy.
Castellum AB ($STO:CAST)
The next stock I’m really happy with is Castellum. This is a brand new position which I was able to initiate after more than a year of waiting. I honestly really thought that the stock flew away for me from a price point of view, but somehow I got really lucky late last week.
A little bit of background about the company: Castellum is one of the largest REITs in Sweden with presence in office space, public sector properties, warehouses & logistics, retail and light industry.
The company grows it’s Net Asset Value via targeted investments and targeted mergers & acquisitions. As an example, the most recent acquisition is Kungsleden which the company acquired for ~27 billion SEK.
Having said that, Castellum is a proud European dividend aristocrat with 24 years of consecutive dividend growth. Their most recent dividend hike resulted in an increase of 10% to 7.60 SEK per share. This means that the company has been growing their dividend with a 8.73% 5 year compounded annual growth rate.
But it gets better, they also announced a new payment schedule from bi-annually to quarterly. This is a very welcome move, because there are not so many European dividend stocks paying a dividend on a quarterly basis.
What’s not to like you might think? Well, there has been some noise in top management in the recent months and now Rutger Arnhult is the new CEO. He seems to have an extravagant, but good reputation from what I heard from some Swedish followers.
Time will tell us whether this was a good move or not.
Nevertheless, I’m quite bullish on this company and how they are positioned for the future. Just don’t expect fireworks here, because in the end it’s “just” a Real Estate company.
This purchase added 760 SEK in annual dividend income which is an equivalent of ~72 Euro.
FYI: I’m using Net Income from Operations as FCF / FFO for calculating the fair value of Castellum.
I did a full stock analysis last year about this company, so if you are interested to learn more about the stock then have a look at the following video.
Intel Corp. ($INTC)
Intel is the second semiconductor I bought this month. It’s not an entirely new position, because I started to build up a position mid December last year.
So far I have been staying away from Intel and especially when Bob Swan was leading the company. However, the incoming CEO Pat Gelsinger really started to change my mind. Somehow he’s really inspiring me by bringing back the geekiness into the company and that’s something I’m very bullish on.
Intel is a technology company and the last thing we need are bookkeepers at the helm. Pat Gelsinger is different, he comes across like a founder-like CEO with a very strong energy to bring Intel back to where it belongs.
And that’s off course the question!
We shouldn’t ignore the fact that this is a very competitive and very complex industry. Becoming the market leader requires a lot of talent and upfront investments and Intel lost it’s mojo several years ago. So there is a genuine question whether Intel will be able to realize its plans and regain it’s dominance in the semiconductor industry.
That’s why I treat my investment in Intel more as a turnaround story than a dividend growth story.
Having said that, I believe he can turn it around. If you are interested to learn more about my thoughts on Intel then check out one of my latest videos on YouTube:
PS: I have classified Intel as a Tier-3 company.
Intel transaction log:
- 13-Dec-2021: Buy @ 50.00 USD
- 27-Jan-2022: Buy @48.40 USD
- 28-Jan-2022: Buy at @ 46.50 USD
- 18-Feb-2022: Buy @ 45.50 USD
Last but not least, I sold a PUT option with a strike price of 40 USD and a June 2022 expiration date. I would be more than happy to buy some additional shares at 40 dollars.
Meta ($FB)
Facebook is a very small position in my portfolio which is part of the 10% non-dividend stocks section. Within this section I own a share of Google, quite some shares in Alibaba and a few shares in Facebook.
These stocks are typically high growth stocks which I consider undervalued and which I believe are well positioned for the future.
And that’s where the fun start, because many investors I know see Facebook as a sin-stock. Hence, not much different than a tobacco stock.
I understand where this thinking comes from and I do have my doubts about Facebook’s data privacy policies. It’s clear that they have a lot of work to do that on that front.
Unfortunately this is also the part where Facebook is sensitive in its revenue stream, because it really feels the impact of the policy changes by Apple in the app store. It became harder for advertisers to target consumers with fit-for-purpose advertisements and this has a direct impact on Facebook’s revenue.
Hence, no wonder that the price dropped 38%. On the other hand, I find this an overreaction of the stock market. Meta is so much bigger than just Facebook with Instagram and Whatsapp. Although, we can’t ignore that the Facebook app is the main revenue generator.
At the same time the company also announced to heavily invest into the metaverse. I really don’t know whether this is money spent well, but on the other hand we’ve seen what happened to Intel by underinvesting compared to their competition.
That’s why I think Meta is doing the right thing right now. I also think that they are well positioned with their Oculus which was a top selling product during the Christmas holidays.
Hence, it’s not an easy investment case, but I believe in their long term prospects. At the same time I believe that the risks are priced in and that there’s an attractive reward from a long term perspective.
Having said that, I was bit early, because I bought those few shares at 240 USD when averaging up my position. I might consider adding some more if it drops towards the mid 100’s with the same fundamentals.
Final Thoughts
It was a expensive month for me, but I’m very happy with the opportunities the stock market provided to me. In my opinion Texas Instruments and Castellum are high quality stocks at a fair price. Hence, I’m very comfortable with holding them for the long-term.
What do you think? Do you agree with the quality of these stocks? And what did you buy in February?
Everyone, stay safe, keep your head cool and thanks for reading 🙏
Yours Truly,
European Dividend Growth Investor
