Stocks to watch in summer

Hey guys, as summer is here my writing frequency went a little down, sorry for that but summer time is one of the best times of the year :). Nevertheless let’s have a look at the current development of the stock market. Although I said my main investment focus until the end of the year will be on investing in ETF, there are currently 2 companies getting very close to my buying zone, and I am currently thinking of adding one of them to my portfolio.The two companies are 2 big players in their sector and one the oldest companies in the US. I am talking about AT&T and General Electric both of them experienced a decent drop in their share price in the last couple of months. But let’s have short a look if they are worth and investment.

General Electric

GE is one of the stocks I do not have in my portfolio so far, the main reason for it is that it was quite expensive in the last year, but considering the latest drop, the company gets more and more in my investment focus. The company itself is also in transition phase and is getting rid of some business sectors to be more competitive in the future. This does of course effect the growing rate but to me GE is doing very well in that restructuring phase and is slowly able to get back on track again. So this means for me the decrease in the share price is more than a typical market overreaction.

source:morningstar.com

As you can see in the chart above the price went from a 52 week high of 32.59 USD to now 25.91 USD, that is a decrease of 20.5% but this is not reflected in the fundamentals of the company. Looking at the development of their liabilities GE is one of the few companies who was able to reduce their debt in the last 5 years significantly. They were even able to cut their liabilities by more than 270 bn USD. No doubt they are still on a very high level but the development does look really good and the financial situation now is much better than it was 5 years ago.

GE currently pays a yearly dividend 0.96 USD, which makes it a yield of 3.71%. Based on the pay out ratio I do not expect much growth in the near future but the EPS estimates for this year of about 1.59 USD and for 2018 of 1.81 USD will leave some more room for future growth.

AT&T

The other company, which gets more and more in my focus is AT&T, which is already in my portfolio but as I mentioned in the stock analysis I am always having T on my watch list of potential buys. Similar to GE, AT&T also experienced a decent decrease in its share price in the last couple of months.

source:morningstar.com

As you can see in the chart above, the share price went from a 52 week high of 43.02 USD to now 36.51 USD, that is a decrease of 15.1%. Based on yearly dividend of 1.96 USD the current yield is at impressive 5.37%. Another impressive point is that T was able to increase their dividends in the last 32 years. Nevertheless their is one factor which concerns me a little bit. It is the development of the debt level, in the last 5 years debts got more and more and with the latest Time Warner it will not get much less in the near future.

Conclusion

Although AT&T offers a great yield I am currently tending to buy GE instead of AT&T. The reason is quite simple GE is able to decrease their debt and AT&T currently increases their debt year by year and increasing their debt level is for me always a warning sign. So to sum up a good entry point for GE is at around 24 USD, this would make a yield on cost of 3.9%. Last but not least I have to admit I am always a fan of a conservative financial management and GE makes currently the right moves into that direction.

What do you think about GE and AT&T? Do also consider them to buy?

Disclosure:

I do not recommend any decision to the reader or any user, please consult your own research. Thank you for your understanding.

1 Comment

  1. Hey DCF,

    i own 190 shares of AT&T and added some recently, but you’re right, the debt level is something to monitor closely. I don’t like it either and hope that the integration of TimeWarner works in the long term.
    General Electric is a giant conglomerate and the price drop put them on my radar. But I’dont think that i will pull the trigger with GE.
    I just posted my consumer watchlist…
    https://dividendsolutions.wordpress.com/2017/07/24/watchlist-consumer-stocks/

    Best Regards,
    DividendSolutions

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