RD's Picks

By chasing some falling knives last weekend, I got my SLO portfolio a little out of whack with my goal of a fund primarily focused on income. I also decided bringing in a consumer goods and/or healthcare company to bolster the defense and add a couple more divvy payers would be a good idea.

I'm getting pretty close to all in with the cash position now just a little over 5%.

New Adds
For a consumer goods company, I made a small buy in Unilever plc (UL). I also considered the other Unilever (UN) and Proctor & Gamble (PG). I selected UL primarily because it has slightly better long term growth estimates than PG or UN. Unilever PLC is based in London; currently trades at a forward PE of 15, PEG of 1; profit and operating margins are 12 and 14% respectively. Dividend yield is 2.9%. Trading today filled my order bringing it to about 2.5% of the portfolio.

From healthcare, I chose Novartis (NVS). Novartis is a Swiss based pharmaceutical and consumer health company. In addition to pharma, they have operations in animal health, Gerber baby products, and CIBA vision eyecare. It trades at a forward PE of just under 15, PEG of 1.25 and pays a dividend of 1.7% on the current share price. The pipeline looks solid and they've been reporting double digit revenue and earnings growth. NVS jumped above the limit price of my order on the open and didn't pull back enough to fill any shares during the day. I'll leave the order open and see if it'll pull back and fill over the next couple of days. If not, will either re-evaluate or shift to another, similar company.

Commentary
I finally had a positive day in the contest, although I lost ground to the S&P 500 so suspect my standing is still near the bottom. Overweighting GSF and then averaging down has really hurt the portfolio performance. I continue to believe the drilling sector is cheap and am looking for this to run up strongly - although it's beginning to look like it may not happen in my lifetime.

Other disappointments are Chevron, American Railcar and Prospect Capital.
The dip in oil prices is probably hurting CVX, like GSF, I think it'll come back up.
I can't find any news on ARII explaining it's drop from 40 to under 30.
Prospect Capital (PSEC) makes private placement loans to small energy companies and often takes equity positions as part of the deal. There's no news, so I believe it's just getting a double whammy by being associated with high yield debt and energy. Yield is now up around 10% if the payout holds. I scraped a few bucks together and bought a very small position in PSEC in my real portfolio this morning.

Disclosure: I own shares of CVX, GSF and (now) PSEC.

Comments: View Comments |  Monday August 6, 2007