Sunday, July 19, 2015

Recent Buy

Hello,



If you follow my blog, I recently mentioned that NOV is starting to look very attractive.


I made the following purchase on July 17th, 2015:


Ticker
Price
Number of Shares
Dividend
Est Forward Div
NOV
$42.71
35
1.84
$64.40


National Oilwell Varco (NOV)  Summary


National Oilwell Varco (NOV) is an international oilfield services company that provides the hardware components. NOV’s customers are Exxon Mobil (XOM) and CONOCOPHILLIPS (COP) as well as large drilling companies such as Transocean (RIG).



NOV 7/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
6 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
No
Narrow
M* & S&P
Credit Rating
> BBB+
Yes
A+
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 0.71
Interest Coverage 34.41
Debt to Equity 22.2
M* & S&P Stars
> 3 Stars for both
Yes
M* 5 Stars
S&P CapIQ 3 Stars
Payout Ratio
<60%
Yes
35.00%
Dividend Growth
& Yield
Dividend Yield
>3%
Yes
4.10%
Dividend Growth
>5%
Yes
60.10%
Chowder
>12%
Yes
64.20%
Valuation
Yield/Avg Yield
>1.1
Yes
3.15
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 63.68
Low Point 39
P/E
Below Mid Point
Yes
Median 13.28 Current 8.22
DRRM
~10%
Yes
Assuming 5.5% growth; projected return=11.33%
M* Estimate
<M* est
Yes
M* 66
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 58


Note: data from M*, Yahoo, Gurufocus and CCC


I will document my analysis in a separate post. The only issues are the short dividend growth history and narrow moat, and of course, the short-term noise from the energy market.


What do you think of NOV?

D4S

8 comments:

  1. I recently purchased a small stake in NOV as well. Only to watch it drop a few percentage points! Oh well, better watch for an opportunity to average down!

    DK

    ReplyDelete
    Replies
    1. DK,
      Recently, I averaged down on a few of my holdings as well. I normally do this if a company goes down 7-10%. With energy and the short term volatility, I don't know if this is the bottom for NOV or not. However, my investment outlook is way in the future, so I think I am okay here.
      Thanks for sharing your thoughts.
      D4s

      Delete
  2. I think NOV is a great choice but I'd say it's far from being a core holding. The dividend growth history isn't exactly entrenched into management yet and they've already missed a regular increase time based on last years increase. I can't say I blame them for holding the dividend steady but it'll be interesting to see how well they protect the dividend going forward and how committed they are to it. Still a solid play on the rebound in oil prices leading to an uptick in drilling and therefore parts/services from No Other Vendor.

    ReplyDelete
    Replies
    1. PIP,
      No Other Vendor - that's a good one!
      I agree with you on the short dividend history and missing of a div hike after 4 payments. However, I think they will still pay a dividend - probably hold the growth until the sector rebounds.
      They have a good backlog of orders, so they can hold out for a while.
      Thanks for commenting!
      D4s

      Delete
  3. Nice purchase, Div4Son. Looks like the fundamentals are great...should do well over the long run

    R2R

    ReplyDelete
    Replies
    1. R2R,
      Thanks for your comments. Absolutely, this is a long term trade. Only long for me.
      D4s

      Delete
  4. Looks like a very strong company but I'd say NOV is probably not a stock that I'd hold as one of my core holdings.

    ReplyDelete
    Replies
    1. Tawcan, thanks for your thoughts on this. I see some short term noise affecting the energy sector but this is just a distraction. The only issues I see are the short dividend history and the narrow moat. For me, I am still building up all holdings one company at a time. I've doubled up on a few - but far from what you guys would call core holdings. Actually, I don't really have a 'core' holding concept where one company is treated different from another.
      D4s

      Delete