Outlook for December 2014

Outlook for December

The year is drawing to a close and we are looking at records being broken week after week with all time market highs. November saw a surprise interest rate cut from China. On the Canadian front, OECD has called for Bank of Canada to increase the interest rates as early as May 2015. However, there have been reports that Bank of Canada might wait until the end of 2015 to start raising the rates. It is also interesting to note that the economists are calling for steady rise of rates once increased instead of a rise and pause there. But then again, most of these economists also said that we would have higher rates by now! Personally, I dont think the BoC will be rushing to raise the rates…the fall in commodities and oil market will bring some rough times for the Canadian economy and the bank will need to keep the rates down.

Outlook for December 2014

Oil and commodities seem to be the sectors under most pressure. Folks looking for value in the equity markets can easily pick up blue chip names trading at discounts in these sectors. Its a great time to build up a solid energy portfolio. The lack of moves from OPEC have sent oil prices crashing, we are not yet close to seeing the end of this trend. The strong US$ has also been a contributing factor in the drop in oil prices – which will be welcomed with open arms by energy consuming public, industries and countries; not so much from the producers.

I am fully invested, with just a 1% cash position in my portfolio. I will be concentrating on rebuilding my cash positions over the month unless something un-passable comes up. Some of the stocks that I am keeping an eye on:
My existing holdings
  • Qualcomm (QCOM) designs, develops, manufactures and markets digital communications products and services based on CDMA, OFDMA and other technologies. QCOM has been raising dividends for 12 years and has a 5-yr DGR of 16.95%. Qualcomm is facing some serious issues in China: the customers have outright rejected paying the licensing fee for using QCOM technology and the Chinese government has slapped the company with anti competitive behavior allegations. However, the risks are now priced into the stock and the stock looks attractive. The company is still expecting approx 10% EPS growth for the next five years.
  • RioCan REIT (REI.UN.TO) – is one of the largest REITs in Canada and owns a lot of retail real estate across Canada. Although not a dividend grower (5-yr DGR 0.50%), the stock is currently undervalued and I am considering adding to my position simply because there is plenty of value to be found at these levels.

Possible new additions to my holdings

  • BHP Billiton (BHP) (BBL) – is a global mining giant that discovers, acquires, develops and markets natural resources. This company has been popular amongst other dividend growth investors over the course of November and I still havent completed my research to make a call on the company. The company is a Dividend Contender having raised its dividends for 12 consecutive years with a 5-yr DGR of 10.6%.
  • Enbridge (ENB) and TransCanada Corp (TRP) – are both pipeline companies based in Canada. The downturn in energy sector has affected the pieplines, although not as much as the oil majors and services sector. Both ENB and TRP have indicated that they expect the cash flow to increase over the coming years (TRP has indicated that the dividend growth will double to 8% for the next three years). However, my portfolio is already heavy in pipelines, so I have to keep my overall diversification in mind.

Dividend Increases

I am expecting dividend increase announcements from the following companies in my portfolio.

  • Archer Daniels Midland (ADM) – last increase was in Dec 2013 by 26%.
  • AT&T (T) – last increase was in Dec 2013 by 2.2%.
  • General Electric (GE) – last increase was in Dec 2013 by 16%.
  • Realty Income Corp (O) – last increase was in Sep 2014 by 0.17%.

What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I deeply value reading your questions and comments.

Disclosure: My full list of holdings is available here.
Photo Credit: Sage_Solar

13 thoughts on “Outlook for December 2014

    • Yup, the so called “experts” always seem to get it wrong. A few weeks ago the media reported that 6 months prior to that 100% of economists had predicted we’d have higher rates by now. I club such forecasters with the weatherman. Their word means nothing to me 🙂

      R2R

    • First time I bought RioCan was right at the lows of the market crash in 2009. I havent added since…but it sure looks very attractive right now. Would love to add more to my position.

      cheers
      R2R

    • Good call on BBL, Alexg. The company sure has been popular with a lot of DGIs…and for good reason. It looks pretty attractive and I wouldnt mind adding it to my portfolio.

      Best wishes
      R2R

  1. I remember last year when REITs got hammered, I went panick buying on O, I got rewarded for it. Right now the same thing is going on with the energy sector, I am expecting to be heavy on oil for the next few months and it will be painful (just like last year) but I still believe oil is not going anywhere and patient investor will be rewarded.
    Take care,
    FFF

    • Likewise, I bought my first share in O last year around this time and kept adding for the next month or two. Now, i am happy I did. Oil looks in a similar place right now. Energy demands arent going to go down over the long run. Good time to load up on energy companies.

      Thanks for stopping by and sharing your thoughts
      R2R

  2. R2R….
    Once again your thoughts are right on target. I’m looking for this dividend increase announcements also. I look for oil stocks to stay down for several months but I’ll need that much time to build up a sizable position. Good Luck and Good Trading.
    Respectfully,
    Dennis McCain
    dennismccain.weebly.com

    • Thanks for the thoughts, Dennis. I am looking forward to the dividend increase announcements…unfortunately I am fully invested and wont be buying any more cheap energy stocks. Happy trading! Looking forward to see what you will be buying.

      Best wishes
      R2R

  3. Interest rate will go up but I don’t see it going up all of a sudden, that’ll harm the overall economy. I hope to pick up a few more energy sector stocks to take advantage of the price drop.

    • Im not so sure about the interest rates going up. The depressed oil prices will keep inflation suppressed and might also cause job losses in western Canada. In any case, I dont see BoC moving before the US Fed to raise rates. I guess everyone is just watching the events to unfold before making a call. Good call on picking up energy stocks…definitely a great time to pick up some quality names.

      Thanks for stopping by and the comment.
      R2R

Leave a Reply

Your email address will not be published. Required fields are marked *