Outlook for October 2015

Its the official start of the fall season and the market dynamics are in full swing. We have started seeing some wild gyrations in all the markets – stock, bond, commodities and forex markets. The prime focus is of course on whether the US Fed will raise the rates this year. The Fed passed on the opportunity to raise rates in September and have kicked the can down the road – which the market did not take well. The bond market is pricing-in the probability of an increase in interest rates up in the low-to-mid-40% range for December of 2015 (by 25 basis points). It is important to keep in mind that the Fed still sees deflationary pressures everywhere in the market causing them to stumble in their path to higher rates. Whether the Fed will do it or not remains to be seen. No move is expected in October.

On the Canadian front, the focus on the federal election (on Oct 19) is heating up. The central bank is not making any moves at the moment and taking a wait-and-see approach after two cuts in interest rates so far this year.

Outlook for October 2015

In February, we started putting together an index-based ETF portfolio for my wife’s portfolio. In order to avoid buying at a market top, we started off with a modest amount of funds put to work. We will continue building our position over the course of the year. The portfolio details are shared here. As for my portfolio, I hold a decent amount of cash as discussed in my 2015 goals post. I am well above the 3-5% of cash position target to take advantage of market corrections.

Portfolio Considerations

I’ve made plenty of new purchases over the course of summer and am spread thin. For the remainder of the year, I intend to add and build on the existing positions instead of adding new names (unless something un-passable comes up). A lot of the companies are attractively priced and the following table details my portfolio holdings and some metrics associated.

Portfolio-Outlook-October2015

Dividend Increases

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

  • Amgen Inc (AMGN) – last increase was 30% in October 2014
  • Kinder Morgan Inc (KMI) – last increase was 2.08% in July 2015
  • Omega Healthcare Investors Inc (OHI) – last increase was 1.85% in July 2015
  • Starbucks Corp (SBUX) – last increase was 23% in October 2014

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 value reading your questions and comments.

Disclosure: My full list of holdings is available here.

Photo Credit: Tambako The Jaguar

24 thoughts on “Outlook for October 2015

  1. Hi R2R,

    I dont own any of these, but was commenting on a couple of other guys’ stock watches for October, and noting that Emerson was common to 3 of them, along with Cat on 2. For me, I’d probably go with KMI and OHI if I had to choose from the 4. This is mostly because I don’t know enough about Amgen, and I don’t like Starbuck’s coffee, HAHA! However, the point for you is that if they’re good companies, and are increasing their dividends above the rate of inflation, then it’s a win-win situation.

    Cheers

    • Hey M,
      Cant really argue with purchasing EMR. Its been on my watchlist for a while – and the fundamentals seem great. Its really hard to ignore a 4%+ starting yield on a dividend aristocrat having raised dividends for more than 50 yrs. Both KMI and OHI are also very attractively priced….def a great time to initiate now.

      Happy investing!
      R2R

  2. I’m holding APPL, CVX, JNJ, O, QCOM, SBUX, and T from your list.

    I added more T at 32 last week.

    I’m looking at doing a long put on APPL today, but I want a huge margin of safety so it depends on what premiums are going for.

    • Hi Devin,
      Thanks for sharing your holdings and recent transaction. All great companies that warrant more buys imo. T at $32 is a great purchase as well – I wish I had more free capital to buy. I am running fairly low on the cash, and hoping to build up the reserves.
      APPL is undervalued – a PE of 12 and Forward PE of 11.7 is very attractive. Looking forward to see when you pull the trigger.

      Happy investing!
      R2R

          • Correct, in that neighborhood. That’s based on the $9.13 yearly estimate for qtr. ending 9/15 to be reported on 10/27/15. (not recommending anyone buy or sell anything), but yes, personally I need it to be under 103 and I would still sell a put for it at either 95 or 100 depending on the margin of safety and the premium.

  3. With thye creation of my play money fund, the goal is to invest in dividend companies and enhance performance with options. In that sense, EMR is on my watchlist, next to ams:una

    I wait for some cash to free up…

  4. Nice watch list. I’m considering AAPL if it falls to the 90s again. It’s a long shot as the company is doing a huge buy back and everybody love the stock. We will see what happen.

    I think WPC has also increased dividend.

    • Hey Vivianne,
      If AAPL falls to the 90s, that would be an amazing find. It is entirely possible as last month’s correction took AAPL briefly down to the 90s. Hanging onto some cash hoping for some market panic.

      I dont follow WPC as closely since I dont own it, but thanks for the mention
      R2R

  5. Your portfolio is looking good R2R. I own 3 of the 4 stocks you are hoping for dividend increases on. Let’s hope it happens soon. Last week I added more AMGN and GILD, and initiated positions with UTX and EMR.

    Keep up the good work buddy.

    • Thanks for stopping by and the comment, IH. Good to hear that you loaded up on AMGN and GILD – I think those two companies complement each other very well. Looking forward to a big div increase this month from AMGN.

      Hope the transition to the new domain went smooth.

      cheers
      R2R

  6. Like you, I intend to add and build on the existing positions instead of adding new names. There are too many good deals in many of the names I already own so why go shopping elsewhere at this time. I see we are considering some of the same names for October. Canadian banks are still looking enticing and I saw ADM as well. Of course, other names you are considering are also in my portfolio too. Look forward to seeing where you deploy your cash.

    • The Cdn bank and ADM sure are near the top of my list. They are attractively priced and definitely worth adding at these levels.

      Looking forward to see which ones you purchase this month
      R2R

    • Listening to the pro guys! 😛 if we think the stock is a great deal at a higher price, when the stock go lower, people just look at the price in red and refuse to make any buy decision, the herd mentality is hard to cure.

  7. There are plenty of companies on that list which I find interesting (JNJ, OHI, T). I’m a bit pessimistic about how the market will end up being by the end of 2015, I think you are doing the right choice by just averaging on existing holdings. Looking forward on how you will put your money to work this quarter.

    – mraitn

    • Hi mraitn,
      Most indicators seem to point to some rough months ahead – thats why I am holding onto some cash instead of going all-in. I am hoping the market will panic and give us some good valuation to initiate/add in the coming months.

      Best
      R2R

  8. R2R,

    I can’t wait for that KMI announcement to come. I’m interest to see if they are going to stick to their promise of 10% annual dividend growth rate or if they will back off now thta their stock price has fallen and oil prices continue to remain low.

    One quick question. Do you rank the stocks on your watch list? The list has a lot of great companies on it; however, if I had to make a quick decision, I would have a difficult time selecting just one of them haha

    Hopefully you continue your tear in 2015 and have an amazing October!

    Bert

    • Hi Bert,
      I am looking forward to the announcement from KMI too – they still have some firepower and I think they might increase this year…but things might change a bit more going forward – for the reasons you mentioned.
      I dont really rank them…I tried to come up with a ranking system earlier this year but things seemed very random at the time. I will have to take another crack at it to see if I can come up with a good system.

      Thanks for the wishes and the comment. Wishing you the same for October and rest of 2015
      R2R

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