Brook Reef

Buying NWL @ $22.65 2% position NWL is a stock that I've always had bad luck trading. I like the story and the products - and the valuation is always tempting - but something about the business tends to underperform and underachieve. So the attractive valuation persists. That said, the underlying business has performed at least as well as others in the category - but the stock price hasn't. So we get to buy NWL today with a hefty 4.1% dividend yield and only 13.1x P/E. Using the formula I introduced here - when I bought (more) CAG - NWL shows me a 9.3% total, long-term return vs. the S&P 500 at ~7.1%. I'll dig more into NWL and the strengths and weaknesses of this valuation formula in the coming weeks, but for now I'm continuing to move slowly in the market as it continues to rise.

Buying (more) CAG @ $33.39 Adding 2% 4% position After more watching CAG and analyzing some financials and thinking, I've decided to buy another slug of this position.  ConAgra is a major food packager/producer that we all know and love. Their major brands include SlimJim, Gardein, Vlasic, Duncan Hines, Birds Eye, and more! The stock trades at 12.6x next year's earnings - which is an 8% earnings yield. That's a pretty solid return if earnings never grow - but they will. Additionally, CAG pays a 3.7% yield - which means the payout ratio is under 50% of earnings. A very sustainable and safe level. One way that I simply value stocks is looking at their earnings yield, payout ratio, and GDP growth. Basically, find an adjusted growth rate and add it to earnings yield. Here's how that works for ConAgra: Earnings Yield: 8.0% Payout Ratio: 46.8% Long-Term GDP Growth: 3.5% Payout-Adjusted Growth: 3.5% x (1 - 46.8%) = 1.9% Total Return (Long-Term): 8.0% + 1.9% = 9.9% As compared

Buying PNW @ $68.46 2% position PNW's main utility subsidiary, APS, had a rate case decision come out today and shares are down about 8% because the rate case was "value destructive" and "draconion" due to an allowed return of 8.7% vs. the historical average of ~10%-ish. However, most analysts who use a cost of equity in their valuations would use something between 7-8%. So "value" can still be created with an allowed return of 8.7% and a cost of equity below that. With PNW shares trading at ~14x next year's earnings, the stock is a total buy on this weakness - both on a relative and absolute basis.  If ROEs come down across the country (as they should) PNW will not fall given it has taken the first step down. This would be a great pair trade against XLU too!