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Value Portfolio - Value Stocks to Invest in for the Long Run - 2019 Value Stocks - Value Stocks - YouTube
Channel: Learn to Invest - Investors Grow
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Hi I'm Jimmy in this video.
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We're gonna be looking at value
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stocks that are going to make up
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our value portfolio from our Dow
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30 analysis.
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So if you're new to this channel
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Well what we've been doing is we've
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been doing an analysis.
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We call the Dow 30 analysis
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where we analyze all 30 companies
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in the Dow Jones industrial average.
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We then take that analysis and we're
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building three different portfolios
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value portfolio a growth portfolio
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and a dividend portfolio.
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We've already completed the dividend
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portfolio.
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This is the value portfolio.
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Then after this the final piece to
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the puzzle is the growth portfolio.
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So my goal here is to pick
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reasonably priced stocks that could
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do great for long term
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holders.
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Now because part of
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the Dow 30 analysis
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we're only picking companies are
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mostly picking companies that are
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part of the Dow Jones Industrial
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Average. We limited ourselves to
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those 30 companies because I want
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people to be able to see the
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research behind each of the
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stocks that we put in the portfolio.
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Now I do have some add ons that I
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think could be a good addition to
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this value portfolio that are not
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part of the Dow.
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But I did limit myself
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to only analyzing value
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stocks that we've previously made
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videos on.
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So this video is going to be
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less about reviewing the individual
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companies and more about reviewing
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the stock selection process
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for building a value portfolio.
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So our first sector is the
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industrial sector.
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We have three different value stocks
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coming out of the industrial sector.
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First one is 3M.
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Now 3M makes a ton of different
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products. They make tape they
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make posted notes.
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They have security gear.
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They have air filters they have
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bandages.
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And the list goes on and on.
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Now this is their chart over the
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past five years as we could see
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they had a pretty big drop in their
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stock price at the end of April
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and in early May this drop
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was from a missing earnings and
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management came out and said they
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also lowered guidance
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going out the next couple of years
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now. Personally I think that this
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sell off was a bit of an
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overreaction by the market which
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is OK because this gives us our
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value opportunity.
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OK now we shifted our next value
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stock Boeing.
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Now this one's interesting.
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They've had some really crazy
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couple of years.
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So we we I'm sure we all
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know that they had a few terrible
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plane crashes and that
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has really hurt the stock's
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ability to keep climbing higher that
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some inventory issues for a while
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and as we could see with this
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stock chart they haven't done much
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in the past year and a half or so.
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They've also been caught in the
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middle of the whole trade war
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situation.
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We could actually say the same thing
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for 3M but
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this is actually it serves our
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purpose well because since we're
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building a value portfolio
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I'm assuming the trade war situation
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is a temporary situation and I
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would expect both this both
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Boeing and 3M to do
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well in the long run.
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Okay. Last industrial companies
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United Technologies now United
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Technologies is super interesting
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because they just recently announced
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that they're going to be merging
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with Raytheon.
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Now this is an all stock merger
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and United Technologies
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is the bigger of the two companies.
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But Raytheon isn't that
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small.
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It's got about a 50 billion dollar
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market cap.
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So in the long run I think that this
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merger will do well for both
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companies and at the end of the day
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I think that they will do better
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together than they were apart.
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I think the the economies of scale
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that they pick up for that from this
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merger will ultimately be be
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a good thing for the stock and
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in the long run.
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I think that this will be a great
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addition to a value portfolio.
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Okay. Back to our valued stock
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portfolio.
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So up next we have the financial
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sector in the financial sector we
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have two companies two really good
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companies Goldman Sachs
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and J.P. Morgan.
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Now I like both of these companies
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for very similar reasons.
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First Goldman Sachs
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Well they are one of the biggest
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and most stable investment banks in
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the world.
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Then J.P.
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Morgan Chase they're one of the
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largest and most stable banks
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in the world. Now I think that
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it's going to work to their
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advantage in the long run.
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The financial sector has been going
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through a lot of different changes
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recently and
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ultimately it seems that the
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larger companies are expected to do
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better as they continue
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to consolidate and continue to make
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a creative acquisitions that
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could ultimately help all of
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the top dogs in the industry.
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Now I think that these two companies
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in particular are going to do
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the best in let's say the next
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three or four years.
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Okay. Now we jump over the health
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care sector.
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We have two companies Johnson and
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Johnson and Pfizer.
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Now these two companies are great
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defensive names.
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And I think they make a good
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addition to value portfolios.
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But on the negative side
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we'll pick Johnson and Johnson as
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an example.
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They've seen a ton of well-deserved
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criticism lately.
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And if that alone kept them
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out of the portfolio I completely
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understand.
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So even though.
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The stock has really not done much
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over the past two years or so.
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Revenues and profits have continue
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to climb and I would expect for
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eventually the stock is going
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to catch on to how well profits
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are doing.
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Now if we switch over to Pfizer Well
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there we can see that Pfizer's
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profits have continued to climb
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nicely despite the fact
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that the pharmaceutical industry
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has faced a bunch of headwinds.
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And I also expect
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their stock to continue to move
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higher over the next couple of
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years. OK.
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Next up we have the energy sector
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in the energy sector we have two
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companies Chevron and
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Exxon now out of these two
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companies.
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My favorite company is Chevron
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although I also like Exxon.
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I'm just a bigger fan of Chevron's
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long term stability.
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Now both of these companies are
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heavily reliant on the price of oil.
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This is what crude oil has done over
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the past couple of years.
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Now this particular chart is WTI
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oil which is oil that comes out of
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West Texas but something like
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Brent oil which is comes
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out of Europe.
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Well that price chart looks very
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similar to this one.
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So oil hasn't done all
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that much it's been somewhat
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volatile but it hasn't done all that
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much since the collapse in 2014.
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But Exxon and Chevron have
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both done a good job of growing
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profits and I expect for this to
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continue over the long run which is
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why they would end up in a value
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portfolio like this.
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Okay. Now we jump over to
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information technology here
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we have both Apple and Intel
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now considering both of their
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size scale and general
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reliability.
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Well it seems that they
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are trading at a pretty good value
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right now because right now
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Apple stock is trading at a PE of
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about 17 X and Intel
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is trading about 12 x.
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Meanwhile the S&P 500
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is trading at an average of about 20
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x. So over the past few years
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Apple has seen a decent amount of
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volatility but
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Apple stock as we could see hasn't
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done all that much in those two
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years.
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Now when we look over at Intel
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well intel they had a big disappear
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on fears of growth
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and trade tensions.
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Well from a value stock perspective
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both of these well
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this type of activity I think makes
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it better and more interesting when
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building a value portfolio.
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They continue to grow profits but
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the stock just sort of stalls out
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for a bit. Now this brings us to our
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last sector in our last company for
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that matter and that company is
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Walgreens.
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Now I'm actually a fan of Walgreens
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from a value stock perspective.
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And as we could see in this stock
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chart here well a lot of these dips
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were caused by overall industry
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pressures.
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And I actually think that given the
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industry pressures Walgreens
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has done a pretty good job of
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positioning themselves in the face
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of drug prices
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and retail pressure in general.
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Walgreens has gone out they've
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acquired a piece of Rite Aid
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and they've done a lot to try
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to offset what has
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been happening to the general
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industry.
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Now this actually leads us to some
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potential add ons that I think
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could make this whole portfolio a
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little bit better.
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One easy one is to add CVS
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right alongside Walgreens.
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Now I actually think that CVS
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is a bit more of a defensive play
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than Walgreens is because CVS
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acquired Aetna where
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Walgreens went ahead and they
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acquired Rite Aid.
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So I think paring those two together
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CVS was is not in the Dow.
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That's why I sort of making an add
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on here.
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Another good addition to this
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whole portfolio would be over in the
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industrial sector and that is to
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add General Electric to it.
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Now you might have seen the GE
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video I just recently did if not
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once again like the description
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below but this
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would be more of a speculative
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holding. I think that this has the
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potential to have an enormous
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upside over the next
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few years.
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But there's also some risk involved
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in that so that only makes sense in
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our portfolio if we're willing to
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take a little additional risk.
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Now another addition to this whole
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portfolio that we could easily
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make the argument is the most
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important addition we could make
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would be to add an ETF to this whole
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mix because personally
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I found that building a value
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portfolio when the stock market is
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up at all time highs is
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somewhat of a tricky thing to do
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with some of these we had to stretch
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you know our accepted term
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of value. This is much easier to do
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when the market crashes and
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I'm not quite sure these total 14
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companies assume we bought all of
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them is enough diversification.
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So if we would add an ETF like VOO
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which is an S&P 500 ETF
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put out by Vanguard they have
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a fee of about 3 basis points
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and that would add the
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entire S&P 500
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to this portfolio.
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So in the long run I think
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that's a very smart thing to do
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if we're trying to get enough
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diversification on top of
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a solid value base.
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So I believe that for the long term
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buy and hold value investor
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this is a very solid portfolio.
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I think this would. Quite well.
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Another thing we could do.
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They're not stocks so I didn't
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include them in the core would be to
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add some corporate bonds corporate
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bonds at a certain amount of safety
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and they tend to do well when the
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market struggles.
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But my question is to you
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are there any value stocks that are
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not included in this that you would
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have included if you do
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know some that aren't in
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the Dow or even if they are on the
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Dow. Please let me know.
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Perhaps I can go ahead and try to
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make a video on those companies.
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So if you happen to know any even if
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they're from companies outside the
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United States please let me
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know in the comments below I'm sure
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the community would appreciate it
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because diversifying this type of
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portfolio with some international
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holdings would be a great twist
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to this whole thing.
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So thank you for stick with me all
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the way to the end of the video if
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you haven't done so yet please hit
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the subscribe button hit the thumbs
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up. Thank you and I'll see in the
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next video.
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