Transcript Larry Smith Outlook Stk Mkt - Houston Investors Association

Outlook – Economy , Stk Mkt
1) Earnings p/s increasing 2% p/yr due to Financial Engr.
1) Stock buy-back
2) R/O expensive debt at lower rates
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S&P P/E ratio is currently 20
Demographic change. Aging of population
Manufacturing Utilization Rates remains 79%
College loans to repay before 1st house purchase
S&P P/E ratio is 20 vs an average of 14
China had a 30% Price run-up early 2015 (giving a P/E
of +100) now those gains have been erased.
June study S&P layed by Dividend
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50 top yielding stocks down 7% in 2nd Qtr
Next 50 yielding stocks down 5%
Bottom 50 yielding stock w/no dividend up 6%
Due to looming rate increase
Dividend paying Stocks got crushed
Dow Industries dividend yields increased 18%
over previous year’s June quarters
Projection
• Since 2011
GDP has increased average of 2.1%
S&P sales growth average 4.8%
S&P EPS growth average 4.4%
SPY has increased by 62% or 18% p/yr
• The SPY is flat so far the year I would expect the total
market to increase 4% by year end.
• China’s growth rate will decline
• As we saw the turmoil in Greece and China were both
brought under control.
Stock Recomendation
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MLP
Prior 10 years show two News Letters
Nate – superior earnings growth
Turnaround - recovery
Targa Resources NGLS
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Dividend Growth
1st qtr 2011 $2.33
1st qtr 2015 $3.28 growth +10% p/yr
Total Capital Exp - $800M Maint. -$110M
Does have exposure to lower commodity prices
Distribution growth slower in upcoming year
Distribution is 8.3%
Plains All America -PAA
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Dividend Growth
2010 $1.90
2015 $2.82 growth +9% p/yr
Total Capital Exp - $3,349M Maint. -$224M
Does have exposure to California Oil pollution
Distribution growth slower in coming year
Yield is 6.5% due to recent price declines
ONEOK PARTNERS LP -OKS
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Dividend Growth
2010 $2.20
2015 $3.16 growth +8%
Total Capital Exp - $1,746M Maint. -$???M
Distribution growth 8.5% over last 5 years
Yield is 9.4% due to recent price declines
123 Months Analysis N/P
• Nate's Notes Aggressive
Avg 123 Mo’s
123 Mo’s buy Nov Sell May
1.8%
5.8%
0.4%
4.4%
• Turnaround Small-Cap
Nate Notes
• DIS – diversified entertainment
• Electronic Art (EA) – multimedia & graphics
software
• ILMN - Biotechnology
• Currently rebounding AFFX, - Scientific &
technical instruments
Turnaround Letter
• DW – Drew Industries recreational vehicles
• FRP – Pairpoint Communications
• LAYN- Layne Christensen (Heavy Constr.)
• PGEM – Ply Gem (Building materials)
• MHO – Residential Construction