DGI For The DIY

[EricL]

Made a trade today.

Sold out of my GPC position for a 21% gain.

Bought GME at $38.49.

GPC appears moderately overvalued according to FAST Graphs with a 19.9 PE vs. a 10 year average PE of 16.6.

GME recently announced a 20% increase to the dividend, which boosted the payout to $1.32 and a yield of 3.4%. The company is trading at a PE of just 11.6, has zero debt, and $650M in cash with a market cap of just $4.45B. Also generates significant cash flow and has authorized a stock buyback worth about 10% of the market cap.

Analysts project earnings to increase by greater than 10% annually over the next 5 years, which is great considering its current low valuation.

[Dividend Watcher]

Eric, that sounds like an interesting company. It's been around for quite a while but it was never on my radar. I guess because, as an old fart, I automatically dismissed any gaming company.

What do you think their secret is that didn't cause them to implode like many other game retailers?

[rnsmth]

I took a quick look at GME. Not interested. Too many questions that need answers.

[EricL]

(03-12-2014, 06:46 PM)Dividend Watcher Wrote: Eric, that sounds like an interesting company. It's been around for quite a while but it was never on my radar. I guess because, as an old fart, I automatically dismissed any gaming company.

What do you think their secret is that didn't cause them to implode like many other game retailers?

I don't know what their secret sauce is other than the trade in program good for cash towards new games/systems. Obviously the market has been doubting them for some time as its been a volatile stock despite earnings and cash flow growing at a steady clip for the last decade.

   

The share count has been cut by about 30% since 2010 and is projected to be cut further with current buyback program. They generate huge cash flows and with no debt can return that to shareholders, which they are doing with the recent established dividend and further buybacks.

I would call this as much a capital gains play as a long term buy and hold play. The stock is roughly 50% off of its 52 week high and yields 3.4%. Trading at a PE under 12, I think there is some safety and potential for upside.

I guess stocks like this are what makes a market as there are plenty of investors who don't like it.

[Jason]

I haven't played video games since I majored in Madden 93 back in college. I was wondering if you feel like gamestop's business model will be around in ten years. I feel like gaming will shift to online subscriptions but maybe they are in that market as well. This could be the replacement for Hasbro that I have been looking for.

[EricL]

(03-13-2014, 08:42 AM)Jason Wrote: I haven't played video games since I majored in Madden 93 back in college. I was wondering if you feel like gamestop's business model will be around in ten years. I feel like gaming will shift to online subscriptions but maybe they are in that market as well. This could be the replacement for Hasbro that I have been looking for.

That's been the fear and a cloud hanging over GME. So far the fear has been mostly unfounded and gamers prefer to have the physical game so they can trade with others and resell it when done with it.

Its still a concern going forward and how the company positions itself in the market will be important.

As of its most recent sales update, digital and mobile sales were about 10% of revenues ($300M of $3B).

Next earnings release is March 27.

[EricL]

My GameStop trade is going well so far. Up nearly 14% since I bought on March 13th. Going to need to figure out what my price target is for the shares as I don't know if this is a hold forever type stock. If it were to continue pushing back into the $50's I will probably have a decision to make.

[EricL]

Had some new money hit the account so I put in a buy on CVX today at $119.

I expect an announced increase to the dividend rate in the next couple of weeks which should provide a yield on the buy of around 3.7%. This will double my position and bring it up to an equal weight in the portfolio.

[Dividend Watcher]

(04-09-2014, 01:47 PM)EricL Wrote: Had some new money hit the account so I put in a buy on CVX today at $119.

I liked it better around the $110 range but not a bad price to pay. Then again, sometimes I can be a piggie.

I keep thinking I ought to lighten up a little as it gets back in the $120's but I just can't seem to find the gumption to ditch a perfectly good dividend that's not going to go anywhere but up. Wondering if it will ever get back down to the low 60's again so I can rent another truck to back up.

[EricL]

Yeah, I'd have liked it better at $109 too, but I'm not going to complain too much getting a blue chip like CVX at a PE under 11, especially right before a dividend increase.

[EricL]

My portfolio update was posted on Seeking Alpha.

2014 - Q1 Review

Hope you enjoy.

[EricL]

I sold my Darden Restaurants (DRI) yesterday and opened a position in General Electric (GE).

I posted an article today on my thoughts on Darden.

I give up about 1% in yield while upgrading the quality as GE is AA+ while Darden is BBB-. I also think GE has much better growth prospects over the next 5+ years and feel what I give up in dividends will be made up for in capital appreciation.