Bears and Badgers
10/03/2016 9:00 am EST
Our portfolio has hit all-time highs repeatedly over the last few months. Every time this happens we congratulate ourselves on how smart we are to be invested in the stock market, jests Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
I, like everyone else, get a warm fuzzy feeling when our portfolio reaches a new, higher level.
However, I am also careful to remind myself that our 10.7% annualized growth has not been in a straight line.
The dot-com bust and the 2008 financial crisis are sobering examples of the downside of stock market investing.
The current bull market is one of the longest in history, and I’m cautioning investors today -- with some certainty – that something bad is going to happen and the bull market will eventually come to an end.
I would be foolish to predict the timing of the onset of the next bear market and, because of the fully invested nature of our portfolio strategy, I’m not planning any changes our monthly buy/sell routine.
However, everyone’s financial situation differs and asset allocations will vary accordingly but, with emotions and market uncertainty being pumped up by the coming election, I recommend a review of your overall financial situation.
Therefore, our current advice should be bracketed by the assumption that your stocks may be taking a hit over the coming months.
Meanwhile, August split activity picked up a bit and I was to have several high quality ideas to pick from.
Badger Meter (BMI) is an old (1905) Wisconsin company primarily known for its water meters. Badger delivered its split shares this last Monday and will be added to the 2 for 1 Index this coming Monday.
Our ranking algorithm gave Badger a high score despite its 31.6 PE ratio. It helps that the price-to-book ratio of 3.8, another measurement of value, is lower than average, boosting the score.
Healthy profits and no long-term debt are also positive factors. BMI is a small cap stock (just under $1B market cap), flying pretty low under the Wall Street radar, with only four analysts covering it and a Beta of just 0.64.
Badger makes a wide variety of flow control and measurement devices for all types of fluids, but water meters are its core business.
My assumption is the water meter business will only grow as droughts get worse and municipalities and water districts demand stricter water saving measures.
Toro (TTC) is another small industrial outfit much to my liking. Anything to do with turf, including mowers and irrigation equipment, from residential to large commercial installations, falls under Toro’s umbrella.
We are adding Badger Metr to our portfolio. However, we’ll be keeping an eye on Toro over the coming months as a backup, if the flow of 2 for 1 split announcements should dry up again.
By Neil Macneale, Editor of 2-for-1 Stock Split Newsletter