Southern California Edison – SCE Trust VI

Ticker: SCE-PL, Buy below $24.

Southern California Edison is electric utility located in Southern California.

Why I Would Buy

  1. Yield – SCE-PL yields close to 6% at current prices.
  2. Cumulative – The ordinary shareholders of Edison will not receive any dividends until holders of this security are paid.   
  3. Qualified Dividends – A rarity among preferreds, the dividends of this security are eligible for 15% tax rate.
  4. Discount – Selling at a 15%+ discount to par.
  5. Strong Issuer – Parent company is Edison International, which is a large utility holding company.

What Could Go Wrong

  1. Perpetual – SCE-PL is a perpetual preferred security with no mandatory call-date.
  2. Credit Rating – The security is rated Ba1 / BB+ by Moodys and S&P, which puts it into non investment grade ratings.

Disclosure: I am long SCE-PL, please read additional disclosures here before taking any action based on this post.

MAGNA

Ticker: MGA, Buy below $50.

Magna International is leading global automotive supplier.

Why I Would Buy

  1. Cheap – Magna trades at < 8x earnings.
  2. Reducing Sharecount – Magna is aggressively buying back stock.   
  3.  Low Payout – The dividend payout ratio is below 20%, while the yield is 3% +.
  4. High ROE – Return on Equity > 10% for past few years.
  5. Low Debt – Debt to Equity is just 30%.

What Could Go Wrong

  1. Trade War – Trade War with China is weighing the stock down.
  2. Cyclicality – Automobiles are a cyclical industry which is possibly at it’s peak right now.

Disclosure: I am long MGA, please read additional disclosures here before taking any action based on this post.

CK Asset Holdings

Ticker: CHKGF, Buy below $15.

CK Asset Holdings is an real-estate and infrastructure assets focused holding company based in Hong Kong .

Why I Would Buy

  1. Low Earnings Multiple – CK Asset trades at < 7x earnings.
  2. Below Book – CK Assets is trading at 0.75 times tangible book value.   
  3.  Low Payout – The dividend payout ratio is at a very healthy 20%, although the yield itself is < 3%.
  4. High ROE – Return on Equity > 10% for past few years.
  5. Insider Buying – Li Ka Shing (the “superman”) purchased significant blocks of shares from the open market.

What Could Go Wrong

  1. Concentration – 80% of revenues are derived from real estate in Hong Kong and China, where there is a persistent talk of a bubble forming.
  2. Conglomerate – CK Assets is a weird conglomerate holding disparate assets such as real estate, airline leasing, home heating services and the like.

Disclosure: I am long CHKGF, please read additional disclosures here before taking any action based on this post.