BASF

Ticker: BASFY, Buy below $20.

BASF is the world’s leading chemical company, with operations sprawling the entire globe.

Why I Would Buy

  1. Cheap – BASF trades < 10x earnings, and less than 1x Sales.
  2. High RoE – My favorite metric for measuring company performance is return-on-equity. BASF has consistently earned an RoE between 10-20% during the past decade.   
  3.  Good Credit Ratings – Strong long term debt ratings: A1/A by Mooys and S&P.
  4. Dividend – Close to 5%at these prices, although payout ratio is a tad high.
  5. R&D spend – I like companies that have generous R&D spend, as it indicates sustainable innovation pipeline. BASF spends 2-3% of gross revenues on R&D.

What Could Go Wrong

  1. Taxes – US investors face > 26% withholding by Germany. Additionally there is ADR fees to be paid.
  2. High Payout Ratio – More than 75% of earnings is being paid out as dividends.

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

Landmark Infrastructure Preferred Series O



Ticker: LMRK-PO, Buy below $25.

Land Mark Infrastructure is a company that owns and operates infrastructure assets.

Why I Would Buy

  1. Below Par – This preferred is trading below par, allowing for an immediate whenever this security gets called.
  2. Yield –  Greater than 8%   
  3.  Insider Buying – The common shares have experienced aggressive insider buying, signaling the management’s confidence in the company’s health and longevity.
  4. Cumulative – The common stock can’t receive a cent in dividends until the preferred’s get their due first.

What Could Go Wrong

  1. MicroCap – Issuer has a market cap below 400 million, bringing associated risks.
  2. High Cost of Capital – Landmark suffers from high cost of capital, crimping higher profitability and elevating risk.

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

Capstead Mortgage REIT Preferred Series E

Ticker: CMO-PE, Buy below $25.

Capstead Mortgage is a publicly traded residential mortgage REIT.

Why I Would Buy

  1. Below Par – This preferred is trading below par, allowing for an immediate whenever this security gets called.
  2. Yield –  Greater than 7%   
  3.  Insider Buying – The common shares have experienced a good amount of insider buying, signaling the management’s confidence in the company’s health and longevity.
  4. Cumulative – The common stock can’t receive a cent in dividends until the preferreds get their due first.

What Could Go Wrong

  1. Past Call Date – This preferred was eligible for redemption in May/2018, and may get called away anytime.

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

Prudential Financial

Ticker: PRU, Buy below $100.

Prudential Financial a Fortune 500 company providing insurance, financial management and other financial products.

Why I Would Buy

1.       Cheap – Prudential’s stock is currently selling for < 6x earnings.

2.      Strong Buy rating – Sports a 5 star buy rating from S&P   

3.       Low Payout Ratio – The dividend is a respectable 3%, with a payout ratio below 30%.

4.      Good Credit Ratings – Long term debt of the company is rated investment grade by all three rating agencies.

What Could Go Wrong

1.       Uneven Performance – During the past decade, Prudential has had 2 years of negative earnings.

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

LyondellBasell Industries

LyondellBasell is one of the world’s largest chemical and plastics companies.

Why I Would Buy

1.       Cheap – LyondellBassell’s stock is currently selling for < 9x forward earnings.

2.      Strong Returns on Equity – As visitors to this site know RoE is my favorite metric for evaluating stocks. LYB has delivered an eye-popping 50% returns on equity during the  past 5 years!  

3.       Low Payout Ratio – The dividend is a respectable 3%, with a payout ratio below 30%.

4.      Good Credit Ratings – Long term debt of the company is rated investment grade by all three rating agencies.

What Could Go Wrong

1.       High COGS (Cost of Goods Sold) – LyondellBassell  has incredibly high COGS, approaching80% of revenue. Even small increases in cost of raw materials will significantly eat into profits.  

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