Community Healthcare Trust

Ticker: CHCT, Buy below $50.

Community Healthcare Trust is a REIT that focuses on real-estate properties relating to health care.

Why I Would Buy

  1. Insider – Strong insider holding and buying.   
  2. Strong Alignment of Management Interests – Bulk of management and Directors compensation is in restricted stock.
  3. Uncorrelated Businesses: Healthcare REIT — benefits from a recession resistant, long term trend.
  4. Dividend – generous 3.5%+ yield

What Could Go Wrong

  1. Coronavirus related Damage – Pandemic has hit healthcare industry disproportionately, as all non-essential procedures are being deferred.
  2. Dilution – Aggressive issuance of equity to fund expansion.

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

Raytheon Technologies

Ticker: RTX, Buy below $65.

Raytheon Technologies Corporation is a major aerospace and defense company.

Why I Would Buy

  1. Moat – Part of an oligopoly of Aerospace players, especially engines.   
  2. Credit Rating – Investment grade credit rating.
  3. Uncorrelated Businesses: Aerospace is a high beta industry, but the defense industry moves to an uncorrelated cycle – potentially smoothing out earnings
  4. Dividend – generous 3%+ yield

What Could Go Wrong

  1. Synergy May Not Materialize – Recently created from merger of Raytheon and United Technologies.  Not enough operating history available to analyze the combined entity
  2. Coronavirus Impact – The extent of damage to aerospace industry is unkown.

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

Enterprise Bancorp

Ticker: EBTC, Buy below $25.

Enterprise Bank offers commercial and consumer loan and deposit products, investment management, trust, and insurance services.

Why I Would Buy

  1. Insider Holding – 18%+ of the shares are held by insiders.   
  2. Dividend – 3%+ dividend, with a payout ratio < 30%.
  3. Cheap – Trailing P/E of 9, P/B of 0.9.
  4. Return on Equity: between 9 and 12+% returns on equity annually for most of last decade.

What Could Go Wrong

  1. Tiny Bank – Microcap, large exposure to commercial loans in a limited geographic area in Massachusetts.
  2. Coronavirus Impact – The extent of loan book that could become non-performing is unknown.

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

PPL Corporation

Ticker: PPL, Buy below $28.

PPL Corporation is an utility serving electricity to customers in US and Great Britain.

Why I Would Buy

  1. Defensive Buy – Diversified, good quality utility, a defensive play during a coronavirus meltdown.   
  2. Dividend – 5%+ dividend.
  3. Investment Grade Ratings – PPL long term debt is rated BBB/A- by leading rating agencies.
  4. Return on Equity: 10+% returns on equity annually for most of last decade.

What Could Go Wrong

  1. Not A Screaming Bargain – Even with the crash, PPL is trading at 14 times earnings.
  2. Expanding Sharecount – Float has doubled in the past decade.

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

DIAGEO

Ticker: DEO, Buy below $145.

Diageo Plc  is a British multinational alcoholic beverages company.

Why I Would Buy

  1. Opportunistic Buy – Take advantage of coronavirus induced crash to buy a high quality company.   
  2. Industry – Alcohol is a recession resistant business.
  3. Strong Brands – Diageo owns a large portfolio of leading alcohol brands around the globe.
  4. Return on Equity: Diageo has earned an eye-popping 25+% returns on equity annually for all of last decade.
  5. Low Payout: The 2% dividend is just 55% of income.

What Could Go Wrong

  1. Not A Screaming Bargain – Even with the crash, DEO is trading at 8.5 time book value, and 22 times earnings.
  2. Coronavirus – Extent of impact on the worls economy is an unkown.

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

Banco De Chile

Ticker: BCH, Buy below $22.

Banco De Chile  is a Chilean bank and financial services company.

Why I Would Buy

  1. Contrarian Buy – Dislocation in Chile has led to a double whammy: the stock has crashed; additionally Chilean Peso has crashed against the US Dollar.   
  2. Credit Rating – Banco De Chile’s credit ratings on long-term foreign currency debt was high investment grade.
  3. Dividend – 4% yield, payout ratio at about 60%..
  4. Return on Equity: BCH has earned ~10% returns on equity  for most of last decade

What Could Go Wrong

  1. Chilean Social Unrest – Severity of Chilean social crisis is unknown. Result of the constitutional rewrite could be severe socialism, and wipe out all private investments.
  2. High Dividend Taxes – Chile extracts very high taxes of 35% on dividends.

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

COMPANIA CERVECERIAS UNIDAS S.A.

Ticker: CCU, Buy below $22.

CCU is a Chilean producer of diversified beverages. The company produces both alcoholic and non-alcoholic beverages. They have operations in Chile, Argentina, Bolivia, Colombia, Paraguay, Uruguay and Peru.

Why I Would Buy

  1. Contrarian Buy – Dislocation in Chile has led to a double whammy: the stock has crashed; additionally Chilean Peso has crashed against the US Dollar.   
  2. Industry – CCU produces and markets alcoholic and non-alcoholic beverages in multiple Latin American markets. Beverages are generally a recession-resistant, high margin business.
  3. Dividend – 3% yield, payout ratio has stayed below 50% for past 10 years.
  4. Return on Equity: CCU has earned double digit returns on equity  for most of last decade

What Could Go Wrong

  1. Chilean Social Unrest – Severity of Chilean social crisis is unknown. Result of the constitutional rewrite could be severe socialism, and wipe out all private investments.
  2. High Dividend Taxes – Chile extracts very high taxes of 35% on dividends.

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

New Mountain Finance Corporation

Ticker: NMFC, Buy below $15.

New Mountain Finance is a Business Development Company that lends to middle market companies.

Why I Would Buy

  1. Insider Holdings – Officers and employees holds 12%+ of all outstanding shares.   
  2. Insider Buying – Strong insider buying during last 3 and 12 months. No insiders have sold last 12 months.
  3. Dividend – 10%+ yield.

What Could Go Wrong

  1. Dilution – NMFC has been indulging in massive stock issuances.
  2. Beta – Tied to the health of the US economy, could get hurt disproportionately in a recession.

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

Hersha Trust

Ticker: HT, Buy below $20.

Hersha Trust is a REIT that owns and operates upscale hotesl in United States .

Why I Would Buy

  1. Cheap – Hersha Trustcurrently sells at 8x trailing and forward AFFO (Adjusted Free Flow from Operations).   
  2. Insider Buying – Strong insider buying during last last 12 months. No insiders have sold last 3 months.
  3. Dividend – 7%+ yield.
  4. Insider Holding – More than 10% of the outstanding units are held by insiders
  5. Low Dividend Payout – Less than 70% of AFFO paid out as dividends.

What Could Go Wrong

  1. High Debt – Debt-to-Equity at 1.39, several high yield preferred securities are outstanding.
  2. Risky Market Segment – Luxury hotel occupancies are highly sensitive to the health of economy.
  3. Interest Rates – Interest rates moving up will likely hurt all leveraged REITs including HT.

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

LyondellBasell

Ticker: LYB, Buy below $75.

LyondellBasell  is one of the largest plastics, chemicals and refining companies in the world.

Why I Would Buy

  1. Cheap – LyondellBasellcurrently sells at 7x trailing and forward earnings.   
  2. Return on Equity – LYB has maintained a RoE in excess of 40%for past 5 years!
  3. Dividend – 5%+ yield.
  4. Credit Ratings – Investment grade credit ratings: Baa1/BBB+
  5. Low Dividend Payout – Less than 30% of earnings paid out as dividends.

What Could Go Wrong

  1. High COGS – Incredibly high COGS, approaching80%. Any increase in cost of raw materials will eat into profits.
  2. Decline In Income – MRQ net income slid down significantly (39%+) y-o-y.

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