First American Title

Ticker: FAF, Buy below $70.

First American Financial Corporation provides comprehensive title insurance protection and professional settlement services for homebuyers and sellers.

Why I Would Buy

  1. Dividend – ~3% yield, <30% payout ratio.   
  2. Low Debt –Debt to equity 0.4.
  3. Cheap – Forward P/E <10x, trailing < 9x.  
  4. Return on Equity – In the teens for most of past decade.
  5. Oligopoly – Massive database of title records, competitive advantage.

What Could Go Wrong

  1. Regulatory Risk  – Could face change on state regulations, some states even insure titles themselves.
  2. Short-Term Earnings Spike – Temporary boost from refinancing and new home buying resulting from low interest rates. Earning likely to decline/normalize.

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

CapitaLand

Ticker: CLLDY, Buy below $5.

CapitaLand Limited (CapitaLand) is one of Asia’s largest diversified real estate groups. Headquartered and listed in Singapore, it owns and manages a global portfolio worth about S$133.3 billion.

Why I Would Buy

  1. Dividend – 3. 5% yield, <30% payout ratio.   
  2. Diversified Holdings –Highly diversified, global holding of real estate assets spanning 30 countries.
  3. Cheap – 0.6x book, 11x earnings
  4. No Withholding Tax – Singapore does not withhold taxes on dividends for US investors (in most situations).

What Could Go Wrong

  1. Low RoE  – In high single digits for most of last decade.
  2. High China Exposure – 44% of revenues.  
  3. Stock Performance – Relatively flat stock performance over past 5 years.

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

Canadian Utilities

Ticker: CDUUF, Buy below $25.

Canadian Utilities is a globally diversified utilities company headquartered in Canada.

Why I Would Buy

  1. Dividend – 5. 5% yield, <60% payout ratio.   
  2. Credit Rating – Investment grade long-term credit ratings (A- S&P, A DBRS).
  3. Defensive Industry – Power generation, electric powerlines, energy pipelines, water infrastructure etc.

What Could Go Wrong

  1. Expensive – Forward P/E 17+.
  2. Earnings Decline – YoY decline in earnings
  3. Expanding Float – Share count increasing.

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

Fortress Transportation & Infrastructure Investors – Series A Preferred

Ticker: FTAI-PA, Buy below $24.

Fortress Transportation and Infrastructure Investors LLC owns and acquires infrastructure and related equipment for the transportation of goods and people.

Why I Would Buy

  1. Yield – 8.25% at par.   
  2. Discount – Trading at discount to par.
  3. Callable – callable within 4 years.
  4. Insider Buying – High volumes of recent insider buying of common units of the issuer.
  5. Strong Backers – 10% of issuer is held by Washington State Pension.

What Could Go Wrong

  1. Yield –Very high yield and discount-to-par. Market has probably priced in the risks appropriately.

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

JP Morgan Chase

Ticker: JPM, Buy below $120.

JP Morgan Chase is an American multinational investment bank and financial services holding company.

Why I Would Buy

  1. Return on Equity – JPM has averaged a decent 9 to 14% RoE for all of past decade.   
  2. Cheap – Forward P/E less than 13x.
  3. Dividend – generous 3.5%+ yield, <35% payout ratio.
  4. Credit Ratings – Strong long term credit ratingsAA-/A-

What Could Go Wrong

  1. Complexity –Complex opaque trading operations, non-trivial  probability of a blowup like other Wall Street giants in the 2009.
  2. Book Value – Trading a relatively high book value multiple (1.4x).

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

CVS Health

Ticker: CVS, Buy below $65.

CVS Health is US healthcare company that owns a pharmacy chain, pharmacy benefits manager and a health insurer.

Why I Would Buy

  1. Defensive Play – Pharmacies and health insurance is generally resistant to economic cycles.   
  2. Cheap – Forward P/E less than 8x.
  3. Dividend – generous 3.5%+ yield, <40% payout ratio.

What Could Go Wrong

  1. Retail – Retail is a big part of CVS’s revenues, this has traditionally been a poor and hypercompetitive business segment.
  2. Debt – Enormous debt load, negative tangible book value.

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

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.