Hi I'm Jimmy in this video.
We're gonna be looking at value
stocks that are going to make up
our value portfolio from our Dow
30 analysis.
So if you're new to this channel
Well what we've been doing is we've
been doing an analysis.
We call the Dow 30 analysis
where we analyze all 30 companies
in the Dow Jones industrial average.
We then take that analysis and we're
building three different portfolios
value portfolio a growth portfolio
and a dividend portfolio.
We've already completed the dividend
portfolio.
This is the value portfolio.
Then after this the final piece to
the puzzle is the growth portfolio.
So my goal here is to pick
reasonably priced stocks that could
do great for long term
holders.
Now because part of
the Dow 30 analysis
we're only picking companies are
mostly picking companies that are
part of the Dow Jones Industrial
Average. We limited ourselves to
those 30 companies because I want
people to be able to see the
research behind each of the
stocks that we put in the portfolio.
Now I do have some add ons that I
think could be a good addition to
this value portfolio that are not
part of the Dow.
But I did limit myself
to only analyzing value
stocks that we've previously made
videos on.
So this video is going to be
less about reviewing the individual
companies and more about reviewing
the stock selection process
for building a value portfolio.
So our first sector is the
industrial sector.
We have three different value stocks
coming out of the industrial sector.
First one is 3M.
Now 3M makes a ton of different
products. They make tape they
make posted notes.
They have security gear.
They have air filters they have
bandages.
And the list goes on and on.
Now this is their chart over the
past five years as we could see
they had a pretty big drop in their
stock price at the end of April
and in early May this drop
was from a missing earnings and
management came out and said they
also lowered guidance
going out the next couple of years
now. Personally I think that this
sell off was a bit of an
overreaction by the market which
is OK because this gives us our
value opportunity.
OK now we shifted our next value
stock Boeing.
Now this one's interesting.
They've had some really crazy
couple of years.
So we we I'm sure we all
know that they had a few terrible
plane crashes and that
has really hurt the stock's
ability to keep climbing higher that
some inventory issues for a while
and as we could see with this
stock chart they haven't done much
in the past year and a half or so.
They've also been caught in the
middle of the whole trade war
situation.
We could actually say the same thing
for 3M but
this is actually it serves our
purpose well because since we're
building a value portfolio
I'm assuming the trade war situation
is a temporary situation and I
would expect both this both
Boeing and 3M to do
well in the long run.
Okay. Last industrial companies
United Technologies now United
Technologies is super interesting
because they just recently announced
that they're going to be merging
with Raytheon.
Now this is an all stock merger
and United Technologies
is the bigger of the two companies.
But Raytheon isn't that
small.
It's got about a 50 billion dollar
market cap.
So in the long run I think that this
merger will do well for both
companies and at the end of the day
I think that they will do better
together than they were apart.
I think the the economies of scale
that they pick up for that from this
merger will ultimately be be
a good thing for the stock and
in the long run.
I think that this will be a great
addition to a value portfolio.
Okay. Back to our valued stock
portfolio.
So up next we have the financial
sector in the financial sector we
have two companies two really good
companies Goldman Sachs
and J.P. Morgan.
Now I like both of these companies
for very similar reasons.
First Goldman Sachs
Well they are one of the biggest
and most stable investment banks in
the world.
Then J.P.
Morgan Chase they're one of the
largest and most stable banks
in the world. Now I think that
it's going to work to their
advantage in the long run.
The financial sector has been going
through a lot of different changes
recently and
ultimately it seems that the
larger companies are expected to do
better as they continue
to consolidate and continue to make
a creative acquisitions that
could ultimately help all of
the top dogs in the industry.
Now I think that these two companies
in particular are going to do
the best in let's say the next
three or four years.
Okay. Now we jump over the health
care sector.
We have two companies Johnson and
Johnson and Pfizer.
Now these two companies are great
defensive names.
And I think they make a good
addition to value portfolios.
But on the negative side
we'll pick Johnson and Johnson as
an example.
They've seen a ton of well-deserved
criticism lately.
And if that alone kept them
out of the portfolio I completely
understand.
So even though.
The stock has really not done much
over the past two years or so.
Revenues and profits have continue
to climb and I would expect for
eventually the stock is going
to catch on to how well profits
are doing.
Now if we switch over to Pfizer Well
there we can see that Pfizer's
profits have continued to climb
nicely despite the fact
that the pharmaceutical industry
has faced a bunch of headwinds.
And I also expect
their stock to continue to move
higher over the next couple of
years. OK.
Next up we have the energy sector
in the energy sector we have two
companies Chevron and
Exxon now out of these two
companies.
My favorite company is Chevron
although I also like Exxon.
I'm just a bigger fan of Chevron's
long term stability.
Now both of these companies are
heavily reliant on the price of oil.
This is what crude oil has done over
the past couple of years.
Now this particular chart is WTI
oil which is oil that comes out of
West Texas but something like
Brent oil which is comes
out of Europe.
Well that price chart looks very
similar to this one.
So oil hasn't done all
that much it's been somewhat
volatile but it hasn't done all that
much since the collapse in 2014.
But Exxon and Chevron have
both done a good job of growing
profits and I expect for this to
continue over the long run which is
why they would end up in a value
portfolio like this.
Okay. Now we jump over to
information technology here
we have both Apple and Intel
now considering both of their
size scale and general
reliability.
Well it seems that they
are trading at a pretty good value
right now because right now
Apple stock is trading at a PE of
about 17 X and Intel
is trading about 12 x.
Meanwhile the S&P 500
is trading at an average of about 20
x. So over the past few years
Apple has seen a decent amount of
volatility but
Apple stock as we could see hasn't
done all that much in those two
years.
Now when we look over at Intel
well intel they had a big disappear
on fears of growth
and trade tensions.
Well from a value stock perspective
both of these well
this type of activity I think makes
it better and more interesting when
building a value portfolio.
They continue to grow profits but
the stock just sort of stalls out
for a bit. Now this brings us to our
last sector in our last company for
that matter and that company is
Walgreens.
Now I'm actually a fan of Walgreens
from a value stock perspective.
And as we could see in this stock
chart here well a lot of these dips
were caused by overall industry
pressures.
And I actually think that given the
industry pressures Walgreens
has done a pretty good job of
positioning themselves in the face
of drug prices
and retail pressure in general.
Walgreens has gone out they've
acquired a piece of Rite Aid
and they've done a lot to try
to offset what has
been happening to the general
industry.
Now this actually leads us to some
potential add ons that I think
could make this whole portfolio a
little bit better.
One easy one is to add CVS
right alongside Walgreens.
Now I actually think that CVS
is a bit more of a defensive play
than Walgreens is because CVS
acquired Aetna where
Walgreens went ahead and they
acquired Rite Aid.
So I think paring those two together
CVS was is not in the Dow.
That's why I sort of making an add
on here.
Another good addition to this
whole portfolio would be over in the
industrial sector and that is to
add General Electric to it.
Now you might have seen the GE
video I just recently did if not
once again like the description
below but this
would be more of a speculative
holding. I think that this has the
potential to have an enormous
upside over the next
few years.
But there's also some risk involved
in that so that only makes sense in
our portfolio if we're willing to
take a little additional risk.
Now another addition to this whole
portfolio that we could easily
make the argument is the most
important addition we could make
would be to add an ETF to this whole
mix because personally
I found that building a value
portfolio when the stock market is
up at all time highs is
somewhat of a tricky thing to do
with some of these we had to stretch
you know our accepted term
of value. This is much easier to do
when the market crashes and
I'm not quite sure these total 14
companies assume we bought all of
them is enough diversification.
So if we would add an ETF like VOO
which is an S&P 500 ETF
put out by Vanguard they have
a fee of about 3 basis points
and that would add the
entire S&P 500
to this portfolio.
So in the long run I think
that's a very smart thing to do
if we're trying to get enough
diversification on top of
a solid value base.
So I believe that for the long term
buy and hold value investor
this is a very solid portfolio.
I think this would. Quite well.
Another thing we could do.
They're not stocks so I didn't
include them in the core would be to
add some corporate bonds corporate
bonds at a certain amount of safety
and they tend to do well when the
market struggles.
But my question is to you
are there any value stocks that are
not included in this that you would
have included if you do
know some that aren't in
the Dow or even if they are on the
Dow. Please let me know.
Perhaps I can go ahead and try to
make a video on those companies.
So if you happen to know any even if
they're from companies outside the
United States please let me
know in the comments below I'm sure
the community would appreciate it
because diversifying this type of
portfolio with some international
holdings would be a great twist
to this whole thing.
So thank you for stick with me all
the way to the end of the video if
you haven't done so yet please hit
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up. Thank you and I'll see in the
next video.