I’m a value investor at heart. I buy world-class, steady companies with huge (and growing) dividends at value prices. In doing so, I receive a handsome stream of passive income via dividends that I will one day utilize for my living expenses. Sometimes, however, I take on a little extra risk and buy deep value companies. Today’s video covers the difference between value stocks and deep value stocks, and how I approach each a little differently in my personal stock portfolio. I explain my strategy via two practical examples, Campbell Soup Company (CPB) and BP (BP).
In prior investing videos, I’ve explained my stock portfolio strategy and how I have small/ancillary, medium, and large/core positions. It also happen to sub-segment on value vs. deep value.
Value stocks are the bread and butter of my portfolio. Fundamentals are almost always in-tact. They will sometimes face corrections, but never too large. I’m talking about companies like PepsiCo (PEP) and 3M (MMM), both companies that I personally own.
Deep value, by contrast, are more speculative positions. They are still world class dividend companies, although they have fallen on hard times. Long-term fundamentals are still strong, although short-term fundamentals can face a few challenges. I sometimes take calculated risk with such holdings, with the goal of amplifying my long-term results.
I enjoy sharing two examples in today’s video to explain my strategy via example.
Campbell Soup Company (CPB):
* This one is starting to enter deep value territory, in my opinion.
* It’s there for a reason, as is almost always the case with deep value stocks.
* Facing challenges in their core soup business, CPB has gone on a buying rampage over the last five years. They have acquired: Bolthouse Farms (.55 billion), Plum Organics, Kelsen, Garden Fresh Gourmet, and Synder’s Lance (huge .1 billion acquisition).
* Since CPB did not issue new shares (in fact share count is down), they approached these acquisitions via debt. Debt is now at a very high level and will take years to pay down. This is one of the big reasons, in my opinion, that CPB is in deep value territory.
* When I bought back in September of 2015, oil was at per barrel. Then, it went down to in 2016. BP does not make money at those levels.
* I took on calculated risk, with the expectation that oil would eventually recover.
* Certainly this was a risky move at the time, but it paid off handsomely with my yield on cost at over 8% just a few years later.
While deep value will never be more core strategy (CPB is less than 1% of my portfolio), it plays an important role. And, I’m always on the hunt for great value stocks out there, ones that have a dividend focus!
Want to learn more about my #2 favorite stock of all time, PepsiCo? Check out this video:
Want to learn about my brand new position in 3M? Check this one out:
Want to learn about my calculated risk taking with BP? Here you go:
Want to watch my recent Campbell’s Soup video? Here it is:
Last, learn about my thoughts on General Mills, another deep value, here:
Disclosure: I am long PepsiCo (PEP), 3M (MMM), Campbell Soup Company (CPB), General Mills (GIS), and BP (BP). I own these stocks in my portfolio.
Disclaimer: I’m not a licensed investment advisor, and today’s video is just for entertainment and fun. This video is NOT investment advice. Also, I’m not a tax advisor and today’s video is NOT tax advice. Please talk to your licensed investment advisor before making any financial decisions.
All content on my YouTube channel is (c) Copyright IJL Productions LLC.
STOCK MARKET EXPLAINED: VALUE VS. DEEP VALUE INVESTING (Dividends & Passive Income)