With the roller-coaster trade war saga, plunging interest rates, and general fears of an economic slowdown or even a recession, the stock market has been rather volatile over the past couple of months. After peaking at well over 3,000 in late July, the S&P 500 dropped by 6% as trade tensions heated up in August and proceeded to have several sharp ups and downs over the following weeks.
While volatility isn’t always fun, it does create some pretty compelling investment opportunities from time to time. Instead of just telling you the stocks I’ve been looking at, I figured that it might be more helpful to share some of the stocks I actually bought for my own portfolio…
With that in mind, here are the three most recent purchases I’ve made, how much I paid for each one, and why I decided to buy them, as well as some key observations.
|Company||Price I Paid||Dividend Yield (Current)||Did I Already Own It?|
|Tanger Factory Outlet Centers (NYSE:SKT)||$14.31||8.4%||Yes|
|Teva Pharmaceutical (NYSE:TEVA)||$6.15||None||Yes|
Here’s why I chose to buy each of these stocks recently
- FedEx is a stock that has been in my portfolio for about five years, and it was more than $100 off of its 52-week high in August. Recession and trade war fears hit FedEx especially hard, but at just 11 times forward earnings, it seemed like these fears were a bit overdone. FedEx has a great balance sheet and despite its size, still has a lot of room to grow, especially its ground delivery business as non-Amazon (NASDAQ: AMZN) e-commerce continues to grow.
- Tanger is one of my favorite ways to invest in retail right now. In many ways, outlet shopping is resistant to both recessions and e-commerce headwinds. The deeply discounted nature of outlets combined with the experiential “treasure hunt” component of outlet shopping should keep shoppers coming in the doors. Tanger has a well-covered 8.4% dividend yield and is trading for a single-digit multiple to its forward FFO (funds from operations), so the risk-reward profile of the only pure-play outlet REIT make a lot of sense at these low levels.
- Finally, I consider Teva to be perhaps my most speculative stock. I like the generic-drug business, and although Teva’s debt level is certainly high, I feel that the company’s legal exposure to the opioid epidemic and price inflation, as well as competitive pressures from other manufacturers, have been overestimated by the market. Even after the recent rise in price, the stock trades for just over three times forward earnings, a fire-sale valuation.
A few important notes
As you can see, I already owned all of these stocks, so these were opportunistic additions. Without getting into the dollar amounts I invested, I can tell you that FedEx was by far the largest purchase of the three. In fact, this purchase tripled my FedEx investment.
It’s also important to mention that all three of these stocks currently trade for significantly more than I recently paid for them. As of Sept. 11, FedEx has risen by about 13%, Tanger by 18%, and Teva by 31%.
This is more of a case of fortunate timing than it is that I thought they’d jump so quickly. All of these were purchased during the period from Aug. 15 through Aug. 26, and as you can see, the market has essentially gone straight up since then.
On the topic of price, there are a couple of things to keep in mind. First…
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