Continuing my annual review for 2021 regarding US companies, after posting my 2021 watchlist review for Canadian companies, the same steps apply: I evaluate the operating performance of the business, not how the price stock did. More importantly, I scan the market for quality companies to consider a potential business to be added to my portfolio. And for the US portfolio this year, I will be adding 4 businesses and removing 5.
Keep in mind that each company is evaluated separately, and given the size of my watchlist, I’m unable to cover each one in detail in this post. Therefore, the graphs on earnings and cash flow performance including on what’s reported already plus estimates from street consensus should be used as an initial research point, since your goals and risk tolerance might differ than mine. Having said that, these graphs give a nice glance of recent business performance (including previous recession periods), and how these businesses are estimated to progress in the short term.
List of US companies that I decided to no longer partner with:
Kohls Corp: KSS was severely impacted in the current recession and although analysts expect the company to recover in the long term, I believe there are better opportunities for capital allocation than this sector, even though KSS has a strong history of a well managed business. This is a sector in the middle of a transformation, with many uncertainties regarding growth and stability of income. Although most of the weight of my decision is on the sector that they operate, KSS’s current credit rating also makes it too risky for me, and the recent dividend cut no longer provides the attractive elements that it once had.
Molson Coors Beverage Co: TAP is a well managed business, and although they were affected by this recession, I believe it’s a temporary hit, as cash flow is strong. However, I have been shifting risk from dividend growth strategies to pure growth strategies, being more strict regarding quality and stability for dividend growth companies. TAP credit rating and the high but erratic operating cash flow poses a risk level that I rather have on my growth portfolio, as I seek a better stability and reliability on dividend growth portfolio. Earnings are estimated to decrease in the coming years, helping with the decision that there are better capital opportunities for reliability and dependability of income growth.
Wells Fargo & Co: WFC was severely impacted by this recession, and this is the second time in a relatively short period that their dividends get affected. I believe that as a bank they have more risks than I am comfortable with, and I no longer want to partner with a business that was unable to keep my income growth from dividends as reliable and dependable as I want. I believe there are other financial institutions that can provide the level of income growth and dependability that I am looking for, based on the information that I have today, which is discussed below.
List of US companies that I started to partner with:
JP Morgan Chase & Co: JPMorgan Chase & Co. operates as a financial services company worldwide. It operates in four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). The CCB segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; mortgage origination and servicing activities; residential mortgages and home equity loans; and credit card, payment processing, auto loan, and leasing services. The CIB segment provides investment banking products and services, including corporate strategy and structure advisory, and equity and debt markets capital-raising services, as well as loan origination and syndication; cash management and liquidity solutions; and cash securities and derivative instruments, risk management solutions, prime brokerage, and research. This segment also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The CB segment provides financial solutions, including lending, treasury, investment banking, and asset management to small business, large and midsized corporations, local governments, and nonprofit clients; and commercial real estate banking services to investors, developers, and owners of multifamily, as well as to office, retail, industrial, and affordable housing properties. The AWM segment offers investment and wealth management services across equities, fixed income, alternatives, and money market fund asset classes; multi-asset investment management services; retirement products and services; and brokerage and banking services. The company also provides ATM, online and mobile, and telephone banking services. The company was founded in 1799 and is headquartered in New York, New York.
Digital Reality Trust Inc: Digital Realty supports the world’s leading enterprises and service providers by delivering the full spectrum of data center, colocation and interconnection solutions. PlatformDIGITALR, the company’s global data center platform, provides customers a trusted foundation and proven Pervasive Datacenter Architecture PDxTM solution methodology for scaling digital business and efficiently managing data gravity challenges. Digital Realty’s global data center footprint gives customers access to the connected communities that matter to them with more than 284 facilities in 48 metros across 23 countries on six continents.
Equinix Inc: Equinix is the world’s digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today’s businesses to access all the right places, partners and possibilities they need to accelerate advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value.
Stryker Corp: Stryker Corporation operates as a medical technology company. The company operates through three segments: Orthopaedics, MedSurg, and Neurotechnology and Spine. The Orthopaedics segment provides implants for use in hip and knee joint replacements, and trauma and extremities surgeries. The MedSurg segment offers surgical equipment and surgical navigation systems, endoscopic and communications systems, patient handling, emergency medical equipment and intensive care disposable products, reprocessed and remanufactured medical devices, and other medical devices that are used in various medical specialties. The Neurotechnology and Spine segment provides neurotechnology products, which include products used for minimally invasive endovascular techniques; products for brain and open skull based surgical procedures; orthobiologic and biosurgery products, such as synthetic bone grafts and vertebral augmentation products; and minimally invasive products for the treatment of acute ischemic and hemorrhagic stroke. This segment also provides spinal implant products comprising cervical, thoracolumbar, and interbody systems that are used in spinal injury, deformity, and degenerative therapies. The company sells its products to doctors, hospitals, and other healthcare facilities through company-owned subsidiaries and branches, as well as third-party dealers and distributors in approximately 75 countries. Stryker Corporation was founded in 1941 and is headquartered in Kalamazoo, Michigan.
These are the business that I intend to partner for many years to come – however not all these companies is a buy right now. I want to own quality companies, but I don’t want to pay any price for it.
On my next post, I will cover the trades to rebalance my portfolio, as well as the companies that I believe that are fairly valued and estimated to grow.