June stock purchase

Image of keyboard showing June stock purchase buttonI really want to write up my June monthly summary to see how the first half of the year ended. But before I do that, here’s a summary of a June stock purchase that I made last month.

As part of my general simplification strategy in my portfolio, I aim to hold around 10% of the portfolio in individual stocks. I also favor holding fewer individual stocks for easier management. The 428 companies in VHDYX and 931 companies in VIHAX provide diversification since those two funds make up the bulk of my portfolio.

I decided to make a small purchase in June to take advantage of a lower priced stock and add to an existing position. This purchase came from Income Fund cash and is in addition to the regular purchases I make each month.

Bought: L Brands (LB)

I bought 8 LB shares for a total of $404.72 on June 6th. This includes a $2 commission at my Vanguard brokerage. I now own 31 shares.

My reasons for buying

  1. Under-valued with a P/E of 13 at the time of purchase.
  2. Long-term dividend payer with a good ratio of payouts to free cash flow (72% for FY16)
  3. Strong brand names used in popular culture.
  4. Room for international growth as most revenue comes from US, Canada & China.

Five-year growth forecasts for T range from 8% at Finviz to 0.4% at Morningstar. Short-term growth is expected to be slow as the company stopped selling clothes and swimwear in order to focus on their core product lines.

The company recently paid its 170th consecutive dividend. However growth is low with the last six payments remaining constant at $0.60. This equates to a 4.7% yield at the time of purchase and above 5% at current prices.

Summary

The Retail industry has been under siege for the last few years as the traditional mall-focused culture declines and shopping patterns continue to evolve. The LB share price took a hit this week in July due to lower sales as they focus their products. However I think there’s still long-term value in the Victoria’s Secret brand.

With this purchase, LB represents 0.5% of my Income Fund including the portion of LB I hold within VHDYX.


Quote of the Day

The true currency of life is time, not money, and we’ve all got a limited stock of that.

8 thoughts on “June stock purchase”

  1. Hmm, I’ve never really looked at LB, but based on this post I checked the numbers and they look really good for me. I’ll have a look into this in more detail and it might end up in my portfolio too 🙂

    1. Hi Roadrunner,
      I’ll definitely be interested to read your analysis and if you decide to buy or not.
      Best wishes,
      -DL

    1. Hi Stal,
      Although they’ve paid dividends for a long time, they only have a 6 year growth history and so may not appear on some dividend growth screens. I think they’re under-valued now but we’ll see what happens in the long-term.
      Best wishes,
      -DL

  2. Jumping on the retail bandwagon. Not a bad pick as the entire sector has been beaten silly. You know the saying buy when others are selling. This could work out quite well for you down the road. As you stated it does have very strong and recognizable brand names. That has a large intangible value. Thanks for sharing.

    1. Hi DivHut,
      Retail’s definitely under siege – hopefully I’m catching value and not a falling knife! But I like LB and think they have customer loyalty as well as good brands so we’ll see how they do in the long-term.
      I appreciate your insight as always,
      Best wishes,
      -DL

  3. I’ve never heard of LB, but I know the brands. I agree with you; Victoria’s Secret has legs, no pun intended. Kids are growing-up with now with PINK and moving on to Victoria’s Secret. I see a larger customer base on it’s way. Thanks for sharing.

    1. Thanks IH, I like their brand / customer loyalty. PINK was definitely a good move on their part to capture some of the youth market who will grow into adult customers.
      Best wishes,
      -DL

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