Assessing the fundamentals of a company is crucial in determining whether a dip in share price is a buying opportunity or a yield trap.
Evaluating a company's moat based on factors like competition, pricing, and growth prospects is more important than relying solely on its size or product offerings.
Deep dives
Hypothetical Investing Choices
Option A presents a company that is 30% below intrinsic value with a 5% dividend yield and a dividend safety score of 60. Option B offers a 30% overvalued stock with a 2.75% dividend yield and a safety score of 80.
Differentiating Between a Dip and a Yield Trap
Differentiating between a dip and a yield trap can be challenging, but one way to assess is by examining the fundamentals of the company. If the share price is going down due to deteriorating fundamentals, it may be a yield trap. However, if the fundamentals remain the same or improve while the share price decreases, it could be a buying opportunity. Fundamental analysis is key in evaluating whether a dip is temporary or a sign of deeper issues.
Importance of Moats and Growth Prospects
Mistakenly assuming mega companies with numerous products have a strong moat can lead to misjudgment. A moat should be evaluated based on factors like competition, pricing, and growth prospects. Companies with a broad product range may not necessarily have a solid moat. Additionally, considering the growth potential and total addressable market is crucial. It is essential not to solely rely on the size or product offerings of a company when assessing the strength of their moat.
We started the show by talking about $SHELL capital markets presentation. We discuss our current thoughts on the company, including recent dividend hikes and buybacks. We also ponder if we will ever sell a company like Shell from our portfolios.
Dividend Hikes covered this week are from $TGT, $CAT,$O, $EPT
For the main topic, we discuss both two companies we are currently buying. Derek is buying $VICI and $CRH, and EDGI is buying $AMS:ASR and $HPQ.
We finish, as always, by answering questions from our amazing community, where we are asked about companies such as $MMM, $KO, $CCOI, and $MFC.