WTRG - 10 Buffett-Style Dividend Aristocrat Bargains You Don't Want To Miss

2023-11-04 07:35:00 ET

Summary

• Economists say the recession is canceled; the bond market is 98% sure it's still coming.
• The bond market is likely right, BUT history is very clear, the time to buy wonderful companies at wonderful prices is now.
• Warren Buffett-style aristocrat bargains are blue-chip quality aristocrats trading at anti-bubble "fat pitch" valuations.
• Here are the ten most undervalued non-speculative blue-chip quality (or better) dividend aristocrat bargains.
• They yield 5%, are 41% undervalued, and could double in the next two years, with 6X better return potential than the S&P. The last time they were this undervalued, they soared 550% in the next decade and nearly 500% returns are expected over the next 10 years.

Wait for a fat pitch and then swing for the fences."

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett.

Some of our subscribers have asked me about all the "Buffett-style" blue-chip bargains over the last few weeks, as the market has sold off and high-yield stocks especially have been hit hardest.

Here is what I mean.

Wonderful Companies At Wonderful Prices

Everything our system does is rules-based. There are no "hunches." A blue-chip stock has a precise definition under our 3,000-point safety and quality model that includes the expert consensus from all rating agencies, analysts, and the bond market.

A SWAN (sleep well at night) stock is not something we pull from thin air.

A Buffett-style bargain is a high-quality company (blue chip or better) that is trading at deep value levels.

A "fat pitch," Ultra value buy.

Our Research Terminals are automated with real-time valuation color-codings based on these rules that consider real-time data about company fundamentals.

Every single day, our chat alerts room posts all the changes to fundamentals, good and bad, and changes in valuation ratings.

When the facts change I change my mind. What do you do sir?" - John Keynes.

When companies falter, we let members know with real-time downgrades.

When companies prosper, they get upgraded.

A fact-based system of investing? To paraphrase Churchill,

An evidenced and rules based system of investing is the worst possible way to invest your money. Except for all the rest."

This is disciplined financial science, the math behind getting and staying rich on Wall Street.

No, you won't avoid all disasters.

Almost 50% of all U.S. stocks suffer permanent 70+% collapses and never recover.

In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”— Peter Lynch.

Peter Lynch was one of the greatest investors in history, 30% annual returns for 13 years at Fidelity. He was wrong 40% of the time.

Buffett is wrong about 33% of the time and is the greatest investor of all time.

Kraft? IBM? Every airline? Risk management and buying and holding the world-beaters that work out as expected are the reasons that Lynch and Buffett are legends and billionaires.

I understand that a lot of people are confused right now. The Fed appears to be on hold, and economists now are forecasting a soft landing.

The Fed has never in history avoided recession after hiking rates this much. Inflation above 5% and no recession? Unprecedented.

Could it happen? Yes, there is a first time for everything, and right now, economists think no recession is coming.

The Bond Market Says Economists Are Wrong

The bond market thinks there is a nearly 98% chance of recession next year.

Why?

Because in 70 years, the bond market has never been wrong about forecasting a recession, on average two years ahead of time, while economists are famous for never seeing downturns coming.

The proxy rate is the adjusted or effective Fed funds rate. What the Fed would be at today had the GFC and QE never happened.

Adjusting for reverse money printing, three months ago, the San Fran Fed estimated actual interest rates at 7%, and today, Bloomberg estimates its closer to 8%.

• the official San Fran fed estimate updates quarterly.

So from -0.5% to 7% to 8% rates in 2 years.

How often has that happened without a recession? Never.

So that means no buying stocks, right? Sit in cash until the coming crash?

Once again, Peter Lynch:

Nobody can predict interest rates, the future direction of the economy or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.”— Peter Lynch.

And here's the statistical proof of what Lynch is saying.

Outside of the Great Depression, even perfectly timing the economy wouldn't have beaten buy-and-hold investing.

From 160 years of market data in 3 countries, put your money to work immediately, not trying to be cute and time tops and bottoms. That's the right move 70% of the time.

And over 30 years it resulted in 2.4% better annual returns for U.S. investors or 104% higher inflation-adjusted returns.

Buying every January 2nd vs. always buying the exact lowest market day for 50 years.

A total difference of 22% or 0.4% per year.

The key to returns in the market is time and not timing.” - Bill Miller.

Bill Miller is the only man ever to beat the S&P for 16 consecutive years, and he's one of the best value investors of all time.

Whether you're listening to gurus or pure data, the point is clear: the best time to put your money to work for the long-term is right now.

It's Always A Market Of Stocks, Not A Stock Market

Ok, so you've seen the quotes from the legends, you've seen the data, you understand that something great is always on sale, even with the market down just a paltry 10%.

But in case you are still on the sidelines about buying great companies at great prices, let's sweeten the deal.

How about dividend aristocrats? What are the most dependable dividend stocks on earth? 25+ year dividend growth streaks?

And how about we only consider blue-chip quality or better?

And what if we take out anything speculative? No turnaround stories, nothing at risk of the wheels falling off.

And what if you can take just those blue-chip aristocrats and then sort them by discount to fair value? Not just wonderful companies at fair prices, but wonderful companies at wonderful prices?

What if I could show you the ten best Buffett-style dividend aristocrat bargains trading at their best valuations in a decade or more?

Finding The Best Buffett-Style Aristocrat Bargains

Here is how I have used our DK Zen Research Terminal to find the best Buffett-style blue-chip quality non-speculative aristocrat bargains today.

From 504 stocks in our Master List to the best blue-chip aristocrat bargains.

All in one minute, thanks to the DK Zen Research Terminal. This is how I find all my investment ideas.

10 Amazing Buffett-Style Dividend Aristocrat Bargains

I've linked to a recent article about each company for further research.

Here, they are in order of most to least undervalued.

1. Albermarle ( ALB )
2. Polaris ( PII )
3. Community Bank System ( CBU )
4. Federal Realty Investment Trust ( FRT )
5. Essential Utilities ( WTRG )
6. Essex Property Trust ( ESS )
7. Altria ( MO )
8. Medtronic ( MDT )
9. Realty Income ( O )
10. National Fuel Gas ( NFG ).

Fundamentals Summary

• yield: 4.6% (3X S&P 500 and above SCHD or VYM)
• dividend safety: 93% very safe (1.35% dividend cut risk)
• overall quality: 92% low-risk Ultra SWAN dividend aristocrat
• credit rating: BBB+ stable (4.73% 30-year bankruptcy risk)
• long-term growth consensus: 8.6%
• long-term total return potential: 13.3% vs 10.2% S&P 500
• discount to fair value: 41% discount (potential Ultra Value "fat pitch" buy) vs 1% overvaluation on S&P
• 10-year valuation boost: 5.4% annually
• 10-year consensus total return potential: 4.6% yield + 8.6% growth + 5.4% valuation boost = 18.7% vs 10.1% S&P
• 10-year consensus total return potential: = 455 % vs 164% S&P 500.

5% very safe yield and a 41% discount to fair value. Not just a bargain, but the best blue-chip aristocrat bargains you can buy with minimal risk of permanent losses.

And analysts currently expect these aristocrats to turn $1 int $5.55, a nearly 6X return potential or 3X more than the S&P 500.

The Last Time These Aristocrats Were This Undervalued

(Source: Portfolio Visualizer Premium.)

Think 455% returns in 10 years from a rock bottom valuation is impossible? The last time these aristocrats were this undervalued, they delivered Buffett-like 21% annual returns for a decade.

• Buffett's returns 20% annual returns for 55 years.

And 18% returns for 15 years or a 12X return from 10 of the most dependable and safest companies on earth.

OK, what about the long-term 13% to 14% expected returns? How realistic is that?

Historical Total Return Since 1994

13.4% returns for the last 29 years. Three decades of the same returns analysts expect today.

From stable businesses with predictable business models that keep growing at the same rate over time.

Worried about inflation? Adjusted for inflation, these aristocrats almost tripled the returns of the S&P over the last 30 years.

They turned $1 into $18 while the market turned $1 into $7.

Don't like buying stocks in a bear market? Take a look at the average rolling returns over time and gain confidence that these are quality companies.

The worst 5 year return was +2% per year. The worst S&P 5 year return? -7%.

The worst S&P 10 year return? -3.5% (-30% after 10 years) while the worst 10 year return for these aristocrats was 6% (+80%).

That is the power of diversification.

Consensus Total Return Potential Through 2025

• if and only if each company grows as analysts expect
• and returns to historical market-determined fair value
• this is what you will make.

Albemarle

Polaris

Community Bank

Federal Realty

Essential Utilities

Essex Property

Altria

Medtronic

Realty Income

National Fuel Gas

S&P 500

The S&P has a 17% consensus return potential over the next two years. That's 7% annual returns.

The most undervalued Buffett-style blue-chip aristocrat bargains? 96% total return potential within two years and 36% annualized return potential.

• 6X greater return potential than the S&P and with 3X better and safer yield.

Bottom Line: Don't Be Afraid To Buy Wonderful Companies At Wonderful Prices

What more needs to be said? Here are the ten best Buffet-style deep-value blue-chip aristocrat bargains you can buy for November.

• Albemarle
• Polaris
• Community Bank System
• Federal Realty Investment Trust
• Essential Utilities
• Essex Property Trust
• Altria
• Medtronic
• Realty Income
• National Fuel Gas.

Fundamentals Summary

• yield: 4.6% (3X S&P 500 and above SCHD or VYM)
• dividend safety: 93% very safe (1.35% dividend cut risk)
• overall quality: 92% low-risk Ultra SWAN dividend aristocrat
• credit rating: BBB+ stable (4.73% 30-year bankruptcy risk)
• long-term growth consensus: 8.6%
• long-term total return potential: 13.3% vs 10.2% S&P 500
• discount to fair value: 41% discount (potential Ultra Value "fat pitch" buy) vs 1% overvaluation on S&P
• 10-year valuation boost: 5.4% annually
• 10-year consensus total return potential: 4.6% yield + 8.6% growth + 5.4% valuation boost = 18.7% vs 10.1% S&P
• 10-year consensus total return potential: = 455 % vs 164% S&P 500.

The Last Time These Aristocrats Were This Undervalued

(Source: Portfolio Visualizer Premium.)

Buy these aristocrats, some or all, within a diversified and prudently risk-managed portfolio, and you are practicing disciplined financial science and are 97% likely to achieve success over the next 30+ years.

That's not opinion; that's fact-based investing.

For further details see:

10 Buffett-Style Dividend Aristocrat Bargains You Don't Want To Miss