by Travis Johnson, Stock Gumshoe | April 24, 2012 12:48 pm
Today I picked up a few more shares of two companies that were already fairly large holdings in my personal portfolio — I increased my holdings in both Apple (AAPL) and Lonrho (LONR.L LNAFF) by roughly a third with limit buy orders that triggered this morning.
Apple reports earnings today after the market close, as you might have heard, and there’s no shortage of chatter and prognostication about the world’s largest and arguably most widely-owned company — for me, I added some more simply because it went down by almost 15% from the euphoric high of a while back and it’s again cheap enough to be an easy buy. They might not make their $10 in quarterly earnings per share tonight, of course, which could bring the stock down … as could any number of other comments they might share … but as the stock dipped under 11X next year’s estimated earnings (and under 16X last year’s earnings), with a dividend yield now approaching 2% (dividend starts in two quarters), I have to believe that owning the stock, and buying it at a price in this neighborhood, will work out well even if they can’t possibly repeat (or can they?) the spectacular growth they’ve seen over the past six months. It’s cheap, it controls a huge swatch of mobile computing and telephony, and it has great leadership and the manufacturing and design capacity and balance sheet to enable them to do almost anything they want — there are risks that might slow the growth rate, but you’re not paying much for the growth rate anyway unless their last quarter was their all-time earnings peak. Enough said on Apple, my cost basis now jumps up to about $415.
And I added to my Lonrho position today for the first time in a long time — at a cost that was pretty close to the cost basis of my current holdings (meaning, yes, that I rode the stock up and down for a couple years with not much to show for it — sometimes that’s the way it works with an investment that has you ignoring the road ahead of you because you’re watching through a telescope to anticipate what might come in five or ten years). I think Lonrho’s story has continued to improve, and this year it looks like their income statement will start to look a lot more appealing as well — they’re giving every indication that they’ll share the risks of their airline investment with a big name investor (the guy behind easyJet), which gives me some confidence, and they’ve said that by next year they ought to be paying a dividend as they move from the investment phase in some of their many businesses and into the “generating earnings” phase. I shared some thoughts on Lonrho, including these recent reasons for increased optimism, in a Friday File note a few weeks ago if you’d like a more detailed update. No big changes since then that I’ve seen.
So, coincidentally, these are add-on investments in two stocks that will begin paying dividends over the next several months, though neither is likely to be considered a high-income stock anytime soon.
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