I’m relaunching Paid to Wait newsletter. Not because it’s a new year, this is not my new year’s promise.😊
There’re several reasons actually. I want to bring together some of my writings from different platforms, share the best work of others and systematically jot down the investment ideas that I work with daily. Additionally, Elon chose to shut down Revue (another newsletter service), so if you are wondering why you’re receiving this, you’re being brought to Substack from Revue newsletter that was under my name.
This recurring piece is called “Speedy thesis”. The idea is to share investment theses on companies that pay a healthy dividend with a good R/R for share price appreciation.
The purpose of Speedy thesis is not to analyze or deep-dive into the companies or stocks in question, but work as a quick starting point for further research.
In this issue I’m covering following companies and stocks:
A) Medtronic - healthcare equipment. Dividend 3.5%.
B) Levi Strauss - jeans. Dividend 3%.
C) Weyco Group - office and casual shoes. Dividend 4.5%.
A | Medtronic ($MDT) 🇺🇸
🔑 dividend growth stock, sector play, aging population megatrend
Medtronic’s name is starting to appear on different medias. Last I saw Barron’s covering the stock behind the paywall. Healthcare companies are supposed to have pricing power and shares of healthcare equipment manufacturers have performed the best under high but falling inflation, according to Goldman Sachs. Medtronic, and many other equipment makers, have been in trouble though.
Thesis 💡
The share price of Medtronic could be temporarily under pressure due to the headwinds from supply chain challenges and FX.
Pros
45 years of dividend growth, healtchare equipment stalwart, supply chain challenges are easing out, what happens to the dollar?
Cons
Suffering from exchange rates, inflation on components, supply chain challenges, potential value trap, poor returns on capital. The dividend yield is not tempting enough anymore compared to fixed income investments.
Further analysis is plenty, I very much liked the video by European Dividend Growth Investor valuing the company on Youtube. His fair value estimate is $67 with optimistic assumptions, 17 minutes to the video. I’m looking to cautiously add around $70.
B | Levi Strauss ($LEVI) 🇺🇸
🔑 hated sector, dividend growth, earnings momentum, forgotten?
Everyone knows Levi’s jeans, a company established in 1853.
Thesis 💡
Nobody wants to invest in consumer discretionary at the moment. LEVI is trading at 11.6 forward P/E. The sales and profit momentum has been strong and the company had to tie a lot of capital in the inventory. As supply chain challenges normalize, reduced inventory and shipping costs turn to a short-term tailwind.
The company has ambititious plans to grow outside of jeans category. If even a half of the growth projects succeed, the company will do quite ok.
The company is valued on similar multiples as Kontoor Brands but has better growth history, ROIC and much larger size.
Pros
Market leading brand, reduced debt level, strong revenue and earnings momentum, rapidly increasing dividend.
Cons
Only a brief history as a listed company, controlled by the founding family with dual class shares, some (minor) PR challenges, consumer spending decline.
I wrote a brief analysis in Finnish on Salkunrakentaja.
Current share price: $15.56.
There’re no big expectations in the current share price derived from EPS:
C | Weyco Group ($WEYS) 🇺🇸
🔑 small cap, high dividend yield, asset play, under-valued
Some time ago I wrote a Seeking Alpha article about Weyco, a small shoe manufacturer mostly focused in the U.S. market.
I’m bringing this ticker up now, because the stock went down about 17% before the year end in three days - without any news. Since Weyco is a small cap I believe there was a decent amount of tax loss harvesting or just cleaning up of portfolio out of random names. I find the thesis pretty interesting for a value investor:
Thesis 💡
After the share price decline the inventory of shoes covers nearly half of the EV. The company has other tangible assets on the balance sheet and limited amount of intangibles. Book value should protect the downshide. The sales momentum has been excellent as people have been returning to the office and many competitors exited the office shoe category during the pandemic.
Pros
Strong balance sheet, high management ownership, very little debt, growing nicely in e-commerce.
Cons
Consumer spending declining rapidly, the quality of the inventory is a questionmark, dependent on wholesale. Is the company just filling up the retailers?
Personally I added a lot along the recent share decline.
Current share price: $21.71.
Interesting tweet
One year and 3 year returns in USD in different markets. I’m bargain hunting in Colombia, Brazil and Poland!
In the future I intend to cover stocks in my universe from Finland, Sweden, Germany, UK, United States and a few other random markets.
The picture in top of the post was made by Stable Diffusion AI.