Archive for September, 2005

Buying (More) Home Depot

September 30, 2005

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I am buying some more Home Depot (NYSE: HD) for my retirement account. The company needs no introduction. It is a Dow component and most home owners spend a good chunk of their home maintenance budget at their stores. I am planning on making the stock a core holding at roughly 6% of my portfolio and I hope to hold it forever.

At its current price of $38, Home Depot is trading at a reasonable 15 times its estimated (from ValueLine) 2005 EPS of $2.56. The company has been growing sales at 16%, earnings at 20% and dividends at a 25% annualized clip over the past five years. It is also buying back its shares (note the decreasing share count).

Home Depot is also growing aggressively by expanding its services business (like roofing, countertops etc.), making strategic acquisitions to supply merchandize to builders and professionals and gearing up to open stores in China. Looking ahead, ValueLine expects the company to grow earnings at double digits over the next five years.

Another Lazy Portfolio

September 28, 2005

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Columnist Paul B. Farrell tracks four “lazy” portfolios and has added a fifth to his collection: The Yale Lazy Portfolio. The portfolio is from David Swensen’s book Unconventional Success. Like all “lazy” portfolios, it is made up of low-cost index funds and the allocation is as follows:

US Equity: 30%
International: 20%
REITs: 20%
Bonds/TIPS: 30%

The high REIT allocation is a surprise, but the other asset classes are inline with other “lazy” portfolios. For a Canadian version, check out the MoneySense Portfolios or my Sleepy Portfolio, which I track to benchmark my returns.

That New Car Smell

September 27, 2005

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Experts point out that it makes no financial sense in buying a brand new car that depreciates 50% or more in the first few years. We literally tend to pay through the nose for that new car smell.

Now, it turns out, in addition to damaging our pocketbook, that smell could also be dangerous to our health. The odour is due to a range of chemicals like styrene, formaldehyde, xylene, diazinon etc. (check out the health effects in the Wikipedia entries. Yikes!) emitted by the plastics, vinyl, glue and carpeting in new cars and can cause headaches, sore throat, nausea and possibly cancer. The ABC News report also points out that the health risks subside in six months, when the smell fades. Pretty steep price for driving a new car, wouldn’t you say?