Dividend.com analyzed the search patterns of visitors to our site during the past week ending February 21, 2016. Below, we give an analysis of how intelligently readers used Dividend.com to help them in their investment decision-making process by providing a breakdown of what was searched the most on Dividend.com ranked by volume spikes to ticker pages.
1. Kinder Morgan
Warren Buffett recently piled up a $5 billion stake in Phillips 66 (PSX ). He has followed that with going long on Kinder Morgan (KMI ) as Berkshire’s latest 13F forms reveal that he bought 26,533,525 shares of the midstream business.
Kinder Morgan’s cash flow has actually increased in 2015—because midstream businesses actually operate similarly to toll roads. Kinder Morgan (like others in the same business) collect fees based on the volumes of oil and gas transported and stored through its assets. As such, they are not entirely reliant on a supportive commodity price.
There is a concept of “dumb money” in finance where institutional investors go short on everything related to what’s negative in the market. To give you an example, when Hillary Clinton’s tweet hit Wall Street on price gouging by speciality drug companies back in September of 2015, everything that was remotely related to biotech fell. Even the good stocks were not spared. Hedge Funds who take positions in stocks for which they don’t have as much granular coverage by their analysts give “sell” orders not to just one or two of the many biotech stocks they hold, but to everything that’s related to biotech that they might hold—even if the stock is the darling of the markets. (Does that explain Gilead Sciences (GILD ) fall, even though the company is announcing bumper results year-after-year, followed by a dividend increase and a stock buyback?)
The concept of dumb money applies to sectors that go up too. If people are bullish on wind energy, then dumb money ensures that everything that’s remotely related to wind energy starts going up. Hedge Funds give buy orders for the sector that includes a host of companies. Their buy calls are not specific to “growth stocks” or “value stocks”.
Dumb money eventually fades off as “smart money” takes its place. Investors who identify beaten down companies that have sound businesses and were sold off irrationally start piling up positions.
Kinder Morgan and many other midstream companies weren’t spared by “dumb money”, as they fell from their grace. Kinder Morgan owns and operates 84,000 miles of pipelines and 165 terminals, making it the largest midstream company in the United States.
Kinder Morgan is not entirely reliant on supportive commodity prices. Demand for their business is intact as they have a $21.3 billion project backlog.
2. Toronto-Dominion Bank
TD (TD ), the 4% yielder, one of our “best dividend stocks” was trending last week. TD belongs to a banking system that is widely seen as one of the most conservative banking systems in the world. When US banks were being wiped out in 2008, Canadian banks stood their ground.
1. Two-thirds of its business is in Canada and they are heavily exposed to mortgages. Canada could very much be in a property bubble right now as housing prices have skyrocketed.
2. Canada, as a country, is heavily reliant on commodities with crude oil being its top export. It’s one of the few developed countries that has large oil reservoirs. With China’s demand for commodities going south, Canada is facing problems with GDP growth. The Canadian Central Bank even explored the possibilities of a negative interest rate scenario just like the US.
1. TD has low direct exposure to the oil and gas industry. Compare their numbers to Royal Bank of Canada (RY ) and you get a clear picture:
|Oil & Gas Exposure
|Oil & Gas exposure as % of total Exposure
2. A stronger dollar benefits TD—around 33% of their business is from the US. A stronger USD means more revenue for the bank. This acts as a good hedge for the Canadian bank since the loonie is falling on the back of weak oil prices.
3. Railroad Stocks
Our railroad stocks page was trending last week following the recent talk that railroad stocks have bottomed out.
Railway stocks never trend on Dividend.com when we analyze traffic since there is nothing sexy or attractive about them. Their business is boring. Shuttling freight across borders as a business would never make it to the front page of a finance newspaper. Given that fact, we often ignore these stocks as candidates for our portfolios.
They went off track in 2015 as poor economic and cyclical conditions hit railroad stocks adversely.
Rail traffic usually falls during winter and starts to pick up in spring and then peaks during the fall, before falling back again. Extended winters in the US meant lesser rail traffic.
Railways are primarily used to transport coal and iron ore. The coal industry has been badly hit as there was a steep and sustained decline in natural gas prices starting late 2008, driven by excess supply of shale gas. However, coal is not the only commodity that’s transferred via rail. Crude and agricultural produce transportation make up a significant chunk of topline for railroad stocks and that didn’t help either since lower crude oil prices meant lower production from Exploration and Production (E&P) firms.
If you’re looking for a value play on dividend stocks then this could be your sector, since stocks like Union Pacific (UNP ), Norfolk Southern (NSC ) and CSX Corporation (CSX ) can now be bought for as low as 14.85, 14.98 and 12.65 respectively. These companies are relentless dividend payers and have refused to cut down dividends in these testing times.
One can get weekly as well as annual Intermodal & Carload traffic at the Association of American Railroads.
As you see from the chart above, Weekly Total Intermodal traffic is higher than 2013, 2014 and 2015.
The Bottom Line
We at Dividend.com know how technology is interwoven in our daily lives. Dividend.com has become a central source of information for all things dividends on Wall Street. By analyzing how you, our valued readers, search our property, we hope to uncover important trends that help forecast stock market performance. Each week, we’ll share search patterns from the previous week in order to assist you in making insightful decisions for your portfolio.