Recent Buy – KMB

Yesterday I added to my Kimberly-Clark position.  Now I have to admit to the possibility (probability?) that it’s overvalued.  Passive Income Pursuit made a good case to this effect in his recent article on Seeking Alpha.  Besides our differences – his being growth oriented whereas I don’t mind the “bond like quality” – there are (I feel) a couple of gaps in his analysis.

First, KMB has demographics on its’ side.  Not only diapers, as mentioned, but elder care products as well.  Second it’s not clear that the article fully accounted for the HYH spin other than to note an increase in goodwill.  Granted, KMB has some headwinds but in a normal economic cycle my guess is they would be out in front of them already.  KMB is Exhibit A for the so called ‘Earnings Recession’ the TV talking heads like to banter about.

Therefore I added to my existing position at $130.15 per share.  This will increase KMB’s share of my dividends from 3.43% to 4.09% (with a target maximum of 6%) and provide an initial yield of about 2.8%.  At least I’m leaving a little room to add in the event of a dip.  🙂

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4 thoughts on “Recent Buy – KMB

  1. Well, you will surely get that dip as you are correct. This thing, tho a great company, is overvalued. At some point it will revert back to earnings or at least a normal PE. Stock has long been on my watchlist and will remain there until it comes back to earth.

    Liked by 1 person

  2. I agree on the overvalued, I stopped adding back in January for that reason. With a current yield of 2.8% it’s not a bad choice unless more emphasis is placed on the growth prospects. Who knows when this market will normalize, some are now saying 2017-2018. If so, not a bad yield while riding the wave. If not, I have dry powder. Either way it’s a win. 🙂

    Thanks for the comment.

    Like

    • I tend to agree. But to quote Charlie Munger, “Assiduity is the ability to sit on your a** and do nothing until a great opportunities presents itself”. At current market valuations rather than being 99.9% in, I’m down to about 98%. Still buying, only more selectively.

      Welcome to the community!

      Liked by 1 person

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