I don’t drink coffee so it has never occurred to me before how big this industry is. Apparently after crude oil, coffee is the most sought commodity in the world. People drink over 500 billion cups of it each year. That’s a lot considering there’s only 7 billion people on this planet. Starbucks is a growing company that is expected to make $1.9 billion this year of after tax profit. The company is currently valued at $40.4 billion. Even if they stopped growing forever, anyone who bought the stock today can expect to make a 4.7% return on their investment ($1.9÷$40.4) Not much, but better than nothing! If you did the same calculations for Tim Hortons you would make about 6%. This year I’m going to invest more in relatively defensive stocks that provide coffee, soft drinks, snacks, and other consumables that people can’t seem to get enough of.
Here’s my watch list for 2013. I plan to start buying some of these names soon.
Canadian Stocks
- Canadian Utilities Limited (CU) *Electric, gas, and steam company*
- Emera (EMA) *Another utilities company. This one has a great dividend growth record*
- TransCanada (TRP) *Pipelines. Very recession proof*
- Tim Hortons (THI) *Doughnuts and coffee, om nom nom
- Ritchie Bros. Auctioneers (RBA) *A speculative way to invest in the auction business*
- Bird Construction (BDT) *In construction and general contracting business. 4.9% dividend yield*
- Canadian National Railway (CNR) *Railways. A great way to play the agricultural industry. Bill Gates is its largest shareholder owning over 10% of the entire company*
- Canadian Pacific Railway (CP) *Another railway company. Good CEO. But currently overpriced*
US Stocks
- The Walt Disney Company (DIS) *Steve Jobs’ estate is still making over $100 million a year from Disney’s dividends*
- Coca-Cola Company (KO) *Buffett’s favorite company, enough said*
- PepsiCo (PEP) *Very global. Very diversified. Maker of Pepsi, Frito Lay, Doritos, Tropicana, Quaker, and Gatorade. With a growing middle class with more disposable income in developing countries how can you possibly go wrong investing in Pepsi?*
- Starbucks (SBUX) *Opening 3,000 new stores in the Americas by 2017. China to become 2nd largest market in 2014. This company is growing like a weed. Better get in sooner rather than later.*
- Kimberly Clark (KMB) *They make the tissue you see in public washrooms everywhere. Very stable business model*
- Johnson & Johnson (JNJ) *Increased its dividends for at least 25 consecutive years*
I already have shares in McDonald’s which owns the McCafé brand of coffee. Once I also buy Tim Hortons and Starbucks I’ll have part ownership to pretty much the entire quick service coffee business in Canada, haha (⌒▽⌒）and exposure to many other countries too. Canadians bought 1.5 billion cups of coffee last year, making it the nation’s most popular beverage. So every time someone buys a coffee from these lucrative chains a very small amount from that transaction will eventually be paid back to me either in dividends, or stock value 😀
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Random Useless Fact:
source: CBC
I already own KMB, JNJ, PEP and KO in your list. Looking to buy some CNR really soon, i like DIS too but i think i have too much US holdings.
That means you’re ahead of me lol. I’ll try to buy PEP and KO at the same time to even out my risk. Can’t believe I’ve waited this long before adding them, both companies increased by more than 10% last year and I missed out. It’s okay, there’s autocorrect on my blog 😉
Well not that ahead ! i like to have small positions and diversify a lot (40 stocks approximately ) so if any company goes south i won’t lost more than 2.5%
Starbucks eh? There’s a big row over here in the UK about them not paying any tax here as they claim they don’t make any profit from UK sales. We all know that’s BS of course, and after it came to light, many customers decided to boycott them, so they have now grudgingly agreed to pay a token amount. Not sure if any of that will have a significant global impact, (I think the amount was only about £8m). Not sure if that’s good or bad news for an investor??
That’s interesting. The token amount itself is a rounding error like you mentioned compared to their $14 billion annual revenue, but it might leave behind a bad taste in people’s mouths about how they conduct business in the UK. Similarly, another concern I have myself is when a new Starbucks opens up it can often cause a latte problems with the existing local coffee stores down the road. I don’t know how all this would impact the stock price either. But in the big picture, as long as Starbucks continues to grow it’s same store sales and expand into new locations, its investors will be pretty happy 😀
I was thinking investors might be happy that they’re not paying any tax!
On an entirely unrelated note, their furniture is terrible. Last time I went my trousers ripped on a nail. You could say I had a pair of caput chinos…
Haha nice. Yeah for sure, if investors can get away with paying less taxes or even no tax, they probably will :0)
Nice list. All big companies. I’ll admit it, I’m still learning about self handling my money. I hold mutual funds which have the bulk of my dough – Bissett Canadian Equity F (15% in 2012) and PH&N Dividend Income A (11% in 2012)- good track records (10+% returns over 20yr periods) and low MERs. That said I have loaded my TFSAs (wifes and mine) with smaller firms to balance what I call my conservative funds: AM (which has done outstanding since 2011), EIF, SLF (which i added last year and did quite well with), TMA, PBH (which i just let go, beacause it was my lagard), ZCL (new addition), BAD, CHE.UN, CSU (again, outstanding last couple of years), HR.UN (which may become biggest REIT in Canada with announcement today) and my wildcard WIN, thinking it has been depressed for past few years and may move this year, so jsut add last week. Who knows what the future will bring, but if you do your research, there are gems out there (^O^)… Oh and I own some SWK (USd stuff) from former employer, which I’m debating about keeping…
Sounds like you’re doing pretty well with those. The TFSA is a great vehicle to get in and out of stocks whenever we want because there’s no capital gains/losses to calculate no matter how many transactions we make. If a couple were to max out there TFSA room this year they would have over $50,000, which is quite a nice pile of money to play around with 🙂
Yes, but if they had been using it over the last couple of years, and now you include the growth, they have considerably more, say maybe 15-20K more? You’ve got to love compounding, and now with NO TAXES!!! 😀
Stocks are the bomb! Love them, hate them… trade them, keep them… In hindsight, I let go a lot of good stocks in my trading days. Time to employ a new strategy. Go big or go home! Good choices, I used to own a few mentioned above. Love food stocks … I’ve done well with them in the past, we need to eat as a nation! Best to choo choo choose the best ones for your portfolio 🙂
Food companies are a big part of our economy. I like Loblaws because I shop at their stores, but I heard they have really low margins. I’m also interested in snacks companies, labeling companies, and fast food companies :0)
I only invest in stocks what I can afford to lose… which in this case is only $8000. 🙂
I have SBUX already, and plan on keeping them for a while, I’m doing more of a minor experiment with stocks this year, but nothing too strenuous that will make me check my stocks every 2 seconds.
$8K is quite a bit (^_^) SBUX seems to be a popular stock to own, which makes for a good spending hedge for most people since over half of Americans drink coffee on a regular bases, and I’m sure we’re not much different here in Canada. Good luck with your experiment this year.
valuation wise, i like (in no particular order) THI, CNR, and JNJ the most.
THI represents growth at a reasonable price (GARP). CNR and JNJ are good picks as they’re both around mid teens PE (JNJ current PE inflated due to one time charges). CNR is also a good way to get exposure to lack of pipeline infrastructure. lots of oil companies transporting by rail these days due to lack of pipeline capacity. with all the protest you BC folks are putting up regarding new pipelines, its good for railways 😛
JNJ is actually making a multi-year breakout move right now! new all time highs being made!
disclosure: im building position in THI, and already have full positions in CNR and JNJ
Nice analysis on THI and JNH. I think I might buy THI and SBUX first. It sounds less efficient to transport oil or gas by railway, but unless the pipelines are built there’s no better solution I guess. It’s a little frustrating to think that we can’t sell our resources at the true market price because we don’t have the infrastructure to get it to our coasts and sell it for what the market really demands to other countries. Instead, we have to sell it to the US at a discounted price, which is great for our friends south of the border, but it means we’re losing out on $100 million per day in lost revenue, or about $35 billion a year. If only there was a simple solution to this problem and we could find a way to sell our crude for what it’s really worth we would have a balanced budget instantly and maybe even lower income taxes 😀
I own quite a few of those stocks in our portfolio already, so I guess great minds DO think alike! 😉 I had McD’s for a few years, but got out at it’s high. I may be looking to get back in to it here soon.
Let me know if you do and I’ll increase my position in them :0) I like MCD because they always come up with new menu items or promotional campaigns that work really well.
I own about half of those stocks. Big fan of TRP in Canada and KO in US.
Yeah, boring stocks may not double over night like penny stocks, but they’re pretty good at doubling once a decade or so on average 😀 I plan to buy some KO in my RRSP later this year.
Just bought Tim Hortons last week because the valuation is interesting.
Thinking about initiating a position with KO next week, not super super cheap but I’ve wanted an entry point and now seems to be a good time.
JNJ is definitely on my list, waiting on cash to buy and hopefully price to drop to mid-60’s.
Really like your Canadian stocks list. Would have to say that THI is currently the cheapest on that list. All great stocks to own and worth monitoring.
Keep up the journey!
Looks like we have similar thinking behind our investment decisions :0) I think THI is relatively cheap right now too. Maybe that will be one of my first picks 🙂
Good thought.
I would love to invest in Coke and Starbucks but morally I can’t because being heavily involved in fitness I know the damage they cause. Look forward to reading how your options get on!
I can see where you’re coming from. Do you have any recommendations for the healthier end of the spectrum? I think it would be interesting, for example, to invest in some organic food company stocks or bonds :0)