CMI

Cummins

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-$6.64 -2.91%
🏆 September Idea Competition Winners!
Our panel of esteemed judges met and the votes are in!

Results:
#1: @invesquotes— Texas Instruments $TXN
#2: @dividenddollars — Cummins $CMI
#3: @stockopine — Greggs $GRG
#4: @kostofff — CMC Markets $CMCX
#5: @stockado — Enphase Energy $ENPH

Judge @jennymanydots had this to say about our first place finisher @invesquotes pitch of $TXN:

You gotta check out the grand prize winner! $TXN

[[[@10kdiver](/10kdiver)](/10kdiver)](/10kdiver) had high praise for Dividend Dollars' pitch of $CMI:

Will $TSLA have solutions to power ALL electric vehicles? Unlikely.

@dividenddollars breaks down how Cummins $CMI might be the solution.

@shetalksfinance was impressed with StockOpine's pitch of $GRG:

@stockopine pitched a bakery chain that transformed into a modern food-on-the-go retailer. $GRG https://commonstock.com/post/35bb92a6-6268-455e-8b4c-fafa4c975d7c

@stackinvesting was intrigued by Todor’s pitch of CMC Markets $CMCX:

Bet you haven't heard of this highly profitable spread-betting trading platform based in the UK
@kostofff $CMCX

@shetalksfinance appreciated Sagar Vensi's pitch of Enphase Energy $ENPH:

$ENPH is a one of two duopoly along with $SEDG in the solar micro-inverter sector.

Superlative Prize Winners:

Verified Trade: Capisce Capital @capisce_capital
Trade Chart: Jared Watson @wjared and Scoreboard Investor @scorebdinvestor

Want more investment ideas? Filter the Commonstock home feed using the 'Sept Idea Comp' tag (currently at the end of the tag list)

Thanks to everyone who submitted an entry to the September Idea Comp! See you all next time!
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Idea Competition - Cummins ($CMI) The Diesel Giant That Is Ready For The Green Revolution.
Tesla ($TSLA) pioneered EVs, and now the industry is packed with competition. EVs are great for the average commuter, but will Tesla/others have solutions for powering the trains, boats, construction vehicles, etc that make the world go 'round? Unlikely.
My stock pick might be the solution.
Cummins is a global power leader that designs, manufactures, distributes, and services diesel, natural gas, and now electric and hybrid powertrains. They sell to original equipment manufacturers (OEMs), distributors, and dealers in 190 countries for various uses from Ram pickups, heavy machinery, trains, and more.

Since 2002, Cummins has outgrown competition and the segments they serve with 6.3% revenue CAGR. Cummins has also grown total revenues from $5.6B to $24B and net income from -$103M to $2.1B with 6.7% average net income margin and 22.2% average ROE.


Cummins has great capital allocation with $3B cash, $4.9B debt (1.3% is current), great credit access, strategic acquisitions (recently OEM Meritor) and $1.3B FCF which they use for dividends (2.29% yield) and $2B of share buybacks.
Thesis:
Attractive valuation and economic and political tailwinds are at Cummins’ back as potential catalysts for growth.
  1. New Power
Cummins commercialized diesel engines in 1919 and continues to make innovations and improvements to powertrains. They offer the most fuel and emission efficient engines in the market and invest heavily in R&D to anticipate, prepare for, and exceed the changing regulations in advance (EPA regulations have reduced emissions by 90% this decade).
Some states, China, Germany, and other countries have announced plans to ban the use of diesel or other internal combustion engines by 2030. Cummins knows that zero emissions is the goal in the coming decades and are investing now to ensure they remain the power leader for a changing world.
"New Power" is Cummins' newest operating segment. It is focused on zero emission and zero carbon solutions. Cummins has a large customer base and strategic partnerships, all needing decarbonization answers.

Cummins believes the path to zero emissions creates a market opportunity of $100B for 2030. They will service that market by being an integrator and component supplier. Their components business will grow by providing efficient filtration, emissions collectors, and other components to aid emission reduction efforts. When regulations require net zero, Cummins will have already accelerated adoption of FCEV, BEV, and hydrogen systems among their customers before the regulations occur.

Cummins’ New Power financial targets are $6-13B revenue in 2030 (approx. 15%-28% total projected revenue) with ~$1.3B cash outflow of operations from 2022-2027 reaching breakeven in 2027. With continued worldwide engine population growth and a high-margin component segment, Cummins forecasts EBITDA to grow >20% by 2030. I believe these goals are not overly ambitious.
  1. Food Prices
Global food prices have jumped 40% since the beginning of the pandemic. The Russia-Ukraine war also contributed to a spike in food prices earlier this year as they are substantial exporters of wheat, barley, sunflower oil, and fertilizer. Food prices have been easing but have a long way to go before returning to the norm.
Cummins has over 1 million agricultural engines in operation worldwide. Their products provide greater fuel efficiency, horsepower, durability, and less ownership costs than competitors. During periods of high food prices, farmers can widen margins if they manage COGS and I expect this benefit to extend to Cummins as farmers look to their products to unlock efficiencies and savings.
  1. Valuation

Using a 10-year timeframe and above assumptions, $CMI appears undervalued with potential long-term and short-term returns per the model and thesis.
Risks:
  • Freight Demand: Cummins is sensitive to freight demand. With a looming recession, consumer spending could slow causing truck operators to delay new fleet purchases.
  • Regulation: Though regulation is my main bull case, strict regulation could push competition to invest in technologies and dull Cummins’ edge.
  • Inflation: Cummins’ COGS has increased via more expensive materials and shipping costs. They have raised prices to counter, improving margins for two quarters. However, continued price increases could pose a problem.
Author’s Statement
I have a position of 2.372312 shares with $209.56 average cost. Understanding the potential upside and risks, I plan to hold, buy more shares, and reinvest dividends long-term. Below is a screenshot of $CMI trending in Commonstock mentions on 8/31/22 and linked is a verified purchase.
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Cummins will be around for a while, they’ve consistently been a name that is associated with durability and quality. You could say in the future we’re gonna see a lot more Cummins than a lot more Goings y’knaw I mean?
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Weekly Review
Some nice gains over the past few days after a rough start to the week.

Income Portfolio: Opened new positions in $AMLP and $TSN . Increased holdings in $ARCC $OZK $AFG $DKS $HRL and $LCII . Collected dividends on $INTC $KR $CMI $RDN $RS $JNJ $PCAR and $TSCO .

Growth Portfolio: Increased holdings in $ENPH and took partial profits on $PINS leaving a small holding remaining

Speculative: Nil
Dividend Portfolio Update
As you may know, I write many updates, economic analysis, and opinion pieces on my website, you can read my most recent full portfolio update here. However, it's been a while since I've shared an update on Commonstock so let's do one!

To date, I have invested $11,050 into the account the total value of all positions plus any cash on hand is $10,540. That’s a total loss of -4.62% The account is down $310.76 for the week which is a -2.86% loss.

We started building this portfolio on 9/24/2021 and, even with this rough last week, when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -11.92% whereas our portfolio is down 4.62%! I love tracking my portfolio against a benchmark like the S&P. The above chart comes from Sharesight which makes portfolio and dividend management a breeze!

We added $250 in cash to the account over the last two weeks.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week and the blue ones are positions that I reinvested dividends into. The positions that we added to increased our annual dividend income by $8 at a yield of 4.54%.

For the last two weeks we received $13.78 from five dividends: $2.29 from $SMHB, $2.47 from Starbucks ($SBUX), $1.01 from Aflac ($AFL), $5.88 from Intel ($INTC), and $2.14 from Cummins ($CMI).

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically.

Dividends received for 2022: $237.97
Portfolio’s Lifetime Dividends: $255.90

You can see my trades on my profile and next week I will continue to add $10 into each ETF ($SPY, $XYLG, and $SCHD) and will look at deploying the rest of the money either into $MO or $BBY for the upcoming ex-dividend date.

That is it for the update this week. Let’s kill it next week. Stay patient and be ready to buy income producing assets at a discount!

coming in order to help arm yourself with a strategy for your future buys!
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Dividend Portfolio Update
As you may know, I write many updates, economic analysis, and opinion pieces on my website, you can ready my most recent full portfolio update here. However, it's been a while since I've shared an update on Commonstock so let's do one!

To date, I have invested $10,110 into the account (WOOT WOOT WE PASSED 10K), the total value of all positions plus any cash on hand is $9,887.69. That’s a total loss of 2.20%. The account is up $142.95 for the week which is a 1.47% gain.

We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -12.48% whereas our portfolio is down -2.20%! I love tracking my portfolio against a benchmark like the S&P. The above chart comes from Sharesight which makes portfolio and dividend management a breeze!

We added $120 in cash to the account this week. The trades made this week will be broken out below.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week and the blue ones are positions that I reinvested dividends into. The positions that we added to increased our annual dividend income by $9 at a yield of 4.42%.

This week we received $6.72 from two dividends: $0.49 from Coca-Cola ($KO), $6.23 from Best Buy ($BBY).

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. The Coca-Cola dividend was actually received last Friday, but got reinvested on the following trading day.

Dividends received for 2022: $179.42
Portfolio’s Lifetime Dividends: $202.34

Below is a breakdown of my trades this week!
July 5th
  • Best Buy ($BBY) – dividend reinvested
  • Coca-Cola ($KO) – dividend reinvested
  • Comcast ($CMCSA) – 0.5 shares bought at $39.26
  • Lowe’s ($LOW) – added 0.125 shares at $175.84
July 6th
  • $SCHD – added 0.1399 shares at $71.48 (recurring investment)
  • $XYLD – added 0.233198 shares at $42.88 (recurring investment)
July 8th
  • Intel ($INTC) – added 0.25 shares at $37.96
  • AT&T ($T) – added 2 shares at $20.86

We also bought some $SSSS and sold it the next day for a ~5% gain. This is not something I do often so I won't provide the dates and prices for those orders.

This was sort of a slow week on top of an already shortened week. It was a pretty positive week driving by the tech and consumer discretionary sectors as discussed in my weekly market review, therefore there wasn’t too many amazing opportunities to buy down. I mainly just took this week to add a little bit into some of my favorite down positions and positions on ex-dates.

Next week I plan on keeping my eyes on Lowe’s, Cummins, and Altria for the reasons below:
  • Lowe’s ($LOW) for its ex-date coming up on July 19th.
  • I’ll also be looking to add to Cummins ($CMI) which I’m down 4% on right now. Their yield is 2.89% which is slightly above their 5-year average and their P/E is at 10.8 which is about 20% underneath the 5-year average. They have a 29-year dividend streak with 16 years of consecutive growth. I’m anticipating a dividend increase on their Q3 payout and thus would like to add earlier now while down.
  • I’ll also be watching Altria ($MO) to add to next week. I’m currently down 12.3% on this stock. Its yield is juicy right now at 8.67%, roughly 2% higher than its 5-year average. This company has great financials and the JUUL headlines don’t concern me too much due to the company’s limited stake in it. Similar to $CMI, I’m expecting their next announced dividend to be increased and I want to add early while down now.
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Weekly Economic Analysis and Portfolio Update
Below is a paraphrase of the full portfolio update and market review article I write weekly. Click here for a full portfolio with more statistics, an economic review, plus a break down of all my trades (which you can see in my Commonstock profile as well), and what stocks I'll be looking to buy next week.

Market Review

"The first week of June was a short one! Short in terms of trading days, but also short in terms of the market movement as it failed build on last week’s gains. The market this week showed renewed seller’s interest off of the back of economic concerns, earnings outlooks (looking at you Microsoft), and monetary policy.

As discussed in our monthly market recap, JPMorgan Chase (JPM) CEO Jaime Dimon said that he sees a storm ahead, whether it’s an “economic hurricane” or a slight down pour, we need to ready. He and JPM will do so by being conservative with their balance sheet. On Friday, Elon Must said that he had a bad feeling about the economy and that his electric car company Tesla (TSLA) needs to freeze hiring and cut 10% of staff.

Every S&P sector finished Friday in the red with the exception of the energy sector. Healthcare, real estate, financial, and consumer staples were the worst performers. Energy was the best performer followed by information technology at a distant second. The energy sector’s performance this week was a result of oil prices pushing higher off an announcement by the EU to ban 90% of Russian crude imports by the end of the year and an announcement from OPEC that they will boost production targets for July and August. OPEC’s oil decision is sound on the surface, however, oil traders saw it as insufficient to meet demand. Demand is expected to rise in the wake of China’s reopening and the EU’s oil ban. WTI crude started the week at $115.07 and are now at $118.87. It had just come off of highs of $120.46 which is the highest level seen since March.

Portfolio

To date, I have invested $9,220 into the account, the total value of all positions plus any cash on hand is $9,497.74. That’s a total gain of 3.01%. The account is down $85.99 for the week which is a 0.9% loss.

I love tracking my portfolio against a benchmark like the S&P. The above chart comes from Sharesight which makes portfolio and dividend management a breeze!

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week.

Dividends

This week we received four dividends. $1.00 from Aflac ($AFL), $3.12 from Intel ($INTC), $2.94 from $XYLD, and $1.96 from Cummins ($CMI).

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. All dividends were reinvested.

Dividends received for 2022: $131.86

Portfolio’s Lifetime Dividends: $154.79"

Again, click here for a full portfolio with more statistics, an economic review, plus a break down of all my trades (which you can see in my Commonstock profile as well), and what stocks I'll be looking to buy next week.
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A Weekly Update on Happenings in Special Situations
Three highlights:


Full release:
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Commonstock is a social network that amplifies the knowledge of the best investors, verified by actual track records for signal over noise. Community members can link their existing brokerage accounts and share their real time portfolio, performance and trades (by percent only, dollar amounts never shared). Commonstock is not a brokerage, but a social layer on top of existing brokerages helping to create more engaged and informed investors.