“David, I began following BHP last year and put on preliminary positions in May after a pullback.  I wanted to become comfortable with the investment before making more widespread commitments.  The stock has ranged since then, and recently pulled back below $60 (NYSE BBL).  Given the occasional comments you had made about cost cutting and information gleaned from their Web site (www.bhpbilliton.com) I became emboldened to add full positions, particularly with the yield at or near 4%.  I decided to measure BHP against consistent dividend raisers ranging from 5 years to more than 25 years on 4 measures: 

1. Tweed Factor
2. Chowder Rule
3. Confidence Factor
4. 5 year payback %

“Without going into the details of what each measure means, what I did was use BHP as a floor in each of those measures and looked for which companies met or exceeded it in all 4 categories.  8 companies did so:

1. ARLP
2. COP
3. SNP
4. CMS
5. DRI
6. PM
7. SDRL
8. TAL

“I looked over each chart and found those highlighted in green to meet the qualitative characteristics Eoin espouses at TCS.  I would love any further information you have on this group as to why they are cheap.  Some of the charts LOOK expensive but may in fact be cheap.  Thoughts?”

David Fuller's view

Many thanks for an interesting and informed email.

You know more about the eight shares you listed than I do.  However, I will add for everyone else that they appear to be conservative investment choices with good yields and generally lower valuations, which are appropriate for this maturing stage of the US stock market cycle.  

One reason for this - shades of 1999 - is that they are currently perceived as ‘boring’ basic industries without the glamour of new tech shares, many of which show some bubble characteristics, although by no means as excessive as fifteen years ago. 

Nevertheless, New Tech is beginning to underperform and will continue to show high-beta characteristics when Wall Street’s next 10% plus correction occurs, probably between now and the end of 3Q 2014. 

Meanwhile, many ‘boring’ basic industries are beginning to benefit from technological advances, such as within the mining industry as I reported most recently with Thursday’s lead item: Drones Portend High-Tech Future for Dangerous Mines.