Buy Banco Santander (SAN)   Leave a comment

I am adding a small position of Banco Santander (SAN) to my long-term portfolio in my 401k. It is at a decent price (book value/share of $8.71), the financials are clean with multi-national exposure, they do seem to be growing (last quarter’s revenue grew 8.4% yoy), and they are expected to grow well beyond their current price in the future (PEG ratio of 0.46). And then there is their dividend, which has a 5 year average yield of 6.9%. You have to consider that because, even though their current yield is about 7.5%, their yield fluctuates with the currencies. Consider their dividend has risen 7 times in the past 5 years, as well as fallen 11 times. But even if it were to drop as low as 5%, that is still better than most banks.

However, even as good as SAN looks, there is huge risk, which is why I am keeping my position small. If it drops, I can add more later. If it totally craps out, there is always the potential for an EU bailout (especially since they seem to be following the Fed’s lead on all things economic). Worst case scenario: I haven’t lost much. Low downside, high upside, and I collect a good dividend in the meantime.

On top of that, I get to add some European exposure to my combined portfolios, which I have also been looking to do.

One last point: SAN has been above it’s 50 day moving average since July, with the current price being only the third time SAN has touched it. The first 2 times it went up after touching the 50 day MA. My guess is it will do the same thing again here.

I bought SAN at $8.64.

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Posted November 20, 2013 by edmcgon in Portfolio Moves

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