Summary
Best Ideas, Dividend Growth Portfolio Holding Apple Crosses Above $600!
Best Ideas, Dividend Growth Portfolio Holding Altria Keeps Marching Higher!
Removing DirecTV from Best Ideas Portfolio
June Edition of Dividend Growth Newsletter to Be Released June 1
Dear Member,
We’d like to share a few updates today. First of all, we are very pleased with Apple’s (AAPL) recent stock-price performance. As you know, Apple is the largest weighting in the Best Ideas portfolio and one of the largest positions in the Dividend Growth portfolio. We’re very excited about the acceleration of the company’s iPhone 6 launch, and we think the firm is worth north of $700 on the basis of our discounted cash-flow analysis. View its landing page here. We don’t plan to make any changes to its weighting in the portfolios at this time. Investors should expect a 7-for-1 stock split soon (June 9), so don’t be surprised. Shares of Apple are trading just shy of $610 each.
In recent weeks, reports have indicated that tobacco-producer Reynolds American (RAI) is looking to purchase peer Lorillard (LO). Though no formalities have been announced, the news has driven peer Altria (MO) higher, and we’re very excited about Altria’s opportunities from any divestitures that may result from the potential combination. On a fundamental basis, our investment thesis on Altria centers on the company’s significant financial flexibility (arising from its valuable ~27% equity stake in global brewer SABMiller) and its hefty and very nice quarterly dividend payout. Shares yield roughly 4.7% at the time of this writing. Altria is also a holding in both the Best Ideas portfolio and Dividend Growth portfolio. The company is now trading just shy of $41 per share.
In other news, we had indicated on our website Monday that we were planning to remove DirecTV (DTV) from the portfolio as a result of AT&T’s (T) acquisition of the company. We had originally planned to do so earlier this week, but we were a bit surprised by DirecTV’s trading activity. At the time of the deal announcement, the value of the transaction was equivalent to roughly $95 per share, but concerns over DirecTV’s ability to renew its NFL Sunday Ticket Football Package have kept a lid on convergence to the takeout price. Though we think the likelihood of the firm not receiving the renewal is minimal, we see no reason to stick around to find out, especially given that regulators could complicate the tie-up even further (and that DirecTV’s price is now implicitly tied to AT&T’s share price changes due to the structure of the proposed transaction). We also believe the extra few bucks per share to the upside that waiting for the completion of the deal would provide is not enough for us to risk the substantial gain in shares in the Best Ideas portfolio. We’re not greedy, but prudent, and the firm’s trading activity suggests the deal “has some hair on it.” We’re removing the full position today at $84.15 per share.
Also, we wanted to let you know that the next newsletter edition will be the Dividend Growth Newsletter, and it will be released on June 1. We release the Dividend Growth Newsletter, which houses the Dividend Growth portfolio (on page 5), on the first of each month. We release the Best Ideas Newsletter, which houses the Best Ideas portfolio (on page 8), on the 15th of each month, and you should expect the June edition at that time. Though we call them newsletters, they are chock-full of valuation analysis and analytical insights. These days, news is hardly news. It’s the analytical insights that matter.
We also wanted to let you know that we’ve been quite busy through the calendar first-quarter earnings season (which has just wrapped up), and a large number of firms’ fair value estimates, Valuentum Buying Index ratings, and Valuentum Dividend Cushion ratings have changed in the past several weeks. Updates are common as new information comes to light and firms generate cash from our last intrinsic value updates, so please be sure to stay up to date with your holdings by using the ‘Symbol’ search box in the top right of our home page.
For our new members, I’ve included some helpful videos on getting started with our website below. For some of our well-seasoned fans, these videos may provide a helpful reminder on the easiest way to find what you are looking for.
Getting Started: http://www.youtube.com/watch?v=Gr9x_yux93I
How to Access Stock & Dividend Reports: http://www.youtube.com/watch?v=I0RDmu3NJq0
How to Access Valuentum’s Newsletter Products: http://www.youtube.com/watch?v=5wXDbNTNpTU
How to Access Financial Advisor Publications: http://www.youtube.com/watch?v=b1KqzkfXvEg
Remember, the next edition of the Dividend Growth Newsletter will be released the evening of Sunday, June 1. We trust you are very happy with the performance of both portfolios and the quality of the in-depth valuation analysis across our coverage universe. If you have any questions, please contact us at info@valuentum.com. That’s all for now!
Sincerely yours,
Brian Nelson, CFA
President, Equity Research
Valuentum Securities, Inc.