I confess.
I went on a short weekend getaway, and the team rested, too. It has been awhile, and frankly, we needed a break. We’re covering a lot of ground at Valuentum, and we’re doing a great job with so many points of research presence.
I came home Sunday night after an adventurous but rejuvenating weekend to the following emails:
Hello…can you please cancel my subscription and provide a refund for the unused portion of my annual subscription. Thanks
Please cancel the renewal of my subscription which expires April 20th. Great information on your site and in the newsletters, I just find myself not having the time to read and utilize them all, as I have multiple other sources of investment information. Thanks.
Sigh.
We’re getting large enough now where some “frictional” (normal) cancelations have become just part of the business, but serving the investor is not easy.
You really, really have to want it in this business. You have to give everything and expect nothing in return. And we do. It’s a lot of sacrifice. We can never really forget the Easter Sunday cancelations or the Sunday afternoon cancelations.
It’s tough. There is no rest in this business, unfortunately.
But emails like those above are particularly difficult.
We’re coming off a fantastic week, and maybe this is why some of the baffling customer correspondence is a little tough to swallow.
It’s almost like we want to say, “Have they been paying attention?” Or, “My goodness, what more can we do?”
But there’s no rhyme or reason to any of it. You know the Jerry McGuire “Help Me, Help You” scene? Some days I feel like Jerry McGuire. Why don’t some investors understand what we’re doing here?
Why don’t they see? How many times do our calls have to work out?
In any case, General Electric (GE) finished up 10%+ Friday, and we can go into the reasons why, but we’ve been hammering home our thesis on the company for many months now.
An announcement that GE will exit almost all of GE Capital and launch a $50 billion buyback should not be surprising. We’ve been applauding GE’s exit strategy for a while, and GE’s shares are cheap, so a buyback is a natural extension of this line of reasoning.
As for incremental developments, the company now expects 90% of its earnings to be generated by its industrial businesses by 2018 (was 75%), with some assets going to Blackstone (BX) and Wells Fargo (WFC). This means that GE has the potential to return more than $90 billion to investors through 2018 in dividends, buyback and Synchrony (SYF) exchange.
There is not a better time than near the peak of the economic cycle to sell assets. Why don’t some prognosticators get it? All of a sudden 16 times earnings for one of the strongest portfolio of industrial assets is too expensive? The broad market is trading north of 17 times, and some bellwethers like Coca-Cola (KO) are trading at over 20 times. You can’t pay too close attention to multiples. Use the DCF.
Do you know why the bulge bracket firms are called the sell-side. Let me be very clear: they want you to trade. They generate their revenue from your trading. Every piece of their research will be actionable because an unactionable piece of research will not generate them any money. They are called the sell-side because they are selling.
GE is one of the largest holdings in both the Best Ideas portfolio and Dividend Growth portfolio. Maybe those that canceled missed it, and they are frustrated that other members got it right? In any case, we’re going to keep doing great work and making fantastic calls!
We care, and that’s why we let you know of this kind of stuff. We’re not going to pretend. We’re working hard and doing a great job. We’re not removing one share of GE from the portfolios.
Here’s to another great week!
(no more vacations anytime soon for me)
Brian Nelson, CFA
President, Valuentum Securities