Competition Is Heating Up for Intel
April 26, 2021
Image Shown: Intel’s shares have outpaced the S&P 500 SPDR (SPY) since we removed them October 2020. By Brian Nelson, CFA We removed Intel (INTC) from the simulated newsletter portfolios in late October 2020. Since then, the chip giant has outpaced the index modestly. We’re not reading too much into this, but we wanted to keep the name in front of you as it has been an idea in the simulated newsletter portfolios in the past. Shares yield about ~2.4% at the time of this writing. On April 22, Intel reported first-quarter 2021 results that showed flat non-GAAP revenue performance, while non-GAAP earnings per share declined modestly. Intel has lost a bit of its edge against Advanced Micro Devices (AMD)
Chipotle Could Double the Number of Restaurants in the Long Run
April 26, 2021
Image Source: Valuentum By Brian Nelson, CFA “Letting winners run” is an important dynamic behind the concept of compounding, and it often makes having a long-term horizon necessary. I talk about how we think about “letting winners run” in the following video, “Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value.” Compounding returns is one powerful aspect of investing. That said, we can understand why it may be confusing to see us continue to highlight ideas in the simulated newsletter portfolios that may be trading above the high end of the fair value estimate range, but per the Valuentum methodology, we would only look to remove them when their shares start to roll over in a meaningful
P&G and Kimberly-Clark Tell Two Different Stories
April 23, 2021
Image Shown: Since the beginning of 2019, on a price-only basis, Procter & Gamble (orange) has handily outpaced the Vanguard Consumer Staples ETF while Kimberly-Clark (turquoise) has stumbled. Brian Nelson, CFA Consumer staples (VDC) stocks are known for the stability of their demand profiles, strong and recognizable household brand names, and solid dividend growth track records. Procter & Gamble (PG) may be among the most recognizable names across the sector, but Kimberly-Clark (KMB) is not far behind. Their share prices, however, tell two different stories since the beginning of 2019. In P&G’s third-quarter fiscal 2021 report (calendar first quarter), issued April 20, the company posted a net sales increase of 5% and diluted net earnings per share expansion of 13%,
Lockheed Martin Boosts Guidance
April 23, 2021
Image Source: Lockheed Martin Corporation – First Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan Geopolitical tensions are on the rise worldwide. In recent weeks, Russian forces started massing on the border with Ukraine (though reportedly, those forces are beginning to pull back) as acrimony between Western governments and Russia continues to grow while the situation in Ukraine (i.e., Russia’s annexation of Crimea and involvement in eastern regions of Ukraine) remains in paralysis. Tensions between the US and China are building as well with an eye towards trading relations, espionage of all kinds, and cyber-attacks. The geopolitical backdrop indicates that the trajectory of defense spending is likely to continue growing in key developed and developing nations worldwide going
Coca-Cola Looks Ready to Break Out, Valuation Not Attractive Though
April 22, 2021
Image Shown: Coca-Cola’s technicals look like they are carving out a nice cup-and-handle pattern, but its valuation leaves a lot to be desired, in our view. By Brian Nelson, CFA On April 19, Coca-Cola (KO) reported solid first-quarter results that showed net revenue increasing 5% and its operating margin advancing 2.5 percentage points from the year-ago period. Comparable earnings per share leapt 8%, to $0.55. Very few companies have as strong a brand name and dividend track record as Coca-Cola, but investors should be cautious about its valuation, in our view. On the basis of our discounted cash-flow modeling approach, the high end of our fair value estimate range of Coca-Cola stands at $48 per share, which reflects over 20x
Good News from High Yielding AT&T
April 22, 2021
Image Source: AT&T By Brian Nelson, CFA On Thursday, April 22, AT&T (T) reported solid first-quarter results that gave the market confidence that it can make good on its payout to shareholders. The company offers high yield dividend investors an attractive risk-reward profile given its healthy earnings (and free cash flow) coverage of the dividend, in our opinion. During the period, AT&T’s consolidated revenue advanced 2.7% while adjusted diluted earnings per share came in at $0.86 versus $0.84 in last year’s quarter. Operating cash flow leapt 12% while free cash flow soared to $5.9 billion, up by more than half over the same tally in the year-ago period. Here’s what CEO John Stankey had to say about the quarter in
One of Our Favorite Dividend Growth Ideas J&J Smashes Consensus Estimates
April 21, 2021
Image Shown: Summary of Johnson & Johnson’s first-quarter 2021 earnings results. Image Source: J&J. Valuentum’s Dividend Growth Newsletter portfolio >> By Callum Turcan On April 20, Johnson & Johnson (JNJ) reported first quarter 2021 earnings that smashed past consensus estimates. In conjunction with the solid earnings report, Johnson & Johnson raised its quarterly dividend 5% sequentially to $1.06 per share or $4.24 per share on an annualized basis, good for a forward-looking yield of ~2.5% as of this writing. The health care giant’s outperformance largely came from its ‘Medical Devices’ segment, which took a beating last year as the COVID-19 pandemic prompted widespread deferrals of elective surgeries. Last quarter, this part of the firm’s business grew its reported sales by
Abbott Expects Strong Earnings Expansion in 2021
April 21, 2021
Image Shown: We use a discounted cash flow model to derive a fair value estimate range for companies in our coverage. The high end of our fair value estimate range for Abbott is $125 per share. We’re maintaining this range after its first-quarter 2021 report. Image Source: Valuentum’s 16-page stock report of Abbott. Presentation: How to Use our 16-page Stock Reports (pdf) >> By Callum Turcan On April 20, Abbott Laboratories (ABT) reported first quarter 2021 earnings that missed consensus top-line estimates but beat consensus bottom-line estimates. Last quarter, Abbott Laboratories’ ‘Diagnostics’ revenues more than doubled year-over-year due primarily to its COVID-19 pandemic-related offerings, while its ‘Medical Device’ and ‘Nutrition’ revenues were up 9% and 6% year-over-year on an organic
Vertex and CRISPR Therapeutics Partnership Update
April 21, 2021
Image: Vertex Pharma is co-developing gene-based therapy for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT). CTX001 may offer a potential cure for people that have SCD and TDT. By Callum Turcan We include shares of Vertex Pharmaceuticals (VRTX) in the Best Ideas Newsletter portfolio and continue to view the biotech company quite favorably. Our capital appreciation thesis on Vertex Pharma is partially built upon the “call option” related to potential upside that various partnerships, including that with CRISPR Therapeutics (CRSP), could uncover. Even if such promising partnerships don’t pan out, however, Vertex Pharma’s free cash flow growth outlook underpins the higher end of its fair value estimate range, which currently sits at $321 per share (well above where
Banks Holding Up Well, Some Feel Pain from Archegos Capital Collapse
April 20, 2021
Image Shown: Bank of America Corporation has an optimistic view towards the ongoing US economic recovery. Image Source: Bank of America Corporation – First Quarter of 2021 IR Earnings Presentation By Callum Turcan Earnings season is now underway! In this article, we cover the performance of two large US banks and the problems facing one major European bank in light of losses stemming from Archegos Capital Management blowing up. Large reserve releases last quarter–due to the US economy holding up better than expected–during the coronavirus (‘COVID-19’) pandemic played an outsized role in bolstering the financial performance of key US banks after these institutions recorded large reserve builds in 2020. Net interest margins (‘NIM’) continue to face headwinds from the low
