Walmart Reports Fourth Quarter Results, Raises Dividend
February 19, 2020
Image Source: Valuentum By Brian Nelson, CFA On February 18, global brick-and-mortar retail bellwether Walmart (WMT) reported mixed fourth-quarter fiscal 2020 results (ends January 31, 2020) that showed revenue advancing 2.1% and non-GAAP earnings per share of $1.38 missing the consensus forecast. We await the filing of the firm’s 10-K to roll our valuation model forward, but we do not expect to make any material changes to our fair value estimate at this time, which stands at $109 per share. The stock is trading hands at ~$118 per share at the moment. Walmart’s US comparable store sales growth, on a two-year stacked basis, came in at 6%, which is solid in our view, but the most recent quarterly pace (+1.9%)
Newmont Updates Investors Ahead of Earnings
February 18, 2020
Image Source: Newmont Corporation – January 2020 IR Presentation By Callum Turcan Back on January 13 (link here), we added Newmont Corporation (NEM) to our Dividend Growth Newsletter portfolio with a modest weighting as part of our shift towards more defensive names in light of rising exogenous headwinds to global economic activity. Some important considerations include Newmont increasing its quarterly payout to $0.25 per share from $0.14 per share, which is expected to be declared at the level in April 2020 (the fourth quarter of 2019 dividend, as management puts it, will be paid out in March 2020 at $0.14 per share). As of this writing, Newmont would yield ~2.2% at the new annualized dividend rate. We like Newmont’s dividend
Digital Realty Starts 2020 Off Right
February 18, 2020
Image Source: Digital Realty Trust Inc – Fourth Quarter and Full-Year 2019 IR Earnings Presentation By Callum Turcan On February 13, the data center real estate investment trust (‘REIT’) Digital Realty Trust Inc (DLR) reported fourth quarter and full-year earnings for 2019 after the market close. The firm’s top-line marginally missed consensus estimates as its funds from operations (‘FFO’) per share modestly beat consensus estimates. Shares of DLR marched up 4% on February 14 as investors priced in the FFO per share beat and recent events. We continue to like shares of DLR as a holding in our Dividend Growth Newsletter portfolio. As of this writing, Digital Realty yields ~3.3%. Earnings Overview and a Tough 2019 The REIT’s FFO per
Our Reports on Stocks in the Building Materials Industry
February 18, 2020
Image Source: Scott Structure of the Building Materials Industry The building materials industry is made up of firms that produce a wide range of materials for use in new/remodeled housing and commercial/industrial construction projects. Demand for and the prices of building materials are very cyclical/volatile and are tied to general economic conditions, including the level of housing starts, existing home sales, and floor-space growth, all of which are beyond the control of industry participants. As a result of the housing bust, significant production overcapacity still exists for some materials, resulting in ongoing pricing pressures. We don’t like the structure of the group. We’ve optimized our building materials coverage, the reports of which can be found here.
Our Reports on Stocks in the Gaming & Hotels Industry
February 18, 2020
Image Source: Erin Pettigrew Structure of the Gaming & Hotels Industry The gaming industry is heavily regulated and particularly sensitive to discretionary spending. Significant future gaming revenue growth will come from the Asian markets, especially Macao. Possession of a gaming subconcession by the Chinese government is an advantage, though competition remains intense among existing Macao rivals. The hotels industry is highly competitive, with over 900 lodging management companies in the US alone. Demand for hotel rooms is very cyclical, and fluctuations in both occupancy rates and revenue per available room (RevPAR) should be expected. We’re generally neutral on the structure of the group. We’ve dropped coverage of stocks in the Gaming & Hotels industry.
Amazon Contests Microsoft Winning JEDI Contract
February 17, 2020
By Callum Turcan Microsoft Corp (MSFT) is a longtime holding in the Dividend Growth Newsletter portfolio and on top of posting great dividend growth historically–from the start of 2010 to the start of 2020, Microsoft’s quarterly dividend rose from $0.13 per share to $0.51 per share, and we see that trajectory continuing going forward–shares of MSFT have been on an upward tear and are up ~73% over the past year as of this writing. Microsoft now trades well above the top end of our fair value estimate range. However, we let our winners run until the technicals start turning against them in a meaningful way. As of this writing, shares of MSFT yield ~1.1% on a forward-looking basis. Recent Events
What is Risk?
February 13, 2020
Image Source: Mike Cohen By Matt Warren Let’s start by talking about what isn’t risk. Risk isn’t easily measured and yet that is what the asset management industry and academia tend to serve up to the average and professional investor alike. You will see the standard deviation of a stock or portfolio, showing how much the value wiggles. You will see beta, which shows how much the value wiggles as compared to the benchmark’s own wiggles. You will see things like the Sharpe and Sortino ratios, which tackle further quantifiable ways to describe risk–and the list of equations goes on and on. Do you know what is a much more difficult question for an asset manager to answer? How much
Cisco Continues to Showcase Its Free Cash Flow Strength
February 13, 2020
Image Source: Cisco Systems Inc – Second Quarter Fiscal 2020 IR Earnings Presentation By Callum Turcan On February 12, Cisco Systems Inc (CSCO) reported second-quarter earnings for fiscal 2020 (period ended January 25, 2020) that beat consensus estimates on both the top- and bottom-line. However, shares of CSCO still fell initially on the news, possibly due to the company’s forward guidance for the third quarter falling short of expectations. Cisco is currently undergoing a major transition from a company that primarily sells hardware to one that also offers material subscription-based services and software, in order to offset the structural declines facing the enterprise data application management space (which can be summed up as many/most enterprises around the world switching their
Our Reports on Stocks in the Engineering & Construction Industry
February 13, 2020
Image Source: CBI Structure of the Engineering & Construction Industry Firms in the E&C industry design and construct facilities for customers across a variety of end markets. Participants generally have slim margins and use percentage-of-completion accounting, which can cause wild swings in profitability, especially on fixed-priced contracts when cost overruns occur. Firms that operate primarily under cost-reimbursable contracts tend to have lower risk profiles. Still, order trends can be volatile, and cash flow depends on projects in cyclical industries. Competition remains fierce, and industry consolidation won’t change existing rivalries much. We generally don’t like the group. We’ve optimized our coverage of industrial firms. They can be found here.
PayPal Closes Out a Stellar 2019 and the Future Looks Bright
February 11, 2020
Image Shown: PayPal Holdings Inc has been a big winner in our Best Ideas Newsletter portfolio, and we expect that to continue being the case going forward. By Callum Turcan PayPal Holdings Inc (PYPL) is one of our favorite companies out there in the payment processing/financial tech space, up there with top weighted Best Ideas Newsletter portfolio holding Visa Inc (V), and back on January 13 (link here) we increased our weighting in shares of PYPL in the Best Ideas Newsletter portfolio. We like PayPal’s rock-solid balance sheet, quality cash flow profile, and most importantly, its growth outlook. Guidance Commentary On January 29, PayPal reported fourth-quarter and full year earnings for 2019, and the company continued to outperform. The firm
