Morgan Stanley Expecting Substantial Improvements
January 22, 2020
Morgan Stanley is guiding return on tangible equity to go from 12.9% this year to 13-15% in two years and to 15-17% in the longer term. Management was quite clear that they are using the assumption that the economy and markets move ahead at normal levels, meaning no severe recessions or booms. That said, if the company hits these goals, it will drive fundamentals ahead at a steady clip, requiring a reset higher in its valuation. By Matthew Warren Morgan Stanley (MS) put up solid fourth-quarter results, released January 16, beating the consensus of analyst earnings-per-share forecasts by a decent margin. Net revenues advanced 8% and net income applicable to Morgan Stanley common shareholders was up a modest 1%. Adjusted
You Saw It Coming: 85% of Quant Funds Underperform
January 21, 2020
You Saw It Coming: 85% of Quant Funds Underperform — Financial advisors that shared the book Value Trap with your clients, if you think it makes sense, please be sure to let them know how hard you are working for them in staying up to date with new developments, especially the vast underperformance of quant mutual funds. Keep building trust.— By Brian Nelson, CFA — If I could have one wish come true, it’s for our members to know how much we put their interests first in getting them the right information with sound judgment. This sometimes takes us off in tangents, but where the individual investor and financial advisor are in need or not getting a fair shake, you’re going to find us
PPG Industries’ Latest Earnings Report Indicates Softer Industrial Activity Ahead
January 21, 2020
Image Shown: Capitalizing on the various lucrative opportunities the aerospace industry offers PPG Industries Inc underpins its long-term free cash flow trajectory. Image Source: PPG Industries – December 2019 IR Presentation By Callum Turcan On January 16, maker of painting, coating, and specialty materials PPG Industries Inc (PPG) posted fourth quarter earnings for 2019 that missed consensus estimates on both the top- and bottom-lines. Shares sold off sharply initially before recovering modestly throughout the trading session January 16. Let’s walk through PPG Industries’ quarterly performance to get a feel for how broader industrial activity is trending and why economic softness may be looming. As of this writing, PPG Industries is trading in the upper bound of our fair value estimate
Two Dividend Growth Newsletter Portfolio Holdings Get Ready to Report Earnings Later This Month
January 21, 2020
Two holdings in the Dividend Growth Newsletter portfolio, Johnson & Johnson and Microsoft Corporation, are getting ready to report earnings later this month. By Callum Turcan Johnson & Johnson Shares of Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Johnson & Johnson (JNJ) have experienced a sharp recovery since October 2019 and are trending up towards our fair value estimate of $151 per share. If Johnson & Johnson continues to perform well going forward, keeping in mind management raised the firm’s full-year guidance for fiscal 2019 several times (more on that here), shares of JNJ could test the upper bounds of our fair value estimate range which sits at $181 per share. Shares of JNJ yield ~2.6% as of
Goldman Hit By Charge Related to 1MDB
January 21, 2020
Aside from dominating the global revenue pools for investment banking and trading, Goldman is doing other things right. The firm has rapidly gathered deposits in the US and UK over the past year, bringing in a lower cost of funds to help facilitate its balance sheet. Goldman has also built up Marcus, Apple Card, and the bank is in the process of growing its asset management business to better serve institutional clients. By Matthew Warren Goldman Sachs (GS) posted mixed fourth-quarter results, released January 15, beating consensus revenues but missing on the bottom line by a substantial amount as a result of a $1.24 billion charge related to the ongoing 1MDB (1Malaysia Development Berhad) scandal potential upcoming resolution. 1MDB is
Why We Like Republic Services Over Casella
January 17, 2020
Image Source: Republic Services Inc – 2018 Annual Report By Callum Turcan Let’s talk about the story of two garbage haulers, one that is extremely pricey and one that we just added to the Dividend Growth Newsletter portfolio. Casella Waste Systems Inc (CWST) has grown from a one truck company back in 1975, building Vermont’s first recycling facility in 1977, to a mid-sized waste disposal and recycling company as of today. The rally in shares of CWST over the past ~5 years has been stunning, with shares up over 12-fold since December 2014. We recently updated our models for Casella and the environmental services industry at-large (those reports can be viewed here), and want to caution our members that the
Bank of America Gaining Share
January 17, 2020
We are increasing our fair value estimate of Bank of America to $40 per share, as we view the market share gains at the bank and steady loan and deposit growth to be more sustainable than we had previously envisioned. We like the bank’s solid franchise, the management team, and we like the shares here as it tries to catch up with larger peer JPMorgan. By Matthew Warren While Bank of America (BAC) put up middling results for the fourth-quarter, report released January 14 , they did come in better than analyst expectations on the top- and bottom-lines. Total net revenue was down 1% in the quarter and net income was down 4%, but large share buybacks meant that diluted
Citigroup Succeeding at Cross-Selling
January 17, 2020
Citigroup is finally out-earning our estimate of its cost of capital with a return on tangible common equity (ROTCE) of 12.4% in the quarter, and the shares have rallied substantially more recently as a result. Management lowered expectations for the degree of return on tangible equity improvement going into 2020, but continued improvements would be welcome, nonetheless. By Matthew Warren Citigroup (C) posted impressive fourth-quarter results January 14 with revenue up 7% and earnings per share up a whopping 34% given significant share buybacks, beating analyst consensus estimates on both the top and the bottom lines. Fixed income trading grew substantially against a weak quarter last year. As you can see in the below graphic, Citi’s revenue growth accelerated in
Our Reports on Stocks in the Environmental Services Industry
January 17, 2020
Image: Republic’s Apex landfill in Las Vegas. Structure of the Environmental Services Industry The oligopolistic US non-hazardous solid-waste services industry is dominated by Waste Management, Republic Services and Waste Connections, which collectively generate over half of industry revenue and control an equal percentage of valuable disposal capacity. Most operators boast strong returns on capital and predictable cash flow streams, buoyed in part by real pricing expansion. The landfill business has significant barriers to entry, while Stericycle’s niche in the medical-waste industry and US Ecology’s monopolistic radioactive waste disposal assets are compelling. We like the structure of the group. We’ve optimized our industrials coverage. Our reports can be found here.
Our Reports on Stocks in the Integrated Circuits Industry
January 17, 2020
Image Source: Yuri Samoilov.
We’ve optimized our technology coverage.
