5 Things We Learned in 2019
December 25, 2019
5 Things We Learned in 2019 “The further a society drifts from the truth, the more it will hate those that speak it.” — George Orwell By Brian Nelson, CFA I’m looking at the beautiful Smoky Mountains in Tennessee as I’m writing this piece. I hope that you and yours are having a wonderful holiday season with family and friends. I wanted to share with you a few things that I think investors learned during 2019. Before I do, however, you’re probably wondering why I decided to lead in with this particular quote from Orwell. — — The quote, in some ways, is a reflection of how I think many approach truth in finance. Maybe they don’t
General Mills’ Pet Segment Performs Well
December 20, 2019
Image Source: General Mills Inc – Second Quarter Fiscal 2020 Earnings IR Presentation By Callum Turcan On December 18, General Mills Inc (GIS) reported second quarter results for its fiscal 2020 (period ended November 24, 2019), which saw shares of GIS rise by almost 2% during normal trading hours that day as investors were excited over its strong performance of its pet food sales. Please note General Mills completed its $8.0 billion all-cash acquisition of Blue Buffalo Pet Products Inc in April 2018, and investors have been eagerly awaiting the revenue growth stimulus that deal was projected to generate. Shares of GIS are trading near the very top of our fair value range estimate and yield 3.7% as of this
Our Reports on Stocks in the Specialty Retailers Industry
December 20, 2019
Images Source: Mike Mozart (Home Depot, Lowes) Structure of the Specialty Retailers Industry The specialty retail segment is fragmented, highly competitive, and economically-sensitive. The group covers a broad array of businesses and is dominated by retailers with large brick-and-mortar store footprints. Though some constituents may be insulated from e-commerce competition, others risk obsolescence as product distribution moves to digital means, and online retailers offer lower prices for identical goods and services. We’re fairly neutral on the structure of the industry, though some constituents will inevitably face secular and permanent declines. For coverage of firms in the Specialty Retailers Industry, please click here.
Devon Energy Completes High-Grading Process, Free Cash Flows Remain Elusive
December 20, 2019
Image Shown: An overview of Devon Energy Corporation’s remaining asset base, which consists of upstream oil and gas operations spread across four major unconventional plays in the US. Image Source: Devon Energy Corporation – December 2019 IR Presentation By Callum Turcan Times are tough in the oil & gas patch, especially for upstream producers of raw energy resources like Devon Energy Corporation (DVN). Not only are global oil prices low, which drags down natural gas liquids pricing for products like propane and butane, but North American natural gas supplies are trading at rock-bottom prices as well. Devon Energy has attempted to cope by divesting less economical assets and shifting all of its focus towards its best well locations, a process
Our Reports on Stocks in the Leisure Industry
December 20, 2019
Image Source: Hasbro Structure of the Leisure Industry The leisure industry is composed of firms that span the cruise line business to those that make toys and children’s products. The cruise business has grown significantly in recent years, but still remains relatively small compared to the overall vacation industry (including land-based destinations). Competition among toy companies is intensifying due to recent trends toward shorter toy life cycles, the increasing use of technology in toys, and the proliferation of electronic consumer products and video games. All industry participants compete for consumer discretionary income. We’re neutral on the structure of the group. For our coverage of firms in the Leisure industry, please click here.
2019: Another Market Beating Year for the Best Ideas Newsletter Portfolio!
December 19, 2019
2019: Another Market Beating Year for the Best Ideas Newsletter Portfolio! — Summary: — We estimate thus far the Best Ideas Newsletter portfolio return has beat the S&P 500 by 2.8 percentage points during 2019 (34.4% versus 31.6% for the S&P 500, as measured by the SPY). — Our move to overweight Apple, Facebook, and Visa worked out wonderfully for members during 2019. We continue to overweight big winners, and we credit this to our team’s conviction in our very best ideas. — We also made quite the savvy move in rolling over a solid gain in Chipotle (60%+) into even more shares of Apple stock during the year. We’re putting some of the best ideas right in front of
FedEx’s Earnings Miss
December 18, 2019
Image Source: FedEx Corporation – 2019 Annual Stockholders Meeting September 2019 IR Presentation By Callum Turcan In the days leading up to FedEx Corp (FDX) latest earnings report where the firm missed by a mile (we’ll cover that in a moment, but first, let’s look how we got here), news broke that Amazon (AMZN) is now blocking third-party sellers that use its marketplace platform from using the FedEx Ground delivery service (which handles North American volumes) to ship to Prime customers. This comes on the heels of FedEx and Amazon ending two significant shipping contracts earlier this year, including the arrangement where FedEx Ground would handle some of Amazon’s packages, a deal that expired at the end of August. Please
Cisco, Intel, Johnson & Johnson, and PayPal in the News
December 17, 2019
By Callum Turcan and Brian Nelson, CFA In alphabetical order by ticker symbol: CSCO, INTC, JNJ, PYPL Cisco Systems Inc (CSCO) announced on December 16 it was acquiring Exablaze, and the deal is expected to be completed in the third quarter of Cisco’s fiscal 2020. Financial terms weren’t disclosed. For reference, Cisco’s first quarter of fiscal 2020 ended on October 26, 2019. Australian-based Exablaze offers services to high-frequency traders by designing and manufacturing “advanced network devices aimed at reducing latency and improving network performance” and Cisco plans to integrate Exabalze’s technology into its own offerings. That will allow Cisco to offer its customers better field programmable gate array (‘FPGA’) technology and beyond high-frequency trading, there’s plenty of room for upside
ICYMI: Interview with Valuentum’s Callum Turcan
December 16, 2019
Callum Turcan helps head up Valuentum’s research product and is co-editor of the company’s newsletters. We sat down with Callum to get his thoughts on new developments in the market and economy. Let’s kick things off with his thoughts on Brexit. Callum Turcan: Looks like the Brexit debate is coming to a close with a large Tory majority coming into the UK Parliament (EWU) after the December 12 general election, a large enough majority to provide Prime Minister Boris Johnson with more than enough room to maneuver the likely political obstacles ahead (over the next couple of months). By early 2020, it seems the UK will no longer be a member of the EU given that the incoming Parliament, in
As Expected, Broadcom’s Organic Revenues Didn’t Grow in Fiscal 2019
December 16, 2019
Image Source: Broadcom Inc – November 2019 IR Presentation By Callum Turcan On December 12, Broadcom Inc (AVGO) reported fourth quarter earnings for its fiscal 2019 (period ended November 3, 2019). While GAAP revenues for the full fiscal year were up 8% year-over-year, hitting $22.6 billion, please note that includes the uplift from Broadcom acquiring CA Technologies. Shares of AVGO initially traded down 2%-3% on December 13, as investors digested the firm’s guidance for fiscal 2020. As of this writing, shares of AVGO yield 3.4%. Overview of Recent Events Management expects the company’s revenues in fiscal 2020 will come in at ~$25.0 billion (give or take $0.5 billion in either direction) while Broadcom’s adjusted EBITDA is forecasted at ~$13.75 billion
