More Big Pharma Earnings to Digest
November 21, 2019
Image Source: Zoetis Inc – 2019 Annual Shareholders Meeting Presentation Calendar third-quarter 2019 earnings was a busy time for biotech and pharma companies. We covered a number of biotech and pharma earnings in this piece here, but let’s dig into a few others. In alphabetical order by ticker: GSK, PFE, ZTS. By Callum Turcan In alphabetical order by ticker: GSK, PFE, ZTS GlaxoSmithKline plc (GSK)–4.6% yield–reported third quarter results for 2019 on October 30. Its pro forma adjusted sales rose by 6% year-over-year, and please note the British pharmaceutical and consumer health giant has been very busy over the past couple of years. Before we get into that, note GlaxoSmithKline reported strong performance across the board at its three main
Our Reports on Stocks in the Pharmaceuticals – Big Industry
November 21, 2019
Image Source: A 4 Structure of the Pharmaceuticals – Big Industry The big pharma industry is primarily composed of makers of branded drugs. Intellectual property protection is vital to the successful commercialization of medicines and offers makers of branded drugs a unique competitive advantage via patents, which can extend for decades. When branded drugs lose market exclusivity, however, makers of generic pharmaceuticals can generate intense price competition, causing drastic revenue losses on unprotected therapies. Long-term success for branded pharma companies depends on a strong and diverse drug pipeline, which can be augmented by M&A activity. We generally like the group and expect continued industry consolidation. We’ve optimized our health care coverage, the reports of which can be found here.
Economic Commentary: Marks, Dalio, and the Discount Rate
November 20, 2019
Image Source: Mike Cohen We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there! Brian Nelson: The concept of negative interest rates is not merely academic, but they have far-reaching implications across the global
Shares of Home Depot Appear Overvalued
November 20, 2019
Image Shown: Shares of Home Depot Inc sold off aggressively on November 19 after management reduced the company’s full-year same-store sales and revenue growth guidance for fiscal 2019 during the firm’s third quarter earnings report. By Callum Turcan On November 19, Home Depot (HD) reported third-quarter earnings for fiscal 2019 (period November 3, 2019), and same-store sales growth fell way short of expectations, which sent shares of HD sharply lower on the day. Company-wide same-store sales rose by 3.6% year-over-year, supported by 3.8% year-over-year growth in the US last quarter. While decent, the market was pricing shares of HD to outperform which we’ll cover in a moment. Please note Home Depot’s fiscal 2018 was a 53-week period, while its fiscal
Berkshire Hathaway Invests in RH, a Quality Company in Our View
November 19, 2019
Image Shown: RH now counts Berkshire Hathaway Inc as a shareholder, which saw shares of RH initially spike up on the news. By Callum Turcan In a recent regulatory filing, Berkshire Hathaway Inc (BRK.A) (BRK.B) announced it had acquired a ~$0.2 billion stake in upscale home-furnishings company RH (RH), formerly known as Restoration Hardware Holdings, by initiating a position in the company’s equity. Please note RH does not pay out a common dividend at this time, indicating Berkshire Hathaway is seeking capital appreciation with this investment. Additionally, RH’s fiscal 2018 ended on February 2, 2019. Business Overview As of February 2, 2019, RH operated 86 galleries and showrooms across the US, Canada, and the UK. That includes galleries highlighting offerings
Our Reports on Stocks in the Auto Specialty Retailers Industry
November 19, 2019
Structure of the Retail Auto Parts Industry The retail auto parts industry is characterized by stiff competition in many areas, including brand recognition, customer service, and price. The industry is impacted by both the age and number of vehicles in service, especially those that are no longer under manufacturer’s warranties (typically seven years old and older). Demand for retail auto parts can best be described as counter-cyclical: as consumers’ cash flows decrease, drivers tend to keep their vehicles longer, leading to more retail auto parts sales. Though competition among constituents is intense, we like the industry’s defensive characteristics. We’ve dropped coverage of stocks in the Auto Specialty Retailers Industry.
Improving Our Coverage
November 19, 2019
Valuentum continues to scour the stock market for new ideas. We’ll be following the set of companies in this list via commentary on our website and a data sheet updated periodically. By Valuentum Analysts The list of companies in the download below were previously covered by our team via 16-page report and dividend report fashion. Going forward, we are now covering these companies with commentary on the website and via a data sheet updated periodically. This will be a much better use of members’ time, especially as members scour our Best Ideas Newsletter, Dividend Growth Newsletter, stock methodology, dividend methodology, and the hundreds of stock valuation reports and dividend reports on our website, available through the Symbol search box. We
Dividend Increases/Decreases for the Week Ending November 15
November 15, 2019
Below we provide a list of firms that raised their dividends during the week ending November 15. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Alerus Financial Corporation (ALRS): now $0.15 per share quarterly dividend, was $0.14. ALPS Alerian MLP ETF (AMLP): now $0.195 per share quarterly dividend, was $0.19. ALPS ETF Trust – Alerian Energy Infrastructure ETF (ENFR): now $0.3496 per share quarterly dividend, was $0.3123. Automatic Data Processing (ADP): now $0.91 per share quarterly dividend, was $0.79. Bancroft Fund (BCV): now $0.97 per share quarterly dividend, was $0.25. Boyd
Cisco Remains a Free Cash Flow Cow Supported By a Solid Net Cash Position
November 15, 2019
Image Shown: A breakdown of Cisco Systems Inc’s revenue as of the end of its fiscal 2019. Image Source: Cisco Systems – Fiscal 2019 Annual Report By Callum Turcan On November 13, Cisco Systems (CSCO) reported first quarter earnings for its fiscal 2020 (period ended October 26, 2019) that saw shares of CSCO sell off on November 14. That was likely due to the weak guidance management put out for the second quarter of the firm’s fiscal 2020, but we continue to like Cisco’s quality free cash flows and net cash balance. Cisco’s GAAP revenues came in at $13.2 billion last quarter, up 1% year-over-year, and that growth rate rises to 2% when excluding sales related to the divestiture of
Chesapeake Energy’s Pain Indicates Nothing “Safe” About Energy MLP Distributions
November 13, 2019
Summary There is nothing “safe” in the stock market, and given the track record of the distributions of pipeline MLPs, there is nothing “safe” about pipeline MLP distributions. The MLP business model continues to be phased out, a trend that we anticipated when we made our bearish call on the group in June 2015. Chesapeake Energy’s pain is a yet another reminder of the pipeline MLP group’s exposure to energy resource pricing through the health (or rather ill-health) of its customer base. We continue to encourage pipeline operators to disclose free cash flow (cash flow from operations less all gross capital spending) prominently in press releases, alongside other industry-specific metrics. Investors of Chesapeake could get completely wiped out in a
