Our Reports on Stocks in the Food Products (Large/Mid-Cap) Industry
October 31, 2019
Structure of the Food Products Industry The food products industry is composed of a number of firms with strong brand names. However, market supply/demand dynamics and intense competition still impact product prices, while fluctuations in commodity costs can make earnings quite volatile. Private-label competition, competitors’ promotional spending, and changing consumer preferences often drive demand trends. The group’s customers—such as supermarkets, warehouses, and food distributors—continue to consolidate, increasing buying power over constituents and hurting margins. Still, we’re generally neutral on the group. We’ve reallocated our resources to cover more recession-resistant stocks. See here.
Tech Earnings Roundup: AAPL, FB, GOOG
October 30, 2019
By Callum Turcan Several large tech companies reported earnings this week including three of the top holdings in our Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Apple On October 30, Apple Inc (AAPL) reported fourth quarter earnings for fiscal 2019 (three month period ended September 28) that saw GAAP revenues shift higher by 2% versus the same period last year, hitting $64.0 billion. Its services revenues jumped up by 18% year-over-year while its products revenues declined by a bit over 1% year-over-year, highlighting Apple’s focus on higher margin services sales opportunities. Even so, Apple’s GAAP gross margin fell by over 30 basis points year-over-year due in part to the negative impact of the US-China trade war on top of
Johnson & Johnson Announces New Test Results That Reveal No Traces of Asbestos in Johnson Baby Powder Products
October 30, 2019
Image Source: Johnson & Johnson – February 2019 CAGNY IR Presentation By Callum Turcan A holding in both our Dividend Growth Newsletter and Best Ideas Newsletter portfolios, shares of Johnson & Johnson (JNJ) have been on a wild ride of late over dueling narratives regarding the firm’s potential legal liabilities. In particular, liabilities concerning its talc-based Johnson Baby Powder product. On October 18, Johnson & Johnson announced it was voluntarily recalling “a single lot” of its Johnson Baby Powder product (equal to around 33,000 bottles) after the US FDA found sub-traces of chrysotile asbestos in a single bottle (less than 0.00002%). At the time, Johnson & Johnson vigorously defended its baby care brand and said that its Johnson Baby Powder
Caterpillar Misses Estimates and Revises Guidance Downwards
October 30, 2019
Image Source: Caterpillar Inc – Third quarter 2019 IR presentation By Callum Turcan On October 23, Caterpillar Inc (CAT) posted third-quarter 2019 earnings with both its top- and bottom-line performance falling well short of consensus expectations. Furthermore, management revised the firm’s adjusted (non-GAAP) EPS guidance for 2019 down to $10.90-$11.40 from $12.06-$13.06 previously, quite the reduction. Please note this represents Caterpillar’s second earnings guidance reduction so far this year. Caterpillar’s weak performance is about much more than just the industrial equipment supplier, it speaks unfavorably to the state of the global industrial economy. Our fair value estimate for Caterpillar stands at $156 per share, and shares of CAT yield 2.9% as of this writing. Revenue Growth Disappearing Management has adjusted
Waste Management’s Dividend Well-Covered with Free Cash Flow
October 29, 2019
Image Source: david.dames By Brian Nelson, CFA We continue to be huge fans of the garbage-collection business. In fact, we cannot remember a time when we didn’t like the waste collection space. The group benefits from a relatively recession-resistant pick-up operation, and transfer and disposal assets that simply demand pricing power. The trash-taking industry is also notorious for its free-cash-flow generating prowess, and we don’t think that will ever change. The latest data point as it relates to the health of the waste industry, and perhaps the general economy as well, came with Waste Management’s (WM) third-quarter results, released October 23. The company’s revenue advanced 3.8% thanks in part to strong all-in organic sales expansion in its collection and disposal
Our Reports on Stocks in the Luxury Goods – Ultra & Aspirational Industry
October 29, 2019
Image Source: Jill Clardy Structure of the Luxury Goods Industry Luxury goods firms differentiate themselves based on brand name, perception, and quality in order to generate excess returns on invested capital through the economic cycle. Building a large, successful luxury brand is difficult, leaving those that possess them with intangible competitive advantages that are not easily overcome by new entrants. Growth in emerging middle classes and China will be the key demand drivers going forward, though the strongest brands will also grow successfully via market share gains. Though changes in consumer preferences should be watched closely, we like the structure of the group. We’ve optimized our consumer discretionary coverage. For their reports, please click here.
High Yield Dividend Newsletter Portfolio Holdings AT&T and Philip Morris International Continue to Shine
October 28, 2019
Image Shown: AT&T continues to surge higher this year as shares of T converge towards their intrinsic value, a process supported by recent activist investor activity directed towards the company. If you may wish to add the High Yield Dividend Newsletter to your membership, please click here. By Callum Turcan and Brian Nelson, CFA AT&T On October 28, AT&T Inc (T) reported third-quarter 2019 earnings, and the market clearly liked what the company had to say. Shares of AT&T are trading up ~4% as of this writing as the company’s stock price continues converging towards its intrinsic value, in our view. Our fair value estimate for AT&T stands at $40 per share, with room for upside, and we continue to
Our Reports on Stocks in the Commercial Services Industry
October 28, 2019
Image Source: Zach Seward Structure of the Commercial Services Industry The commercial services industry runs the gamut of firms from those that provide document management services and/or mail-related operations to entities that offer records management solutions and corporate uniforms. Though there are pockets of strength, a number of participants must reinvent themselves to survive over the long haul. Industry constituents are levered to business spending and are not immune to competitive forces. Carving out a sustainable competitive advantage is difficult to do in this group, though returns on invested capital have been satisfactory. We’re neutral on the industry’s structure. We’ve dropped coverage of stocks in the Commercial Services industry.
BREAKING: General Motors and the UAW Reach a Deal, Ending the Strike
October 27, 2019
Image Shown: Shares of General Motors had come under fire over concerns regarding the extended UAW strike over the past several weeks, but with the strike now over, shares of GM may begin to converge back towards their intrinsic value. By Callum Turcan On Friday October 25, General Motors (GM) ratified a four-year deal with the United Automobile Workers union to end the 40-day long strike at its US factories, which had crippled the company’s North American operations. The deal covers ~46,000-48,000 unionized employees and has major ramifications for previous and future employees as well. General Motors is a holding in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios, and we continue to like the name. Shares of
Economic Commentary – Politics, the WeWork Debacle, and How We Use the Valuentum Buying Index in the Newsletter Portfolios
October 27, 2019
In our latest Economic Commentary, the Valuentum team continues its discussion on politics and the markets and the implications of a potential WeWork failure on the commercial real estate and construction markets. We’ll also address a very important question: Why are there lower Valuentum Buying Index ratings in the newsletter portfolios at times? The answer is rather straightforward and a good thing! Let’s get started. Christopher Araos: One comment about the upcoming elections. The previous one proved to the world how susceptible the general populace of America is to propaganda from abroad–when they could organize rallies for locals to go to and from countries like Ukraine and Russia (RSX). My concern is this literally opens up a can of worms/pandora’s box.
