News Roundup: US-China Trade Talks, Plastics Prices, Vale, and Philip Morris
March 4, 2019
No changes to newsletter portfolios. By Kris Rosemann Reports of a potential trade agreement between the US and China (FXI) have hit the wire. The deal is rumored to include lower Chinese tariffs on farm, chemical, auto, and other US products, and the elimination of many or all US tariffs on Chinese products. China is also reportedly exploring a 3% reduction in the value-added tax it imposes on manufacturing, which could provide a 0.6% boost to Chinese GDP, according to some estimates. Both reports are welcome news to investors as concerns over global economic growth persist. A US-China trade deal could be announced as soon as the end of this month, but the recent breakdown in conflict resolution talks between
News Roundup: Tesla, Gap, eBay, Stericycle, Foot Locker, and Monster Beverage
March 1, 2019
No changes to newsletter portfolios By Brian Nelson, CFA There’s a lot of news out on the first day of March 2019. Tesla’s (TSLA) big reveal was that it will be moving strictly to online purchases in a cost-savings move and that it now has the efficiencies in place to roll out a more-affordable $35,000 Model 3. We’re excited about the development, but we have to admit that we’re still skeptical of the company’s long-term success given the fierceness of the competitive environment, not the least of which is the electronic line-up at General Motors (GM), which remains an idea in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. As it relates to other news, Gap
Part III: Buffett’s Letter to Berkshire Shareholders
March 1, 2019
Part III of our analysis of Buffett’s Letter to Berkshire Shareholders emphasizes the importance of companies buying back stock at prices below estimated intrinsic value. We talk about how the Oracle thinks about his excess cash, and why he always seems to be there ready to bail out trouble when the financial markets head south. His thoughts on the market are included, too. By Brian Nelson, CFA In the first part of our analysis of Buffett’s Letter to Berkshire Shareholders, released February 23, we emphasized how book value doesn’t make much sense in the equity valuation process for the valuation of non-financial operating companies, the importance of evaluating the price-to-fair value estimate ratio, and how to think about share buybacks
ConocoPhillips: Turnaround Story in Progress
February 28, 2019
Image Source: ConocoPhillips ConocoPhillips disappointed income-oriented investors when it cut its payout back in early 2016, a situation that was predictable given the company’s weakened Dividend Cushion ratio. However, a lot has changed since then. Now, ConocoPhillips’ Dividend Cushion ratio has climbed back to 3.5, and it’s likely the turnaround strategy launched by management several years ago will enable ConocoPhillips to reclaim its status as an income growth idea in the future. We continue to watch the company closely. By Callum Turcan The two parts of the storied energy giant, ConocoPhillips (COP) split back in 2012, with Phillips 66 (PSX), its downstream operations, performing markedly better in terms of dividend growth and capital appreciation than ConocoPhillips, the upstream super-independent, since then.
Earnings Not So Hot, High Yield Dividend Newsletter Archives
February 28, 2019
No change to newsletter portfolios. By Brian Nelson, CFA Against a backdrop of US-China trade tensions, a Fed that continues to balance the need to hike rates with caution against purposefully and meaningfully inverting the yield curve, US GDP growth humming along at 2%-3%, and news from Tesla (TSLA) CEO Elon Musk, who says something big is in store for tonight. Incidentally, he changed his Twitter name to Elon Tusk. Was it to match our typo yesterday? Elon – if you’re listening, give us a shout out! We love Tesla’s future expected free cash flow! Just some housekeeping items before we get started. For our High Yield Dividend Newsletter members and our Exclusive members, we do not house the archived
News Roundup: Tesla’s Musk, Department Stores, Summit Midstream, Cracker Barrel, Home Depot, GE and More
February 27, 2019
No changes to simulated newsletter portfolios By Brian Nelson, CFA There’s never a dull moment in the Tesla (TSLA) story. Just when we thought things were getting back to “normal,” Tesla’s CEO Elon Musk has been hit with a contempt charge for a tweet that allegedly violated his prior deal with the SEC. We don’t think the tweet was a big deal, by itself, and it may have included content from a prior conference call, but given Musk’s prior behavior, including being outspoken about not having any respect for the SEC, he doesn’t have much wiggle room with the authorities. From our perspective, Musk is in now in some serious hot water. We’ve always viewed Tesla as “uninvestable,” not necessarily
Part II: Buffett’s 2018 Letter to Berkshire Shareholders
February 26, 2019
Part I of this multi-part series focused on Warren Buffett’s transition away from what we consider arbitrary book value and how the Oracle of Omaha thinks about share buybacks. Let’s dig further into his letter in Part II. << Read Part I By Brian Nelson, CFA It was a long time coming but Warren Buffett has finally done away with book value as a measure of business performance (see Part I), and while we think there’s more to assessing a company than just looking at its market price of course, when it comes to operating entities, assessing intrinsic value, of which the market price is one estimate, remains a critical function of any discerning analyst. Book value, in any case,
Part I: Berkshire’s 2018 Shareholder Letter Does Not Disappoint
February 24, 2019
Warren Buffett was on point in his most recent letter to Berkshire Hathaway shareholders. The company remains one of our favorite ideas in the Best Ideas Newsletter portfolio. By Brian Nelson, CFA Warren Buffett wasted little time getting to the point in his 2018 letter to Berkshire Hathaway (BRK.A, BRK.B) shareholders, released February 23: Long-time readers of our annual reports will have spotted the different way in which I opened this letter. For nearly three decades, the initial paragraph featured the percentage change in Berkshire’s per-share book value. It’s now time to abandon that practice. Brian here. Those that have read my book Value Trap: Theory of Universal Valuation might have predicted as much. Warren Buffett is one of the
Kraft-Heinz Blows Up, More Updates!
February 22, 2019
Image shown: The rating history of Kraft-Heinz (KHC). Valuentum members were warned in advance of this pricey equity in 2016/2017, and the VBI rating never advanced past 5 since then after registering a 1, the worst rating, on two separate occasions. Dear members, I wanted to first of all welcome our new members. There have been a lot of new ones during the past few weeks. Thank you. The buzz might be coming from the new book launch, Value Trap. If you haven’t read the book yet, please do so here. Members can get the pdf digital download today at 25% off. For new members, reading this book is simply par for the course to get a feel for how we look at
In the News: Potential US-EU Tariffs, Kraft Heinz, and Stamps.com
February 22, 2019
Let’s take a look at some of the top stories surrounding the markets, including the potential for escalating US-EU trade tensions, Kraft-Heinz’s not so shocking dividend cut, and Stamps.com’s free fall. By Kris Rosemann While equities continue to display optimism over US-China trade talks, concerns surrounding potential tariffs on autos from the European Union are mounting. Retaliatory measures on ~$22.7 billion of US products from the EU are reportedly already being prepared, and companies such as Caterpillar (CAT) and Xerox (XRX) are among those expected to be targeted by the retaliation. Europe is currently facing potentially slowing economic growth, and weakness in industrial production in the region has not gone unnoticed, “In The News: European Growth Concerns…” Shares of Kraft
