In the News: General Mills, Realty Income, Energy Transfer
February 23, 2018
General Mills makes a big deal, Realty Income delivers, while Energy Transfer tries to battle back to even. By Kris Rosemann US Secretary of Defense Jim Mattis came out in support of recommendations from the Commerce Department for targeted tariffs on steel and aluminum. While the Defense Department recognizes that imports of low-cost steel (SLX) and aluminum resulting from unfair trading practices undermine national security, it also warns that more broad action could irritate allies. President Trump has until April to decide whether or not to take action on the recommendations from the Commerce Department for tariffs up to 24% and 7.7% on foreign steel and aluminum, respectively. Consumer food product giant General Mills (GIS) made a splash before the
Johnson & Johnson in Transition Mode
February 22, 2018
Image Source: Johnson & Johnson Fourth Quarter Earnings Presentation Shares of Johnson & Johnson have performed well since being added to both the simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio. We continue to be impressed with the depth of the clinical pipeline as Johnson & Johnson has an appealing mixture of mature and early-stage products that power the portfolio. Let’s examine the three main franchises of the portfolio to gain a better understanding of the depth of Johnson & Johnson’s Pharmaceutical division. By Alexander J. Poulos Immunology The Immunology Division remains the engine that drives performance at Johnson & Johnson (JNJ) as the group accounts for nearly one third of total sales. The division reported operational
Market Valuations Not “Insane” But Certainly Not Cheap Either
February 21, 2018
The stock market is not insanely overpriced, but it is certainly not cheap either. We’re watching the technicals and moves in the 10-year Treasury closely for signs of where the market may go next. We discuss Walmart’s recent disappointment and add another to the list of companies that the Dividend Cushion ratio effectively highlighted the heightened income risk profile of, prior to the dividend cut. Chipotle is on the move! By Kris Rosemann and Brian Nelson, CFA According to the February 16, 2018 release of Factset’s Earnings Insight, the forward 12-month P/E ratio for the S&P 500 is still north of 17 times, above both the 5-year average of 16 and the 10-year average of 14.3. The “right” multiple for
The Future for Independent Advisors and Planners Is…Stock Selection? What?
February 20, 2018
Image Source: 401K Calculator By Brian Nelson, CFA The world is fast-changing, and the financial markets are changing even faster. One of the most influential writers in the blogosphere, Josh Brown (aka the Reformed Broker) wrote one of the most thoughtful pieces I’ve read in a long time last October, “Just own the damn robots.” The gist of the piece is that technology is taking jobs everywhere, and employees that are being displaced may be investing in the same companies that are displacing them as a form of insurance (investing in their “own destruction,” so to speak). It was a fresh read and a fascinating viewpoint. As a former director in Morningstar’s equity and credit department that headed up training
Our Reports on Stocks in the Hotels Industry
February 20, 2018
This listing has been discontinued. Please view the following links for our work on Hotels & Gaming stocks: Gaming & Hotels: BYD, CHDN, HLT, LVS, MAR, MGM, PENN, PNK, WYNN Structure of the Hotels Industry The hotels industry is highly competitive, with over 900 lodging management companies in the US alone. Demand for hotel rooms is very cyclical, and fluctuations in both occupancy rates and revenue per available room (RevPAR) should be expected. Firms deal with the concept of perishable inventory, which tends to create pricing pressure in order to attract customers to meet fixed costs. Aggressive online marketing methods by Internet travel intermediaries can also hurt performance. Brand recognition and location are areas of competitive advantages, but we don’t
A Key Inflection Point for Gilead Sciences
February 18, 2018
We have closely followed events at Gilead Sciences for signs of an inflection point as we have long felt the market is myopically focused on the Hepatitis C franchise instead of cash flows. Our decision to add the idea to the simulated Dividend Growth Newsletter portfolio and the simulated Best Ideas Newsletter portfolio has played out very well as the share price remains locked in an uptrend. We are updating our thesis following the recent conference call. By Alexander J. Poulos Looking Past HCV Image Source: Gilead Sciences Lost in the cacophony of opinions on Gilead (GILD), we are amazed at the intense focus on the Hepatitis C franchise by the investment community. In our opinion, the HCV franchise remains
Subscribe: The Nelson Exclusive Is Simply One of a Kind
February 18, 2018
“I think the Nelson Exclusive publication is worth far more than what we charge for it, and we’re making it even better.” Hi folks, I have to admit that I was quite worried about launching the Nelson Exclusive May 2016. I didn’t know what to expect, and as we’ve progressed with new ideas each and every month, I’ve been working hard to incorporate feedback. For starters, we’re going to be moving to tracking the income characteristics of the income ideas on a go-forward basis as a measure of their success. Many members have voiced this long-term income-oriented preference, and frankly we think it makes a lot of sense. Not one income idea in the Exclusive has cut its dividend! But
Our Reports on Stocks in the Home Health Care Industry
February 14, 2018
Image Source: Addus HomeCare This listing has been discontinued. Please access the following article for our last published analysis and ratings of companies in this industry: /More_Optimizing_to_Maximize_the_Value Structure of the Home Health Care Industry The hospice and home/community-based services industry is subject to extensive federal and state regulation. Hospice care in the US is competitive, and rivalries in the home and community-based services industry are no less so. The market for home and community based services is north of $45 billion in the US and has been expanding at roughly a 10% compound annual growth rate in recent years. Still, barriers to entry are limited (despite requirements for licensing), and the industry remains highly fragmented. There are over 33,000 homecare
Stocks Stage Comeback, US Government Budget Released
February 12, 2018
Image shown: The performance of the Dow Jones Industrial Average since September 2017. The market continues to lick its wounds following the sell-off. We’re watching interest rates and technicals for signs where the market may go next. By Kris Rosemann and Brian Nelson, CFA The US 10-year Treasury yield (TLT, TBT) hit a four-year high before the open February 12, suggesting recent volatility in the equity markets is anything but going away in the near term, despite stocks bouncing back from the rough week that ended February 9. Rising interest rates may not create a financial crisis, but it could challenge the widely-held view that stock prices only increase over long-enough periods of time. After all, the past 40-year bull
Systemic Risk
February 9, 2018
Image Source: Maximo Santana We believe the next crisis will not be a banking crisis, but one of a breakdown in market structure. By Kris Rosemann and Brian Nelson, CFA The volatility of US equity markets has simply been incredible of late. What a change of tune from the past 12-18 months. Many investors are growing more concerned about the health of US sovereign credit and implications on borrowing costs, the benchmark Treasury yield, and further, such implications on long-run equity values (rising interest rates in stock valuation models reduces intrinsic value, all else equal). Moody’s has been warning about the deteriorating health of the US as a result of tax reform, pointing to “at least a $1.5 trillion deficit
