IBM’s Third Quarter Offers Some Relief
October 19, 2017
Image Shown: IBM rallies back after third-quarter results October 18. IBM has been shunned by investors since it bailed on its operating earnings per share target of $20 a few years ago. The market, however, was recently relieved that IBM reiterated its full-year 2017 expectations calling for operating earnings per share of at least $13.80. Many are hoping for a comeback. By Brian Nelson, CFA Here’s what we wrote about IBM (IBM) in July after its second-quarter results: IBM took its eye off the ball years ago with misaligned executive incentive plans focused on operating earnings per share targets, and it is still feeling the pain. Warren Buffett has recently soured on the company’s long-term promise, and we even use
Netflix’s Third Quarter Shows Free Cash Burn, More Debt
October 17, 2017
The Netflix app is displayed alongside other streaming media services on the homepage of a Roku Streaming Stick. (Photo credit: Matthew Keys / Flickr Creative Commons) Netflix is burning through free cash and the company’s balance sheet is ballooning with debt. The junk-rated company continues to attract buyers in this frothy stock market, however. By Brian Nelson, CFA Netflix (NFLX) reported third-quarter results Monday, October 16, 2017. The shareholder letter can be found here. The digital streaming entertainment company burned through $465 million (-$465 million) in free cash flow during the third quarter of 2017. During the past four quarters, the company has burned through $2.14 billion (-$2.14 billion) in free cash flow, almost what it generated in revenue during the
Valuentum’s October Edition of Its Best Ideas Newsletter
October 15, 2017
To download the October edition of the Best Ideas Newsletter, please select here (pdf).
GE Dividend Cut Coming Sooner Than Later, Says Seeking Alpha, Bloomberg
October 15, 2017
Image Source: darkon_turaas We’ve been warning about the tight rope GE has been walking with respect to its dividend. Concerns are spreading, and it seems a dividend cut may be coming sooner than later, according to some sources. By Brian Nelson, CFA It’s unconfirmed, but Seeking Alpha is reporting that much-beleaguered General Electric (GE) may potentially slash its quarterly dividend to $0.18 per share from $0.24 per share the week of October 15-21, sourcing Bloomberg. We can’t find much more to substantiate the report other than the Seeking Alpha post, “GE seen cutting dividend next week – Bloomberg,” but we, too, have had myriad concerns about the sustainability of the payout of the former idea in both the Best Ideas
Dividend Increases/Decreases for the Week Ending October 13
October 15, 2017
Below we provide a list of firms that raised/lowered their dividends during the week ending October 13. 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 Ameren Corporation (AEE): now $0.4575 per share quarterly dividend, was $0.44. Antero Midstream (AM): now $0.34 per share quarterly dividend, was $0.32. Brown & Brown Insurance (BRO): now $0.15 per share quarterly dividend, was $0.135. Civista Bancshares (CIVB): now $0.07 per share quarterly dividend, was $0.06. Clough Global Equity Fund (GLQ): now $0.1188 per share monthly dividend, was $0.1187. Dominion Resources (D): now $0.77 per share
An Overview on Valuing Junior Biotech Companies — Does Clovis Fit the Bill?
October 12, 2017
The biotech industry remains one of the most fascinating yet perplexing industries for investors. Anecdotes of the entry-stage biotech with a home-run new therapy are often romanticized, but the reality is the vast majority of molecules fail in various stages of clinical testing. Due to the boom-bust nature of the industry, many are wary of investing in the space, and traditional valuation metrics are not as useful due to a large number of such speculative entities being in the pre-revenue stage. With this in mind, let’s take a glimpse into our thought process when evaluating upstart biotech companies. By Alexander J. Poulos Before we dig in, we feel a word of caution is warranted. Entry-stage biotechs (IBB) inherently come with
Dividend Increases/Decreases for the Week Ending October 6
October 8, 2017
Below we provide a list of firms that raised/lowered their dividends during the week ending October 6. 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 American Express (AXP): now $0.35 per share quarterly dividend, was $0.32. Bank of the Ozarks (OZRK): now $0.185 per share quarterly dividend, was $0.18. Calavo Growers (CVGW): now $0.95 per share annual dividend, was $0.90. FNB Bancorp (FNBG): now $0.13 per share quarterly dividend, was $0.12. Frederick County (FCBI): now $0.08 per share quarterly dividend, was $0.07. Intuit (INTU): now $0.39 per share quarterly dividend, was
The Bull Case for Airline Stocks?
October 5, 2017
Image Source: BriYYZ Warren Buffett has famously said that airline stocks are horrible long-term investments, but his vast portfolio now owns a number of airlines. What’s the bull case for owning these capital-intensive, cyclical and often boom-and-bust stocks? By Brian Nelson, CFA Last year, the Oracle of Omaha Warren Buffett shocked the investment world when his company Berkshire Hathaway (BRK.A, BRK.B) disclosed that it held stakes in American Airlines (AAL), United Continental (UAL), Delta (DAL) and Southwest (LUV). For a die-hard, economic-moat investor, thinking about taking a stake in an airline seems crazy. After all, Buffett himself used to joke that he had an 1-800 number that he could call anytime he had the urge to buy an airline stock
The Legal Battle Between Regeneron and Amgen Heats Up
October 5, 2017
Image Source: Regeneron The legal battle between two of the titans of the biotech world heated up further with a recent ruling overturning the injunction of a critical asset. We are updating our thesis in light of current events. By Alexander J. Poulos Legal Battle Amgen (AMGN) is locked in a protracted battle with Regeneron Pharmaceuticals (REGN) and its partner Sanofi (SNY) over a potential patent infringement. The asset in question is Praluent which belongs to the PCSK9 inhibitor, which is approved for the patient class afflicted with heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease, which require additional lowering of LDL-C. The nexus of Amgen’s complaint is Praluent infringes on some of the intellectual property (IP) that backs its
Housing Market Very Strong But To “Face Two Contradicting Challenges”
October 4, 2017
Image Shown: The iShares US Home Construction ETF (ITB) has advanced ~ 24% year-to-date, according to data from YahooFinance. “Housing indicators may be leveling off,” per S&P Corelogic, and the threat of rising interest rates looms (as it has for years), but we like the fundamental strength that we’re seeing from the homebuilders of late, which has translated into strong equity performance. By Brian Nelson, CFA We’ve been bullish on the US housing market recovery since early 2012, and we’ve pointed to several factors as to why–including improved affordability, investment by both individuals and investors, falling unemployment, improved household formation, limited inventory, and more recently, the wealth effect that a rising stock market provides. Things continue to be on the
