Shoe Retailing Stocks Stumble
May 20, 2017
The market didn’t like the smell of Foot Locker’s first-quarter report, released May 19. Finish Line and Dick’s Sporting Goods likely forewarned of trouble. By Brian Nelson, CFA Shoe stocks have been stinking up the market lately. The writing may have been on the wall a couple months ago when Finish Line (FINL) released a weak fiscal fourth-quarter report for the period ending February 25 that showed consolidated sales falling 0.4% and (Finish Line) comparable sales dropping 4.5%. CEO of Finish Line Sam Sato said at the time that the company’s fiscal fourth quarter had finished off a “challenging year financially” for the company, and we can’t really disagree. It was tough fiscal year for the retailer. Here’s more of
Walmart Comes Roaring Back; Target Is Still Suffering
May 20, 2017
Image Source: Mike Mozart Walmart and Target have taken a few body blows from Amazon, but the fight is far from over. Walmart is executing much better than Target at the moment. By Brian Nelson, CFA Shares of Walmart (WMT) are now approaching $80 per share following a combination of a strong market tailwind and first-quarter results, released May 18, that revealed that, while the discount retailer may have taken its share of blows from Amazon (AMZN) the past few years, it is not out of the fight by a long shot. Excluding currency fluctuations, total revenue during the first quarter of 2017 advanced 2.5% thanks in part to solid performance at Walmart US, where comparable store sales advanced 1.4%
Earnings Update on the Medical Devices Industry Featuring Zimmer Biomet, Edwards Lifesciences, and Intuitive Surgical
May 18, 2017
Image Source: Zimmer Biomet The outperformance of the medical devices industry continues unabated in 2017. The momentum underscores that the steep sell-off in the second half of 2016 was likely an overreaction. We’re updating our previous take of Zimmer Biomet, along with a brief earnings update on Edwards Lifesciences and Intuitive Surgical. By Alexander J. Poulos Zimmer Biomet Continues to Perform Shares of Zimmer Biomet (ZBH) came under heavy selling pressure upon the release of its recent earnings report on April 27, but we were content with the update as its diversified revenue stream continues to perform, in our view. Zimmer is in the process of integrating recent acquisitions, which continue to augment revenue, and the top line advanced 3.8%
Brazil: Sorry For Your Losses
May 18, 2017
The Brazilian equity markets are in free fall. “Brazil is in a deepening recession, which may grow into depression, as unemployment continues to rise and corporate credit quality deteriorates. Those that made a bundle investing in Brazil’s commodity-driven export boom have been looking to cash out, if they haven’t already, and the real continues to weaken on deteriorating sovereign credit and rampant inflation. Any interest rate hike by the US could have the unintended effect of sending Brazil’s local yields to the mid-teens to account for incremental currency risk and credit deterioration, which would only exacerbate debt service costs as a percentage of the country’s shrinking GDP. This, in turn, could be the catalyst for even more asset flight out
Coherus Biosciences Begins the Process of Bringing a Humira Biosimilar to Market
May 17, 2017
Image Source: Drugs.com The duration and validity of patents that back the intellectual property of drugs in the pharma/biotech industry underpin the group’s revenue stream. Once patent protection is lost, however, revenue from products typically nosedives as multi-source products come to market, undercutting their original price. The patent estate, in essence, bestows monopoly-like pricing power to Big Pharma. Once lost though, it becomes tough to replace. Let’s provide a quick update on the breaking Coherus Biosciences patent win. Alexander J. Poulos Humira Remains the Primary Revenue Driver for Abbvie Shares of Abbvie (ABBV) have come under selling pressure May 17 on the news of a key patent lose to biosimilar upstart Coherus Biosciences (CHRS). AbbVie remains locked in a protracted
Alert: Adding Protection! Finally Acting on Netflix Idea
May 17, 2017
Image Source: Esther Vargas We’re adding protection to the newsletter portfolios and finally making a move on Netflix. By Brian Nelson, CFA Nothing should be alarming in this note. We’ve talked about our concerns about the broader stock market for some time now, and how we think we’re in a bubble. One has to look no further than the very intro to the May edition of the Best Ideas Newsletter here (pdf), released Monday, for example, or our continued reminder of how markets perform during periods of contractionary monetary policy. Of course we’re still content with riding the market higher–should it go in that direction, perhaps on the backs of incremental index investors and dividend growth re-investors–but we’re also being
Nelson: Reminding You of Some of Our Favorites
May 16, 2017
Sometimes we talk way too much about the incremental, the periphery, and the tactical tweaks, and not enough about our favorite ideas included in the newsletter portfolios. Let’s cover four of our favorites. By Brian Nelson, CFA Apple The market has seemingly always had Apple’s (AAPL) shares mispriced. Our fair value estimate of the iPhone giant has been above its trading price for years, and we’ve included the company in both newsletter portfolios since inception. It’s been a win-win for Valuentum investors and dividend growth investors alike. A look at Apple’s rating history (newest to oldest) showcases just how much conviction we’ve had in the idea, and shares have now almost converged to our present $165 per share fair value
Podcast: Defense Spending and the Explosion of Cyber Crime
May 15, 2017
The Valuentum analyst team discusses trends in US and global defense spending and the explosion of Internet crime that is fueling investment in cyber security both in the public and private sectors. ~7 mins. This podcast was originally published November 3, 2016. If you cannot view the video below, please view the transcript that follows or click the link here. Software – Security: CHKP, FEYE, FTNT, IMPV, PANW, PFPT, SYMC, VRSN Aerospace & Defense – Prime: BA, FLIR, GD, LLL, LMT, NOC, RTN Brian Nelson, CFA: This is Brian Nelson for Valuentum Securities, and today I have joining me on our podcast Mr. Kris Rosemann and Mr. Chris Araos. Today, we are going to talk about the landscape for defense spending
Newsletter Alert: Title Withheld – Members Only
May 15, 2017
We’re as surprised as you are by this alert, but we’re removing GE from both newsletter portfolios. After rolling our discounted cash flow model forward (2017 first forecast year) and in light of GE’s release of its 10-Q late April, which showed surprisingly poor cash flow from operations conversion (negative $1.6 billion in industrial cash flow from operations) and only modest capital spending reductions (two key components of the Dividend Cushion ratio), we no longer have the confidence in shares as we did before. But why the change and why now? New information in the 10-Q, and new forecasts in our newly rolled-forward discounted cash flow model. By Kris Rosemann and Brian Nelson, CFA We had just finished saying how
