These Medical Instruments Won’t Heal Your Portfolio
February 15, 2017
The medical instruments industry is a group characterized in part by diversity, and as such, there are ideas of all shapes and sizes. Let’s dig into two overvalued companies in the space and what put them in their current positions. By Alexander J. Poulos and Kris Rosemann The medical instruments industry has something to offer investors of all strategies. From growth candidates to defensive plays to dividend growth ideas, the medical instruments industry has you covered. However, we’re not seeing much valuation opportunity in the medical instruments industry at this point in time. The market’s advance post the election of Donald Trump has stretched many companies’ valuation metrics past historical norms, and this note intends to highlight two of the
Amazon’s Future May Be Rich, But So Is Its Valuation
February 15, 2017
Amazon continues to disrupt the traditional retail landscape and its cloud-based services are gaining momentum, but shares look to be running ahead of its fundamental trajectory. Let’s take a look at its most recent quarter. By Kris Rosemann Shares of Amazon (AMZN) are trading at more than 40 times 2016 free cash flow, a tremendous level, even for a company whose top-line is growing as quickly as Amazon’s. High levels of uncertainty regarding its long-term operating margin increases the challenges in deriving the company’s “true” intrinsic value, and while we’re fans of the e-commerce giant’s increasing free cash flow generation, we’re not comfortable anointing Amazon Web Services (AWS), the true driver of its profitability and free cash flow improvements, as
Is AbbVie a Value Trap?
February 14, 2017
With uncertainty surrounding the patent of blockbuster drug Humira, AbbVie is looking to deliver another success story from its pipeline. Is it headed for a patent cliff? Let’s take a look. By Alexander J. Poulos and Kris Rosemann A successful operator in the pharmaceutical industry (XLV) is often characterized by having high margins, allowing for copious amounts of free cash flow generation, which can be returned to shareholders via dividends. In today’s yield-starved market environment, major pharma, and the above-average yields of some players within, remains in demand, but investors must be cognizant of the unique risks that face the industry. One key risk remains the loss of patent protection on drugs and treatments that leads to the aforementioned attractive
#14? You Can’t Control The Market
February 14, 2017
Image shown: Wall Street Journal front pages from the Financial Crisis — a reminder that an investor cannot control the markets.
Should this be added to the “13 Steps…” piece?
Alpha-Creating Hasbro-Hanesbrands?
February 8, 2017
Understanding some of our recent moves in the Dividend Growth Newsletter portfolio and the context of the Hasbro-Hanesbrands alpha-generating trade-off…how can this be, right? By Brian Nelson, CFA Every reader is different with a different perspective, time horizon, and goals, and I try to provide as much context and background as possible in my writings for those reasons and more. We won’t always get everything right every time (nobody does), but I think your knowing how and why we do things (and being the judge) is par for the course with any membership. Gaining your trust is very important to me, and our team works hard each and every day to do so. Shortly before the release of the Dividend
The Bottom Line: Altria’s Translates to Dividend Growth
February 4, 2017
Image Source: Peyri Herrera Altria continues to successfully battle a challenging demand environment for cigarette volumes across its industry, and the company has once again rolled out expectations for meaningful earnings-per-share growth in 2017. Altria’s stock is among the best performers in history – find out why. By Kris Rosemann Some readers may be surprised that (Altria) is a top performer for investors in the face of the onslaught of government restrictions and legal actions that have cost the firm tens of billions of dollars and threaten the cigarette manufacturer with bankruptcy. But in the capital markets, bad news for the firm often is transformed into good news for investors. Many shun the stock in the company and fear that
Hanesbrands Now Even Cheaper; FCF Yield: ~7%; PE Ratio: ~10x
February 3, 2017
Image Source: Steven Depolo Hanesbrands’ management set too high of a bar for itself to hurdle, and while the company put up strong free cash flow performance, we think it set investors up for a disappointment, shattering investor confidence in the executive team’s ability to accurately forecast future trends in its business. Hanesbrands’ stock, however, continues to look cheap by most valuation measures, and free cash flow is expected to remain robust in fiscal 2017, easily covering cash dividends expected to be paid in the year. By Kris Rosemann Highlights from Hanesbrands’ Fourth Quarter 2016 Press Release: “Record Net Sales, Operating Profit and EPS for Full Year; Record Cash Flow from Operations of $606 Million in 2016; Company Initiates Full-Year
Apple Reports Record Quarterly Results in Return to Top-Line Growth
February 2, 2017
Newsletter portfolios holding Apple set multiple company records in the first quarter of its fiscal 2017. Let’s take a quick look at the quarter. By Kris Rosemann On January 27, tech giant and newsletter portfolios holding Apple (AAPL) reported the highest quarterly revenue in its history in the first quarter of its fiscal 2017, along with all-time unit and revenue records for the iPhone and Apple Watch, all-time records for its ‘Services’ segment revenue and Mac sales, and all-time revenue records for four of its five geographic segments despite considerable currency headwinds. Such impressive top-line performance across the board helped drive record quarterly earnings per share as well. We recently increased our fair value estimate for shares of Apple to
Exxon Mobil Still Battling Back
February 2, 2017
Exxon Mobil’s reported results are improving as the global oil markets continue to work towards rebalancing. Let’s take a look at the most recent quarter of one of our favorite oil and gas majors. By Kris Rosemann In light of the well-publicized recent dividend cuts at ConocoPhillips (COP) and Kinder Morgan (KMI), it’s no surprise to readers why we continue to prefer the diversified Energy Select SPDR ETF (XLE) when it comes to energy exposure in the newsletter portfolios. Operating debt-heavy, capital-intensive business models in a violently cyclical industry such as upstream exploration and production can be a recipe for disaster, as the fallout of 2015 showed. Exxon Mobil (XOM), however, continues to be one of our favorite income ideas
Coach’s Fundamentals Improving But We’re Growing Concerned About Dividend Amid Rumored M&A Talks
February 2, 2017
Dividend Growth Newsletter portfolio holding Coach turned in a strong finish to calendar 2016, but we’re worried about rumored M&A activity. Let’s dig in. By Kris Rosemann We’ve been keeping a close eye on the speculative luxury goods ideas in the newsletter portfolios, and it hasn’t all been smooth sailing as Coach (COH) and Michael Kors (KORS) work to reposition their brands in the North American markets. Though we continue to see an opportunity for capital appreciation in shares of Coach (based on our fair value estimate of $41 per share), which is yielding ~3.7% at recent price levels, we’re growing concerned about the implications that M&A (if rumors come to fruition) will have on the long-term health of the
