GE Positioning for Long-term Crude Oil Price Recovery
October 31, 2016
Image Source: GE, Baker Hughes Newsletter portfolio holding General Electric has agreed to merge its Oil & Gas business with Baker Hughes. By Kris Rosemann General Electric (GE) is betting big on energy these days, even as orders continue to decline in its ‘Oil & Gas’ segment as a result of continued pressure on energy resource pricing (USO, NGAS). The industrial conglomerate on October 31 agreed to merge the business with energy services giant Baker Hughes (BHI) to create a powerhouse in the sector with estimated $32 billion in annual revenue. Although we’re very cautious on the deal based on the current operating environment and uncertainty in the energy markets–GE is expecting operating income in its Oil & Gas business
Are S&P 500 Stocks Returning Too Much Cash to Shareholders?
October 31, 2016
S&P 500 companies are on pace to return a record amount of capital to shareholders via dividends and share repurchases, but what are the investment implications? Let’s take a look. By Kris Rosemann How can any company return too much cash to its shareholders, right? Well, let’s first start this discussion of recent capital allocation trends with some clarifying thoughts. We’re not against corporations returning excess capital to shareholders via dividends and buybacks (SPYB, PKW), provided they are value-generating moves. In many ways, we’re just as excited as the rest of the market about generating sustainable and growing income via strong dividend paying equities, as evidenced by the existence of the Dividend Growth Newsletter and the strong performance of its
Earnings Insight — Amazon
October 31, 2016
Image Source: Mike Mozart Let’s cover some ground on Amazon’s (AMZN) third-quarter report, released October 27. What management said: “Alexa may be Amazon’s most loved invention yet — literally — with over 250,000 marriage proposals from customers and counting,” said Jeff Bezos, founder and CEO of Amazon. “And she’s just getting better. Because Alexa’s brain is in the cloud, we can easily and continuously add to her capabilities and make her more useful — wait until you see some of the surprises the team is working on now.” — CEO Jeff Bezos The scoop: The game has changed at Amazon. No longer is the company struggling to generate meaningful free cash flow; in fact, it is now throwing off copious
Podcast: The ABCs of Investing in Alphabet
October 31, 2016
The company formerly known as Google, Alphabet, has a pristine balance sheet and generates a tremendous amount of free cash flow. A paid search powerhouse that is making some big bets in other areas of the future is one of our favorite ideas. The Valuentum analyst team digs in. ~6 minutes Please access the transcript below. Tickerized for Google, Twitter, Facebook, and various Internet ETFs. Brian Nelson, CFA: This is Brian Nelson for Valuentum Securities and welcome to our podcast. Today I have joining me Mr. Kris Rosemann and Mr. Chris Araos. The topic today is going to be on Google, now calling itself Alphabet. Google is a company that we include in our Best Ideas Newsletter portfolio — ticker symbol
Examining Same-Store Sales in the Restaurant Industry
October 28, 2016
Key Takeaways September 2016 marked the fourth consecutive month of same-store restaurant sales declines, but the pressure is not indiscriminant. Millennials account for nearly a quarter of restaurant spending and are anticipated to account for 40% of restaurant purchases by 2020. Their preferences are becoming important considerations for the strategic planning of restaurants. Fast food restaurants with exposure to the coffee and breakfast segments appear to be faring better than those with limited or no exposure to the segments. Experiential dining is becoming increasingly important in the full-service arena as the gap between grocery prices and food away from home prices has widened of late. By Kris Rosemann The broader restaurant sector (BITE) has been under pressure as of
Podcast: Markets In Motion
October 28, 2016
The Valuentum analyst team covers market moving information that is top of mind from consumer staples valuations, the political election cycle, utility valuations, energy resource pricing, biotech considerations, Brexit uncertainty and beyond. ~8 minutes. Tickerized for several consumer staples entities and ETFs, several companies in the energy sector, emerging market vehicles and more.
Earnings Insight – General Motors
October 28, 2016
Let’s cover some ground on General Motors’ (GM) third-quarter results. What management said: “GM delivered strong earnings and achieved several third quarter records that included net income, EBIT-adjusted, EBIT-adjusted margins, EPS diluted-adjusted and adjusted automotive free cash flow. Net income increased 104% to $2.8 billion as net revenue rose 10% to $42.8 billion, which is an all-time record. EBIT-adjusted was up 14% to $3.5 billion. EBIT-adjusted margin was 8.3%, up 0.3 percentage points and EPS diluted-adjusted was up nearly 15% to $1.72. Adjusted automotive free cash flow was $3.5 billion, up from $0.8 billion last year and ROIC adjusted of 30.6% on a trailing four-quarter basis was an all-time record continuing the positive impact of our disciplined capital allocation framework.
As Expected–MLP StoneMor Partners Slashes Distribution!
October 27, 2016
Image: A clipping of Valuentum’s dividend report on StoneMor Partners. We continue to defend the individual investor! StoneMor Partners (STON) is about the most risky entity in all of our coverage universe, and it showed why after the trading session, October 27, by cutting its distribution! Yes, yet another MLP! For those that listened to us about the severe risks of its business model, we salute you. The MLP has been what we call a double whammy–it’s on Valuentum’s most overvalued list here, and it had a Dividend Cushion ratio of 0.1, now -0.7 (anything less than 1 is risky, but close to or below 0 implies significantly heightened risk). Shares are indicated down 25% after the close October 27.
Earnings Insight – Visa
October 27, 2016
Image source: Visa Let’s cover some ground on Visa’s (V) calendar third-quarter report, its fiscal fourth-quarter release. What management said: “We continue to deliver healthy earnings growth in the face of continued, but abating headwinds. We have begun to see the benefits from our acquisition of Visa Europe and strong cost discipline helped our results. At the same time, we are unwavering in our commitment to invest in client partnership opportunities and the further build out of our digital payments capabilities,” said Charlie Scharf, Chief Executive Officer of Visa Inc. “As we enter fiscal 2017, we are positioned well as revenue headwinds will continue to ease, we will continue to see the benefits from Visa Europe in our results, and
Podcast: Why ETFs and Roasting the Banks
October 27, 2016
The Valuentum analyst team talks about why we don’t like the business models of banking entities, why they are currently destroying economic value, but also why the team includes exposure in the Best Ideas Newsletter portfolio. What gives? Find out in this ~9 minute podcast. If you cannot view the video, please view the transcript that follows. Tickerized for holdings in the exchange traded funds, XLF and KBE, and for various financials-oriented ETFs. Kris Rosemann: Hello and welcome to the Valuentum Securities podcast. My name is Kris Rosemann Associate Investment Analyst at Valuentum. With me is Chris Araos and Brian Nelson President of Equity Research and ETF Analysis at Valuentum. Today, we are going to have a quick discussion over
