Why The Fed Matters
May 23, 2016
By Brian Nelson, CFA I tread very lightly in how I communicate broad macroeconomic information. There are investors that are purely macro-focused asset-allocators, there are eternal optimists that believe the sky is the limit regardless of any economic considerations (perhaps like the Oracle of Omaha these days?) and then there are legends like Peter Lynch who is attributed with saying that “if you spend more than 13 minutes analyzing economic and market forecasts, you’ve wasted 10 minutes,” and that “if all the economists in the world were laid end to end, it wouldn’t be a bad thing.” Peter Lynch was the manager of the Fidelity Magellan Fund that averaged a near-30% annual return during the 13-year period ending 1990, “You
Still More Ag Deals Being Cultivated?
May 23, 2016
Image Source: Aqua Mechanical After Monsanto (MON) COO Brett Begemann called any takeover talks “wild speculation” just a week ago, German health care and agricultural product firm Bayer (BAYRY) on May 23 officially confirmed that it has offered to acquire US seeds company Monsanto for $62 billion in cash, or $122 per share. Monsanto’s shares continue to trade at a discount to the disclosed price in light of the uncertain path to deal completion. The proposed offer represents a substantial premium to Monsanto’s May 9 closing price of ~$89 and our standalone fair value estimate in the low $90s. At a deal multiple of nearly 16 times Monsanto’s trailing EBITDA and one far above our fair value estimate, Monsanto shareholders
Dividend Increases/Decreases for the Week Ending May 20
May 23, 2016
Below we provide a list of firms that raised/lowered their dividends during the week ending May 20. 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 Blue Hills Bancorp (BHBK): now $0.03 per share quarterly dividend, was $0.02. Burberry Group Plc ADR (BURBY): now £37 per share annual dividend, was £35.2 Carriage (CSV): now $0.05 per share quarterly dividend, was $0.025. Cato (CATO): now $0.33 per share quarterly dividend, was $0.30. Chubb (CB): now $0.69 per share quarterly dividend, was $0.67. Cineplex (CPXGF): now C$0.135 per share monthly dividend, was C$0.13. Clorox
Dividend Increases/Decreases for the Week Ending May 13
May 20, 2016
Below we provide a list of firms that raised their dividends during the week ending May 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 AirBoss of America (ABSSF): now C$0.065 per share quarterly dividend, was C$0.06. Algonquin Power & Utilities (AQUNF): now $0.1059 per share quarterly dividend, was $0.09626. American Software (AMSWA): now $0.11 per share quarterly dividend, was $0.10. Black Box (BBOX): now $0.12 per share quarterly dividend, was $0.11. Colombia Pipeline (CPGX): now $0.13875 per share quarterly dividend, was $0.13375. Connecticut Water Service (CTWS): now $0.2825 per share
Part III: Nelson’s Evaluation of Berkshire’s 2015 Annual Report
May 19, 2016
<< Go back to Part I << Go back to Part II By Brian Nelson, CFA It’s always a wonder to open up on the Berkshire Hathaway (BRK.A, BRK.B) annual report for a large variety of different reasons, but every time I do I can’t help but ponder yesteryear through the table on page 2, “Berkshire’s Performance vs. the S&P 500.” I think I have a unique knack for imagining what might have been if today’s standards would have been applied to Berkshire in the 1970s, perhaps in some ways how many baseball fans may think about whether the legends of the past would have put up the type of numbers that they did if presented with today’s dynamics. For
Flash: Cisco Pops… Shares +6% After-Hours Trading
May 18, 2016
Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Cisco (CSCO) is popping nicely in after-hours trading May 18 after a solid fiscal third-quarter report that showed revenue growth of 3% on a year-over-year basis thanks to strength in Security (+17%), Collaboration (+10%) and SP Video (18%), and GAAP earnings per share of $0.46 (non-GAAP came in at $0.57, up 6% during the period). Service revenue jumped 11% in the quarter on a year-over-year basis, while deferred revenue advanced 8% in total. We’re reiterating our $37 per share fair value estimate of Cisco at this time, and we don’t expect its solid 2.6 Dividend Cushion ratio to change materially as a result of the incremental quarterly information. Shares yield ~4%.
Target and Non-GAAP Earnings
May 18, 2016
Image Source: Mike Mozart Another day of earnings — another bad day for retail. May 18 brought a disappointing first-quarter report from retail bellwether Target (TGT) that sent the prices of it and most of its big box brethren including WalMart (WMT), Best Buy (BBY), and hhgregg (HGG) lower on the session, the latter two lower due to weakness in Target’s electronics vertical during the period. We’re reiterating our $71 per share fair value estimate of Target at the time of this writing. Except perhaps home improvement retailers Lowe’s (LOW) and Home Depot (HD), which continue to post desirable comparable store sales increases (+7.3% and +6.5% in the first quarter, respectively), and arguably the auto retailers, including AutoZone (AZO) and
Soros, Icahn, Nelson Hedge for Market Fall
May 18, 2016
Pictured: George Soros; source: Heinrich-Böll-Stiftung By The Valuentum Team Following news that Warren Buffett’s Berkshire Hathaway’s (BRK.A, BRK.B) took a rather sizable stake in Apple (AAPL), news flow from other large investors continues to be decidedly bearish. As our members are aware, we recently added put options on the S&P 500 (SPY) to protect capital in the Best Ideas Newsletter portfolio, a move that may expire worthless but accurately captures our sentiment toward today’s overheated equity market. As of May 13, the forward 12-month price-to-earnings ratio on S&P 500 companies is 16.6, above both its 5-year average (14.5) and 10-year average (14.3). Reversion to the 10-year average alone means the S&P 500 Sector SPDR ETF (SPY) has downside risk to ~$170
Big Pharma 1Q Earnings Roundup, Part II
May 17, 2016
Image Source: Paw Paw Companies mentioned: ABBV, AGN, BMY, AMGN, MRK, PFE. AbbVie (ABBV) Riding Humira to the End AbbVie’s performance in the first quarter of 2016 was nothing short of impressive, as the firm grew revenue by more than 18% on an as reported basis from the year-ago period. Humira (arthritis), the company’s headlining drug, sales increased nearly 15% as reported. New drug Imbruvica (leukemia) showed solid momentum in the quarter, and AbbVie received two approvals for the expansion of the Imbruvica as a first line therapy for chronic lymphocytic leukemia. The treatment is expected to play a key role in the future of the company, especially after its patent on Humira expires in December of this year. The
