Netflix’s “Moat” Eroding; Energy Transfer Equity’s Blunder Continues
March 24, 2016
By Brian Nelson, CFA You won’t see us holding Netflix (NFLX) or Energy Transfer Equity (ETE) in the newsletter portfolios anytime soon, and recent news only supports that viewpoint. We talk about companies not included in the newsletter portfolios as part of their ongoing research and valuation coverage on our website. I must say that as a recent subscriber to Netflix, some of their movie suggestions sent via email haven’t been all that bad – their algorithm must have me figured out. As a logical thinker, and not one swayed by spontaneous gratification, it’s still hard to forget the shortcomings of their content library, in aggregate, however, “5 Reasons Why We Think Netflix’s Shares Will Collapse.” Even if we were to
Valuentum Client Orientation Online Webinar
March 24, 2016
The Valuentum team will be hosting a free online webinar to members and clients. We’ll walk through how to navigate the website, where to find our 16-page stock reports and dividend reports, how to access the newsletter, newsletter portfolios, newsletter archives, where to find our methodology documents, learning materials and much much more. Valuentum’s Brian Nelson will also walk through the firm’s proprietary discounted cash-flow modeling infrastructure and answer questions real-time. Don’t miss this great opportunity to meet the Valuentum team and learn more about how to take advantage of all of the services that Valuentum offers from dividend growth to value-momentum and beyond. Associate Investment Analyst Kris Rosemann, who helps head up the investment research team at Valuentum, will
Initiating Coverage of PayPal with $50 Fair Value Estimate
March 24, 2016
Please select the image below to download PayPal’s 16-page valuation report.
What Gilead’s Patent Miscue Means for Shareholders
March 23, 2016
Source: Gilead Sciences Corporate Fact Sheet (pdf) By Brian Nelson, CFA There’s nothing quite like market instincts. They can’t be taught from reading textbooks, in the classroom, in a valuation model, or even with years and years of experience. It’s the intangibles that sometimes count the most. When we removed Gilead (GILD) from the portfolio of the Best Ideas Newsletter, “Alerts: High-grading! GILD–>JNJ… (Jan 2016),” we just knew something wasn’t right. Sure the introduction of Merck’s (MRK) once-daily single-tablet combination therapy, Zepatier, a significantly less expensive therapy to Gilead’s prized hepatitis C franchise was one major concern at the time, but the market is often not this inefficient when valuing equities. Almost counterintuitively, it became worrisome to us that for
Part II: Nelson’s Evaluation of Berkshire’s 2015 Annual Report
March 23, 2016
Warren Buffett’s optimism about the future of America remains unending. Image source: /\\ \\/\\/ /\\ << Go back to Part I By Brian Nelson, CFA “If you want to guarantee yourself a lifetime of misery, be sure to marry someone with the intent of changing their behavior.” – a “Mungerism” explaining the importance of identifying good managers when pursuing a hands-off ownership style. We covered quite a bit of ground in the first part of the evaluation of Berkshire Hathaway’s 2015 annual report here, and we’ll cover even more ground in this second installment. We left off with a good conversation about the insurance business, and how part of Berkshire Hathaway’s business strength emanates from its fortress balance sheet and credit
Terrorist Activity Tramples Travel Stocks; FBI Says Can Hack iPhone
March 22, 2016
In what have unfortunately become seemingly more frequent occurrences, terrorist activity across the globe appears to be proliferating. The latest, three explosions in the Belgium capital of Brussels, have taken the lives of at least 34 individuals, while wounding as many as 170 more, according to CNN and the Belgian media. Twenty were killed at the Maalbeek metro station while 14 more were killed at Brussels’ international airport, and while at the time of this writing, there has been “no official claim of responsibility,” ISIS appears to be most likely responsible for the terror, tweeting that “What will be coming is worse,” CNN reporting. The events March 22 come only a few short months after the terrorist attacks that rocked
Crude Oil Prices Now Near $40 Per Barrel
March 21, 2016
Image: Top holdings of the Energy Select Sector SPDR; source: State Street. Call it luck. Call it good timing. Call it what you will, but we’re calling it tactical prudence within a portfolio management context. The newsletter portfolios have been on the “long side” of energy equities now for the better part of the past few months, after having negligible exposure to the energy-sector bust for most of the past few years. We continue to target achieving the goals of the newsletter portfolios, and we think tactical exposure makes sense at this time. West Texas Intermediate crude oil prices (USO) have now advanced to ~$40 per barrel from the depths of the mid-$20s just a few months ago, and while
Dividend Increases/Decreases for the Week Ending March 18
March 21, 2016
Image: Williams-Sonoma’s dividend strength continues to impress; source: Mike Mozart Below we provide a list of firms that raised/lowered their dividends during the week ending March 18. 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 Air Products and Chemicals, Inc. (APD): now $0.86 per share quarterly dividend, was $0.81. CareTrust REIT (CTRE): now $0.17 per share quarterly dividend, was $0.16. Children’s Place Retail Stores (PLCE): now $0.20 per share quarterly dividend, was $0.15. Global High Income Fund (GHI): now $0.0658 per share monthly dividend, was $0.0657. Granite Real Estate (GRP.U): now C$0.203
Valeant’s Back Firmly Up Against the Wall
March 15, 2016
Image: A bottle of Valeant’s anti-depression drug Wellbrutin lay in disarray, much like the company’s operations. Wellbrutin was one of several key drugs on which Valeant used questionable pricing strategies to increase sales, source: Wendy. Valeant (VRX) CEO Michael Pearson said it rather bluntly on the firm’s preliminary fourth quarter 2015 press release, “The challenges of the past few months are not yet behind us…” The company has faced a significant amount of political and financial pressure in recent months as the firm has been the subject of numerous investigations from government agencies and multiple litigations, and also delayed the filing of its 2015 annual report to April. Valeant has warned that it could face an “event of default” if
The Corporate Buyback Conundrum
March 14, 2016
The above is a trailing 15-month chart of the broad market index, the S&P 500 (SPY). As you can see, the markets have gone nowhere fast. The fallout in the energy complex coupled with emerging market uncertainty and political unrest in the US is making for quite the choppy market environment. Interestingly, however, since the middle of last year, the Best Ideas Newsletter portfolio has quietly been distancing itself from this broad market benchmark, as strong performance from constituents coupled with a larger cash position in a generally weaker market have paid off. Where indexers focus on controlling costs instead of focusing on generating strong returns with relatively low turnover (and commission and tax implications), the strategy powering the Best
