Valuentum: Time to Load Up on Kinder Morgan?
January 21, 2016
On January 20, Kinder Morgan (KMI) reported fourth-quarter results, and absent 1) a large goodwill impairment charge related to its core midstream natural gas assets, 2) a reduction to its estimate for backlog of future potential business, and 3) warning that further goodwill impairments are around the corner if energy resource pricing remains depressed, quarterly performance wasn’t all that bad (or at least not as bad as some had been expecting). Kinder Morgan had previously announced a 75% dividend cut and a very costly preferred equity issuance just a few weeks ago as it continues to work to get its financial house in order. Our $20 per share fair value estimate is unchanged at this time. We’re starting to like what we’re
Value (Soon) to Be Had in Retail?
January 21, 2016
By Kris Rosemann Department stores have had a rough go of it lately. Consumers have turned their attention to niche stores that sell branded products at material discounts, and online shopping continues to be a draw. The holiday season did not provide as strong of a boost as some retailers have been used to due in part to the unseasonably warm weather across the northern US. Macy’s (M), for example, expects that 80% of the year-over-year decline in its comparable sales numbers in the November/December period can be attributed to weakened demand for cold-weather goods. Investors have taken note of the changes in consumer preference, leaving major department stores to contemplate material changes to their businesses, and the tough sledding
Breaking: Markets in Free Fall
January 20, 2016
By Brian Nelson, CFA I was up late last night watching the 10-year Treasury fall below 2%, crude oil drop below $28 (and now below $27) per barrel, and the Dow futures collapse more than 500 points. Asset correlations are going to 1 — so much for modern portfolio theory, right? The benefits of diversification are sometimes absent at the very time you need them the most. If market observers didn’t learn this during the Great Depression, certainly they must have learned it during the Financial Crisis of 2008-2009. That’s why we like cash so much at times. We have a 35%+ cash weighting in both newsletter portfolios. The Dow Jones Industrial Average (DIA) is now down ~400 points (-2.5%),
Valuentum: Energy MLPs Continue Swoon
January 20, 2016
Energy master limited partnerships (AMLP, AMZ) continue to be in a world of hurt as investors reevaluate the sustainability of distribution streams and reassess the fundamentals on a pure traditional free cash flow basis. Many, however, continue to point to uncertainty related to the completion of the deal between Energy Transfer Equity (ETE) and Williams Partners (WMB) as reason for the sharp drops, but if you recall, both stocks collapsed on the announcement of the deal in October, both stocks collapsed when speculation grew a deal would not be completed earlier this month, and both stocks collapsed when the deal was reiterated last week. Instead, we think the market is focused on tangible long-term fundamentals, free cash flow generation, leverage
Excited About Putting Cash to Work…Eventually
January 19, 2016
Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel
ETP’s Distribution Financially Engineered? Debt Junk-Rated?
January 19, 2016
The term “financially-engineered distribution” has increased in prominence as of late, as investors face an unprecedented swoon in the prices of master limited partnerships (AMLP). But what is a financially-engineered distribution and how does it differ from an organically-derived dividend, paid by Microsoft (MSFT) or Apple (AAPL), for example? We’ll cover this, and we’ll also talk about why we think Energy Transfer Partners’ debt is “junk.” We have to look at the SEC filings to help explain. Let’s first start with our definition of a financially-engineered payout. Based on generally accepted accounting principles (GAAP), the cash flow statement breaks down into three distinct components: cash flow from operations, cash flow from investing and cash flow from financing activities. Bear with
Dividend Increases for the Week Ending January 15
January 18, 2016
Below we provide a list of firms that raised their dividends during the week ending January 15. 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 Alliant Energy (LNT): now $0.5875 per share quarterly dividend, was $0.55. Antero Midstream (AM): now $0.22 per share quarterly dividend, was $0.205. Apogee (APOG): now $0.125 per share quarterly dividend, was $0.11. Blackrock, Inc. (BLK): now $2.29 per share quarterly dividend, was $2.18. Cinver Resources (CINR): now $0.5575 per share quarterly dividend, was $0.551. Delphi Automotive (DLPH): now $0.29 per share quarterly dividend, was $0.25. EPR
Lots to Like About Intel’s 2016: 3D XPoint and Altera!
January 17, 2016
Newsletter portfolio holding Intel (INTC) continues to change with the world around it. An increasingly smart and connected world offers significant opportunities for the company, but those opportunities will not be presented without obstacles to hurdle. It didn’t work out so well for the price of Intel the week of its report, as it released a somewhat cautious outlook on a day of a big market swoon, but we still expect some good things ahead from the chip giant. In fact, we continue to like the holding in the context of achieving the goals of the newsletter portfolios. In the fourth quarter of 2015, results released January 14, Intel reported record revenue of $14.9 billion, though the top line grew
Valuentum: A Beacon For Good
January 15, 2016
Image Source: US Embassy “Any man who may be asked in this century what he did to make his life worthwhile, I think, can respond with a good deal of pride and satisfaction: ‘I served in the United States Navy.’” – John F. Kennedy I felt inspired today. Maybe it was President Barack Obama’s reference to a new “war on cancer” in this week’s State of the Union speech, akin to that of John F. Kennedy’s mission to “go to the moon,” or maybe it was something else, but I was reminded of the great Jack Kennedy and the second quote above: what a man does to make his life worthwhile. If I were asked what I did to make
The 20 Something’s Stock Portfolio
January 13, 2016
A version of this article appeared on our website March 31, 2015. <Our best ideas at any time are included in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.> The “20 Something’s Stock Portfolio” is the first in a series of articles where we get to the core of what many brand new investors want to do when they are first introduced to the stock market: find exciting companies that they are familiar with that will help compound their wealth over time. Other portfolios that we will share in this series include “The Ultra High Income Portfolio,” “The Economic Castle Portfolio,” “The Dividend Cushion Portfolio,” and “The Intelligent ETF Investor’s Portfolio,” among others. The series of portfolios will
