Dividends Not Safe as Energy Markets Swoon
December 8, 2015
We’ve been cautious on the oil and gas markets (XLE, AMLP) for some time, and that includes our October move closer to market neutral on the sector, but we’re still underweight the group. We’ve been saying that crude oil prices are more likely to hit the $20 per barrel level than move significantly higher, and we maintain our view that they may never again return to the $100 per barrel, a level many have grown accustomed to. After all, why should they? Unfortunately, the fallout continues to punish traditional “buy and hold” investors who have been trained to ignore most “news” and may still be holding on the belief of the fallacy of mean reversion, something that we believe cannot
Best Buy and GameStop Limp Into Holiday Season
December 8, 2015
The seasonality of specialty retailers Best Buy (BBY) and GameStop (GME) is no secret, and both are depending on strong holiday shopping to buoy full-year results. Let’s take a look at recent performance to get a feel for how both are trending heading into the holidays. Electronic sales remain a bright spot, so we’re paying very close attention to what’s flying off the shelves and what’s not, but with all the promotional activity going on, the biggest question is whether margins will hold up. In the third quarter of fiscal 2016, ended October 31, Best Buy reported total revenue falling 2.4% from the year-ago period to ~$8.8 billion. Comparable sales grew 0.8% (down from the 2.9% pace in last year’s
Keurig Green Mountain Goes Private
December 7, 2015
Keurig Green Mountain (GMCR) will be taken private by a JAB Holding Co. led investor group for ~$13.9 billion in cash. The price of ~$92 per share represents a 78% premium to the company’s December 4 closing share price, which was the result of a year of disappointing earnings and questions about the firm’s long-term growth prospects. In its fourth-quarter earnings report, Keurig recorded double-digit declines in net sales, operating income, net income, and diluted income per share. Though the price premium certainly was a surprise (greater than the high end of the fair value estimate range), the buyout hardly comes as a surprise to us. We have been of the opinion that a takeout would the best case scenario
Master Limited Partnership Model Still At Risk
December 7, 2015
Valuentum’s President Brian Nelson’s concerns regarding the master limited partnership business model became mainstream in June of this year. In his piece, “5 Reasons Why We Think Kinder Morgan’s Shares Will Collapse,” an article that itself may go down in history as one of the most timely pieces of research ever written–in light of Kinder Morgan’s (KMI) eventual collapse–Mr. Nelson said of the MLP space at that time: Most, if not all, MLPs report distributable cash flow (DCF), which does not in the calculation consider growth capex, an important driver behind the generation of increased cash flow from operations in the future. When MLPs report distribution coverage ratios, this particular calculation also backs out growth capex from the equation, instead
Dividend Increases/Decreases for the Week Ending December 4
December 7, 2015
Below we provide a list of firms that raised/lowered their dividends during the week ending December 4. 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 Bank of Montreal (BMO): now C$0.84 per share quarterly dividend, was C$0.82. C.H. Robinson Worldwide (CHRW): now $0.43 per share quarterly dividend, was $0.38. Canadian Imperial Bank of Commerce (CM): now C$1.15 per share quarterly dividend, was C$0.84. Canadian Western Bank (CBWBF): now $0.23 per share quarterly dividend, was $0.22. Citizens Holding (CIZN): now $0.24 per share quarterly dividend, was $0.23. CoreSite Reality (COR): now $0.53
Leading Investors to Water…
December 6, 2015
“Entrepreneurs are never satisfied. They want to do things better. They strive for perfection and use all the ingenuity to their command to achieve it.” – J.W. Marriott Company Name Symbol YTD % Outperform? Apple AAPL 7.84 Y Alibaba BABA -18.37 N Altria MO 18.75 Y Cisco CSCO -1.2 N eBay EBAY 24.26 Y Financial Select SPDR XLF 1.52 N General Electric GE 20.66 Y Gilead Sciences GILD 10.41 Y Google (now Alphabet) GOOG 46.07 Y Google (now Alphabet) GOOGL 46.84 Y Health Care ETF XLV 6.02 Y Intel INTC -3.73 N SPDR S&P Bank ETF KBE 9.25 Y Republic Services RSG 10.09 Y Rio Tinto RIO -31.07 N Teva Pharma TEVA 16.12 Y Union Pacific UNP -32.46 N Utilities
Alibaba Pops; Kinder Morgan Drops; Chipotle Flops
December 5, 2015
A discounted cash-flow process is your best friend. Not only does it allow you to identify the substance of a company’s balance sheet, what it owns (similar to what you have in your own savings account less all debt), but it also encourages a focus on the future free cash flow stream of the entity (much like your salary after expenses, for example). Intrinsic value estimation provides the backbone behind the conviction that an investor gains in either sticking with an idea or throwing in the cards. You can perform discounted cash flow analysis, too. Let’s walk through a few examples to help explain this concept. In mid-September, shares of Alibaba (BABA) had been in a tailspin, with investors
Future Free Cash Flow to Drive Medtronic’s Dividend
December 4, 2015
Medtronic (MDT), a core holding in the Dividend Growth Newsletter portfolio, reported strong results in its fiscal second quarter, performance released December 3. All of its segments delivered revenue growth in the quarter on a comparable, constant-currency basis, which includes comparable results from Covidien’s businesses. Total revenue grew 6% on a comparable, constant-currency basis, to $7.1 billion, which is a 62% increase from Medtronic’s reported results in the prior-year period. Medtronic posted strong growth in the US and non-US developed countries across the world of 4% and 6%, respectively, as well as 11% growth in emerging markets. The Greater China, the Middle East & Africa, Latin America, India, and Southeast Asia regions all grew revenue at a double-digit pace on
Moody’s Downgrades Credit Outlook on Kinder Morgan
December 2, 2015
An integral part of the Valuentum thesis on Kinder Morgan has now come to fruition. For those that listened to us, we saved them half of their capital.
Creed, Apple, and the Fitbit
November 30, 2015
By Brian Nelson, CFA Hanging out in malls on Thanksgiving isn’t really our thing at Valuentum, but what we’re hearing thus far is that “Thanksgiving shopping was a bust.” It even felt as though tourism was down a bit as traditional near-impassable auto traffic was surprisingly absent in at least one key family destination, the gateway to the Smokies in Gatlinburg, Tennessee, and maybe keeping travelers from commuting through the city of Chicago was the potential for riots following the release of the dash cam video allegedly showing a police officer shooting a youth 16 times in November of last year. My trip from northern Illinois to Gatlinburg, Tennessee, and back was rather uneventful, not that I am complaining about
