Developments in the Iron Ore Market
November 18, 2015
BHP Billiton (BHP) shares have reached their lowest levels since 2008 after reports surfaced November 5 of a mining dam the company owns via a joint venture with Vale (VALE) broke. The dam failure has decimated a rural community, killed at least 8 people, left at least 20 people missing, and potentially contaminated the water source of hundreds of thousands of Brazilians. Samarco, the limited liability company set up to operate the joint venture between BHP and Vale, has been said to be fully responsible for the failure, but the two-year old company may do little to protect its parent companies from hefty fines and cleanup and legal costs. According to an environmental lawyer, if Samarco cannot cover the cleanup
Railroad Merger Talks
November 16, 2015
Canadian Pacific (CP) is back on the hunt for consolidation. After regulators shot down a proposed deal for CSX (CSX) last year, the firm is reportedly in preliminary talks with Norfolk Southern (NSC) concerning a merger that could be worth more than $24 billion. The fact that there are so few railroad operators in the US suggests that a deal will be very difficult to get past regulators, and if a deal does in fact get done, it will likely be the last of its size in the industry. The two companies have complimentary cargo markets and little geographical overlap, in our birds’ eye view of their respective route networks. Norfolk Southern generates 22% of its revenue in intermodal shipments,
Dividend Increases/Decreases for the Week Ending November 13
November 14, 2015
Below we provide a list of firms that raised/lowered their dividends during the week ending November 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 Aaron’s (AAN): now $0.025 per share quarterly dividend, was $0.023. Acadia Realty Trust (AKR): now $0.25 per share quarterly dividend, was $0.24. Automatic Data Processing (ADP): now $0.53 per share quarterly dividend, was $0.49. ClearOne (CLRO): now $0.05 per share quarterly dividend, was $0.035. D.R. Horton, Inc. (DHI): now $0.08 per share quarterly dividend, was $0.0625. DCT Industrial Trust (DCT): now $0.29 per share quarterly dividend,
Beginning of BlackBerry Turnaround?
November 13, 2015
Last January, we were puzzled by the situation surrounding BlackBerry (BBRY), and judging by the volatility in shares, many other investors were as well. The firm denied rumors that it would be purchased for a substantial premium by competitor Samsung (SSNLF) in hopes to continue its efforts to create a larger, more diverse portfolio to compete with Apple (AAPL); BlackBerry continues to bet on its ability to use its own patent portfolio to facilitate a turnaround, even if tying the knot may still be the easy way out. In any case, the possibility that such a turnaround has finally begun has increased…maybe. In early November, BlackBerry completed the acquisition of secure mobile communications leader Good Technology for $425 million in
Alibaba Crushes Singles’ Day Records
November 12, 2015
In 2009, Chinese e-commerce giant Alibaba (BABA) turned a local holiday for singles into a 24-hour online shopping spree through deep discounts and other promotions. Singles’ Day, as it is called, has since gained significant traction in China and is now a bigger online shopping day than Black Friday and Cyber Monday combined. For 2015 Singles’ Day, Alibaba reported total gross merchandise volume (GMV) of $14.3 billion for the day, an increase of over 53% compared to Singles’ Day in 2014. This handily beat consensus expectations of ~$13 billion in GMV, and vastly outpaced GMV growth of 28% in the third quarter of 2015. Alibaba continues to be at the forefront of the shift of Internet shopping to mobile platforms,
Investors Punish Priceline for Conservative Guidance
November 12, 2015
This isn’t the first time this year Best Ideas Newsletter portfolio holding Priceline (PCLN) has been punished by investors for issuing weak guidance after a strong quarter (see our first-quarter piece). The strength of the US dollar played an important role in the weakness of the firm’s performance, but we didn’t see any material fundamental deterioration in its operations in the company’s third-quarter results, reported November 9. Gross travel bookings at Priceline grew ~22% in constant currency and 7% as reported to $14.8 billion in the third quarter on a year-over-year basis. The strength was driven by its international operations, where gross travel bookings grew 25% in constant currency. The company’s global accommodation business booked a record 116 million room
5 Reasons to Consider Not Owning McDonald’s
November 11, 2015
1. Difficult Comps to Come in Late 2016/Early 2017 McDonald’s (MCD) has come roaring back to life. The company reported strong third-quarter performance October 22 and posted an impressive 4% global comparable sales growth rate in the period. We thought the fundamental performance was great, even though consolidated revenue and consolidated operating income dropped 5% and 2% in the quarter on a reported basis, respectively. On a year-over-year basis, constant-currency performance showed 7% top-line growth and 10% operating-income growth, both of which we thought were solid. That said, the market seems to be accepting the report as evidence that McDonald’s is permanently back on track, but we’re striking a more cautious tone. We think the quarterly results and a few
Dividend Growth Newsletter REITs
November 9, 2015
Realty Income’s (O) Dividend Track Record Pictured: Income investors in Realty Income have been handsomely rewarded through the years. Source: Realty Income HCP’s (HCP) Dividend Track Record Pictured: HCP has rewarded income investors in each of the past 30 years with consecutive annual dividend increases. Source: HCP Let’s Talk Interest Rates There’s a lot to think about these days with respect to REITs and rising interest rates. In the equity valuation context, for one, a rising nominal interest rate, by itself, is negative. Increased borrowing costs translate into a higher discount rate applied to a REIT’s future projected net operating income (or a higher cap rate used in the valuation process), and by extension, results in a lower intrinsic value
Email Transaction Alerts
November 5, 2015
We know many of you use our services for a wide variety of different reasons, whether for a primary source of fair value estimates and fair value ranges, to assess the risk of the sustainability of the dividend through our Dividend Cushion ratio, or to apply the Valuentum Buying Index as an overlay to your own processes and beyond. For those that are following changes to our newsletter portfolios, we’re going to make a few today. None of these should be surprising. First, we’re taking some profits in Altria (MO), removing half of our position in both newsletter portfolios. Specifically, we’ll be removing 158 shares in the Best Ideas Newsletter portfolio and 101 shares in the Dividend Growth Newsletter portfolio
Catching Up With Some of Our Best Ideas
November 5, 2015
Teva Pharmaceutical (TEVA) Teva Pharmaceutical has been a key source of outperformance for the Best Ideas Newsletter portfolio since its addition in mid-2013, with its return excluding dividends currently at ~50%. We continue to think the generic pharma space offers significant opportunities for participants, and we like Teva’s global market position. We’re particularly big fans of its ‘first-to-file’ position in the US generics market, and we like its efforts to protect specialty drug Copaxone as the world’s leading treatment of multiple sclerosis. In the third quarter of 2015, foreign exchange rates took a slight toll on Teva’s reported revenue, which fell 5% from the year-ago period to $4.8 billion; on a constant currency basis, revenue increased 3%. Non-GAAP operating income
