Nelson: Time to Consider Buying Kinder Morgan?
October 22, 2015
“Buy and hold investing has done more to turn perfectly decent people into the worst sort.” As others are poo-pooing Kinder Morgan’s (KMI) third-quarter report, we wanted to share a few observations. Our $29 per share fair value estimate for the corporate is unchanged, as we note the low end of our fair value range is $23 per share. We’re reiterating our “neutral” view on the company. First, we were beyond pleased to see Executive Chairman Richard Kinder come to terms with emphasizing the fact that Kinder Morgan is not totally immune to commodity price impacts. He said as much in the press release. Though top analysts on Wall Street are well-aware of this (or they should be), there are
Flash: Kinder Morgan Cuts Dividend Growth Outlook
October 21, 2015
Per the company’s third-quarter report, released October 21, 2015: “while we are at the beginning of our budget process for 2016, we currently expect to increase our declared dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share.” The previous target had called for a 10% increase versus the lowered midpoint of 8%.
Valeant Crushed by “Short-Seller” Research Report
October 21, 2015
Additional uncertainty has surfaced around the biotech firm. We can’t say we are surprised, but the company’s share-price decline has been a monumental one. Despite Valeant’s strong reported performance in recent quarters, the Valuentum Buying Index kept us away from such a risky stock. Please understand why paying attention to the information contained in prices is an important component to any value-, growth- or income-based strategy. Valeant Pharmaceuticals’ (VRX) shares have taken a major shellacking as a result of a research report accusing the firm of Enron-like activities. These are some serious accusations, and Valeant has since defended itself, which has given its shares a sizable bounce. We can’t say we’re surprised there was a material drop in Valeant’s share
Surveying the Aerospace Arena
October 21, 2015
The reasons for liking commercial aerospace, or constituents involved in the production of commercial aircraft, are many and varied. The liberalization of air travel between global point-to-point markets has facilitated expansion in not only leisure travel but also business travel between countries. The advent of the low-cost-carrier model in the likes of Southwest (LUV) and others just like it around the globe has made air travel affordable to those that it once had “priced out.” The growing middle class in developing countries has paved the foundation for continued passenger growth, something that should be expected for decades to come. The collapse in jet fuel costs has made the global airline industry, or those involved in the transporting of people from
Restaurants: Pulling Out All the Stops?
October 21, 2015
Yum! Brands’ (YUM) second annual earnings-per-share guidance revision for 2015 in a matter of a couple weeks–as late in the year as the month of October–must be a new record for an executive suite. Credibility now shot, management is pulling out all the stops and going full-steam ahead with separating its China operations from the rest of its business. Yum! Brands is simply shell-shocked, in our view, and is acquiescing to activist investor demands that may not be beneficial to the interest of long-term shareholders. We think the move by the executive suite is being pursued solely to preserve their jobs. Though some estimates suggest that a separation of Yum! Brands’ China Division from the rest of its operations
IBM Continues to Punish Optimists
October 20, 2015
The fundamentals of International Business Machines (IBM) have deteriorated so much in the past few years that we use the technology giant as our in-house example to explain poor earnings quality. Can you believe it? The bluest of blue chips is now the poster child for what it once was the opposite of. We wrote the following in January of 2014, which addresses the myriad red flags when IBM was still trading close to $190 per share. Let’s explore what we said then to help establish a foundation for evaluating its third-quarter results, released October 19, 2015: Never did we ever think we’d be using Big Blue as an example of poor earnings quality, but its fourth-quarter 2013 results, released January 21, 2014, fit
More Suggested Reading
October 20, 2015
More Reading Must read: Understanding the CFA Designation Must watch: Explaining the Valuentum Buying Index Must read: Why Valuentum Buying Index Ratings Matter Must read: The Best Way to Use the Valuentum Process Must read: Evaluation of Simulated Best Ideas Newsletter Portfolio Must read: Focus on a Rules-Based Process Must read: What Causes Fair Value Estimates to Change? Must read: Resetting Your Mental Model Must read: Introducing the Economic Castle Rating Must read: Deriving Forecasts in Valuation and Dividends Must read: Investing’s Odd Couple: Value and Momentum Must read: How Members Use Valuentum’s Investment Services User Menu View Current and Archived Best Ideas Newsletters — access current and archived newsletters View Current and Archived Dividend Growth Newsletters — access current and archived newsletters Getting Started on Valuentum.com — learn about
Profit Taking in Hasbro’s Shares
October 19, 2015
Note: On July 1, we took some profits on Hasbro (HAS) north of $75 per share. Please read the introduction on page 1 of the July edition of the Dividend Growth Newsletter . Image Source: Hasbro Things are still going great at Hasbro, even as the sharp sell-off following its third-quarter report tries to tell a different story. We think the post-earnings drop in shares is merely profit taking, something we, too, had engaged in a few months ago with its shares in the Dividend Growth Newsletter portfolio. The company’s equity has more than doubled since the beginning of 2012, and investors are taking money of the table in advance of the all-important holiday season, in our view. In
Investment Banking Round Up: Citigroup’s Equity To Rapidly Converge to Tangible Book?
October 19, 2015
Though junior analysts cheating on internal exams at Goldman Sachs (GS) and JP Morgan (JPM) has probably garnered more headlines than the results of the two entities themselves, one thing remains clear: the US financial system remains on very healthy ground. While robust capital ratios speak to this, not all banks are doing great, and volatile economic and market conditions are posing challenges for many, even if such conditions are an inescapable characteristic of the financial system itself. Morgan Stanley’s (MS) third-quarter results, for one, left much to be desired. Reported net revenue dropped to $7.8 billion from $8.9 billion in the year-ago period, while net income fell to $0.48 per share from $0.83 in the September quarter-end last year;
Dividend Increases/Decreases for the Week Ending October 16
October 18, 2015
Below we provide a list of firms that raised/lowered their dividends during the week ending October 16. 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 Antero Midstream (AM): now $0.205 per share quarterly dividend, was $0.19. Cantel (CMN): now $0.06 per share semi-annual dividend, was $0.05. Cintas (CTAS): now $1.05 per share annual dividend, was $0.85. Dorchester Minerals (DMLP): now $0.1942 per share quarterly dividend, was $0.1674. Eaton Vance (EV): now $0.265 per share quarterly dividend, was $0.25. Healthcare Services (HCSG): now $0.18 per share quarterly dividend, was $0.1788. International Paper
