Dear member,
June 27, 2015
We have been blown away by the attention we’ve received from our warning on Kinder Morgan’s (KMI) valuation and dividend health. Our duty as an independent research provider has never been held in higher esteem as we outlined the prevalent hazards that reside both with sell-side research inundated with conflicts of interest and credit rating assessments that are paid for by the company. Independence will always trump biased analysis, and investors of all types have applauded us for this. We thank you. But being in the spotlight is nothing new for us. In the short history of the Dividend Cushion methodology, we have called in advance the dividend cuts on a few dozen equities: SeaDrill (SDRL), SuperValu (SVU), Roundy’s (RNDY),
Nike Is Just Too Pricey of a Stock
June 26, 2015
Everybody loves Nike, and that’s why its equity is trading at too high of a price. We think there are better values elsewhere.
Interest Rates: REITs vs. Financials
June 25, 2015
Since the peak of the Financial Crisis, the yield on the 10-year Treasury, a proxy for the risk-free rate within the valuation context, has been in a steady decline (see image above), but a strong bounce in rates since February continues to have the market on edge. Often moving in relation to Treasury yields are REITs and financial firms, though in opposite directions. Generally speaking, as interest rates rise, REITs experience selling pressure as investors opt for higher-yielding risk-free assets, while the opportunity to generate higher spread income is augmented with higher rates, sparking potential buying across the banking universe. The Fed continues to mull its options with how to build a “stimulus” cushion in advance of the next impending
Williams’ Rejection, Medtronic’s Hike, eBay’s Sale, and Hershey’s Disappointment
June 23, 2015
Williams Companies Rejects Offer from Energy Transfer Equity Natural gas pipeline company Williams Companies (WMB) has seen shares jump after Energy Transfer Equity (ETE) confirmed reports that it had made a bid to acquire the company. Despite the all-equity offer of $64 per share representing a 32% premium to Williams’ June 19 closing price, the offer was rejected by the firm as significantly too low. ETE has made multiple attempts to talk with Williams’ management about a possible merger in the past half year, and ETE has said its offer is contingent on the abortion of Williams’ pending purchase of Williams Partners (WPZ). The initial offer came on May 19, six days after Williams Companies announced it would buy Williams
Oracle’s Cloud Performance Leaves a Hazy Overall Outlook
June 22, 2015
After reporting fourth quarter and full year results for fiscal 2015 on June 17, Oracle (ORCL) shares took a significant hit. It is easy to see the effect foreign exchange rates had on the quarterly results, but there is more to the miss than meets the eye. In the fourth quarter of fiscal 2015, Oracle reported revenue of ~$10.7 billion, a decrease of 5% as reported, or an increase of 3% on a constant currency basis. Driving the top line lower was a decrease in software and cloud revenue, more specifically new software licenses, where sales dropped 17%; new software licenses make up more than 20% of total revenue. Attempting to offset this significant drop was strong 29% growth in
Dividend Increases for the Week Ending June 19
June 22, 2015
Below we provide a list of firms that raised their dividends during the week ending June 19. 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 Farmers & Merchants Bancorp (FMAO): now $0.22 per share quarterly dividend, was $0.21. FBR (FBRC): now $0.20 per share quarterly dividend, first dividend paid. First Bancorp (FNLC): now $0.22 per share quarterly dividend, was $0.21. Great Southern Bancorp (GSBC): now $0.22 per share quarterly dividend, was $0.20. Investar (ISTR): now $0.0078 per share quarterly dividend, was $0.0074. Medtronic (MDT): now $0.38 per share quarterly dividend, was
5 More Reasons Why We Think Kinder Morgan’s Shares Will Collapse
June 18, 2015
This article was originally published on valuentum.com/. “…the credit rating agencies have a lot to think about. Kinder Morgan’s investment-grade credit rating is in part supported by the firm’s ability to access the equity markets to sell its own stock. But its share price is artificially propped up by the incorrect application of dividend discount models that are using financially-engineered dividends, which themselves are in part supported by the debt raised from an investment-grade credit rating, which is then used to keep raising debt and growing the dividend…and so on.” 5 More Reasons Why We Think Kinder Morgan’s Shares Will Collapse It may feel like something’s different at our independent equity research firm, but nothing has changed in the past
Target-CVS Agreement: What It Really Means
June 16, 2015
Image Source: Mike Mozart Target (TGT) and CVS Health (CVS) announced an agreement June 15 in which CVS would acquire, rebrand, and operate Target’s pharmacies and clinics for the price of approximately $1.9 billion. After the deal closes, CVS will operate 1,660 of Target’s pharmacies in its stores under the CVS/pharmacy brand name. The nearly 80 Target clinics involved in the deal will be rebranded as MinuteClinic, and CVS plans to open up to 20 new clinics in Target stores, part of the CVS/minuteclinic goal to operate 1,500 clinics by 2017. Target and CVS also plan to open five to ten small, flexible store formats that will be branded TargetExpress and include a CVS/pharmacy. After Target’s recent Canada debacle, we
Business As Usual
June 15, 2015
It may seem like something is different, but nothing has changed since the last edition of the Best Ideas Newsletter. We’ll continue to provide spot-on analysis across our entire coverage universe. For some of our new members that may not be familiar with our independent investment research firm, we publish two newsletter portfolios. The Best Ideas Newsletter portfolio is housed in this publication, the Best Ideas Newsletter, which we release on the 15th of the month. The other newsletter portfolio that we produce is the Dividend Growth Newsletter portfolio, and that portfolio is housed in the Dividend Growth Newsletter, which we release on the 1st of each month. The newsletters are a companion to the research we produce on our website on
The Under-reported Story: The Presence of Avian Influenza May Be the “New Norm”
June 15, 2015
Source: Cal-Maine, Valuentum estimates; Urner-Barry Southeastern Regional Large Egg Market Price (per dozen eggs) Egg prices are soaring as the avian flu has run rampant across farms in Midwestern states. According to some studies, the outbreak has reduced the national flock by more than 10%, and it is the largest outbreak on record in US history. Egg prices are the highest they’ve been in some time, and investors may not be fully aware of the implications. A state of emergency has been declared in Iowa, where the impact may be the worst. Scientists believe the virus may recede as temperatures in the Midwest increase, but every company in the food products industry, big or small, is being impacted at the
