Iron Prices to Move Higher, Ore Is It Wishful Thinking?
June 15, 2015
A number iron ore producers–including Vale (VALE), BHP Billiton (BHP), Cliffs Natural Resources (CLF), and Best Ideas Newsletter portfolio holding Rio Tinto (RIO)–have seen share prices jump after reports that Chinese demand for the key ingredient in steel production will increase in the second half of 2015. This is good news for iron ore producers, as approximately half of the world’s steel is produced in China. According to Vale CEO Murilo Ferreira, Chinese imports of iron ore will increase significantly in the back half of this year as domestic production is expected to be down ~200 million metric tons. According to Ferreira, a significant amount–more than most realize–of Chinese iron ore producers have ceased operations, boosting the country’s import demand.
Friday Evening News
June 13, 2015
Square to Go Public According to Forbes, San Francisco based mobile payment company, Square, is expected to go public sometime in 2015. In fact, sources close to the situation report that the firm is expected to file a confidential registration statement very soon, if it hasn’t happened already. Under the JOBS Act, emerging, growing companies can file for an IPO confidentially if they meet certain requirements, including having less than $1 billion in annual revenue. Internal debate over the ideal time for the firm’s IPO has clouded the situation, as has the appointment of co-founder and CEO Jack Dorsey as Twitter’s (TWTR) interim CEO. Also this week, Square launched a new credit card and phone reader designed to allow businesses
5 Reasons Why We Think Kinder Morgan’s Shares Will Collapse
June 11, 2015
The facts have changed at Kinder Morgan (KMI). We’re removing the company from the Dividend Growth portfolio right now! The entire position will be eliminated at $40 per share. What was once an optimistic view of the entity’s decision to de-risk by consolidating its disparate master-limited-partnership structure has now turned into fear that the firm’s equity may collapse. From its overpriced valuation to its restrictive debt load to its poor Dividend Cushion ratio that warns of tremendous risks to its dividend growth plans, Kinder Morgan may turn into one of the worst-performing companies this year and into 2016. We’re getting out…and in a hurry. Here are 5 reasons why we think Kinder Morgan’s shares will collapse. 1) The Valuation Paradigm Has
Gilead Price-to-Fair-Value Convergence Underway!
June 10, 2015
It’s a bird… It’s a plane… Nope, it’s Best Ideas Newsletter Portfolio holding Gilead Sciences (GILD) flying high in the months of May and June. For those that are new to the Gilead “story,” shares registered a 10 on the Valuentum Buying Index in September of last year, and while the near term has been a bit rocky, the company is now off to the races. The pharma giant was trading just over $100 at the end of April, and now, 10 days into the month of June, its share price is over $117 and climbing, a cool 17% move. Despite news being sparse on the company during the past few weeks, there are certainly a number of factors driving
No Fly Zone: Airlines’ Economic Profitability Still Unproven
June 10, 2015
Image Source: Amy McTigue We’ve said it before, and we’ll say it again: the airline industry is not well-suited for long-term investors. The industry that we’re talking about is the airline industry and includes companies such as United Continental (UAL) and JetBlue (JBLU), not the aerospace industry and its constituents such as Boeing (BA) and Precision Castparts (PCP), which are involved in aircraft-making and have fantastic business models. More on commercial aerospace here >> Today, we’re reiterating our view that most airline stocks should be viewed as nothing more than boom-or-bust, speculative vehicles. Perhaps the biggest issue with airlines is that the factors that drive their revenue and costs are largely out of their control. In other words, an airline
I Need a CFA® Charter Holder in My Practice – Financial Advisor
June 9, 2015
Financial advisors and individual investors are always looking for the best. I had a conversation with one of our most valued clients this week. I’ve withheld his name and firm for the sake of privacy. We talked extensively about the significant back-testing he performed in constructing a portfolio that was optimized for a number of dynamics. The portfolio he created performed significantly better than the broad market benchmark during the past decade, but most importantly, its maximum drawdown at the depths of the Great Recession was a mirror fraction of that of the S&P 500 (SPY), and the length to recovery was materially shorter than it took the broader market to get back on its feet. I was impressed with
Putting the American in American Pharoah?
June 7, 2015
Image: American Pharoah at the start of the race at Belmont. Source: Diana Robinson Last year left a bad taste in the mouths of horseracing fans across the globe. California Chrome had come off two fantastic wins in the Kentucky Derby and Preakness Stakes in order to position itself for a chance to make history by becoming the first Triple Crown winner in 36 years! The last thoroughbred to take home such an honor was Affirmed in 1978. For those that may not follow the “sport of kings,” to win the coveted Triple Crown, a three-year-old horse must win the Kentucky Derby in Louisville on the first Saturday in May, the Preakness in Baltimore, Maryland, two weeks after that, and
The Global Pandemic of Cybercrime, Cyber Espionage and Cyber Warfare
June 6, 2015
“The new generation of cyber-attacks on organizations, including large and small enterprises and governments worldwide, is characterized by an unprecedented escalation in the complexity and scale of advanced malware created by criminal organizations and nation-states. These modern attacks are built on dynamic, stealthy and targeted malware that penetrates defenses in multiple stages and through multiple entry points of an IT network. These highly targeted, “single-use” cyber-attacks easily circumvent legacy security solutions that rely on pattern-matching detection technologies. Additionally, because legacy solutions reference outdated signatures of past threats, they also generate a high number of false-positive alerts.” – Fireeye Annual Report, 2014 The statistics are striking. According to a 2011 survey of ~580 US IT experts by research center Ponemon Institute,
May US Auto Sales Cruise Past Expectations
June 4, 2015
Key Takeaways The US auto market has recovered significantly since the depths of the Great Recession, posting its best monthly unit sales levels in May in a decade and possibly positioning itself to reach the highest level of annual unit sales since 2001. Consumer demand continues to shift from cars to light trucks and SUVs as pain at the pump eases. America’s best-selling truck, the Ford F-Series, is losing market share, but this may just be temporary as it ramps up production to meet “sky-high” demand. Chevy and Toyota are busy capitalizing on the weakness, however. Tesla may have the brightest future among any auto maker in theory, but how long will it take for its plans to be realized?
eBay Is Over $60 Per Share, Breaking Out
June 3, 2015
I wanted to update members on eBay (EBAY), but let’s cover some ground on the (V)aluentum (B)uying (I)ndex first. The Valuentum Buying Index, or VBI, rating system is not the easiest to understand. There are as many stock-selection methodologies out there as there are fund managers and financial advisors. We’re talking tens of thousands, if not more. What we focus on within the Valuentum Buying Index framework is what matters. You may hear a fund manager talk about ROE, for example. But what you may not know is that ROE is inferior to ROIC because the former considers an artificial and non-operating boost from the application of financial leverage. We talked about this in the four-part education workshop here. Firms
