Hewlett-Packard Still Not Our Favorite Tech Idea
May 22, 2015
Image Source: wlodi On May 21, Hewlett-Packard (HPQ) reported its 2015 second-quarter earnings, which included an update on its turnaround plan and upcoming separation. As you may be aware, HP has had a difficult time combatting secular demand declines and macroeconomic headwinds in recent years, and its near-term outlook remains weak. Though it scores exceptionally well on our Valuentum dividend metrics, the firm’s turnaround plan will likely affect its dividend negatively. Overall revenue is expected to continue to decline in coming periods, but management has high hopes for the effectiveness of the separation of HP into two Fortune 50 companies. Reported revenue for the quarter was a slight miss at ~$25.5 billion, a decline of 7% on a reported basis
Target or Walmart?
May 21, 2015
Image Source: Steven Depolo It’s not the roaring 1990s anymore, investors! There are serious risks to the business models of Target (TGT) and Walmart (WMT), and everyone is looking the other way, consoling themselves with their steady and growing stream of dividends. These investors say, “as long as they pay the dividend, I don’t care,” as if this signals a proud achievement in some way, by which many experienced market participants will then respond, “and now we know why the individual investor is frequently blindsided.” The dividend is a symptom of the health of free cash flow, and management teams can dip into the balance sheet to support the payout. Only trends in free cash flow generation, supported by moaty
The Tax Man Cometh Anyway?
May 20, 2015
Image Description/Source: Berlin Wall, 1963; Roger We ran a video in late January about the concerns we had with Yahoo’s (YHOO) fair value uncertainty, and it turns out they weren’t unfounded (see video). One of our biggest issues surrounding the company was the potential tax ramifications of the spinoff of Alibaba shares (BABA) and whether ultimately the tax bill would land on shareholders’ laps. It turns out that it just might. Bloomberg reported May 19 that the IRS is considering a rule change that would “affect IRS rules for spinoffs by creating new US guidelines that might require a minimum size for active businesses inside the spun-off company.” As it stands right now, Yahoo’s spin-off is just an investment entity with no
What’s The Deal with US Housing?
May 19, 2015
Pictured: An unfinished sub-division in rural Illinois, May 2015. Springtime is here, and housing construction is booming. The US Census Bureau’s latest tally for the seasonally-adjusted annualized rate of housing starts in April came in at 1.14 million, up an incredible 20% from the revised March estimate of 944k (sequentially) and up 9% from the April 2014 rate (year-over-year). That’s some nice expansion, to say the least. Our long-held indirect plays on the US housing recovery have been a couple of ETFs, which focus on an improving consumer credit environment and incremental loan growth from the depths of the Financial Crisis. The two ETFs can be found in the Best Ideas Newsletter portfolio, and we continue to believe that they
Apple and World Domination?
May 19, 2015
Everybody wants to love Apple (AAPL), except those that don’t own it. If you don’t own it, don’t sweat it. We still very much like the company, but there are a number of other companies where we can certainly find common ground. Our cost basis on Apple is but a fraction of where it is trading, and we’re still happy with the latest transaction from the July 24, 2013, email transaction alert when the company was added to the Dividend Growth Newsletter portfolio and when the existing position in the Best Ideas Newsletter portfolio was increased. To us, Apple is not so much a technology company, as it is levered to the ongoing strength toward consumer mobilization, which is inevitable.
The Invincible S&P 500?
May 14, 2015
This is the performance of the S&P 500 (SPY) since the March 2009 panic bottom. It’s incredible, to say the least. US stocks, as measured by the S&P 500 have more than tripled since the doldrums of the Financial Crisis, and for those of us that lived and breathed the markets during every day of the Financial Crisis, the lack of volatility and the ongoing, steady advance seemingly month after month during the past 6-plus years have been incredibly peculiar–and perhaps contradictorily–less-than-comforting. Any market that sets prices on the buying and selling behavior of a wide-variety of participants with differing views shouldn’t be so coordinated and one directional. It seems unnatural, or at the very least, unusual. While others are
Turnaround Plan at McDonald’s Does Not Fly With Franchisees
May 12, 2015
Image Source: Mike Mozart Things haven’t been going well at McDonald’s (MCD), and they might not get better anytime soon. McDonald’s initial turnaround plan, released May 4, left a great deal to be desired. Though the major points of the plan seem to be improvements, there was a lack of detail about how to fix the restaurant’s menu issues while improving service speeds, two major areas of concern we have with the fast-food giant. Nevertheless, management is confident that its efforts will return the company to an industry leader, as it works toward its goals as a modern, progressive burger company. We’re not so sure. Starting on July 1, the firm’s organizational structure will be revamped. It will group the
The Continued Rise of Pizza and How to Play It
May 10, 2015
Image Source: Blaze The pizza industry is flat-out sizzling! Or is it stuffed? Call it how you want, but pizza is hot! Literally, and well, figuratively. There are some pretty interesting statistics about pizza. Here are a few from the latest Pizza Industry Analysis at Franchise Help: Americans eat on average 100 acres of pizza daily or 350 slices per second. In addition, 93 percent of Americans eat at least one pizza per month, easily making pizza the number one dinner choice in the United States. With such mass appeal, it is no surprise that this $40 billion industry (measured by sales per year) makes up approximately 17 percent of all restaurants in the nation…there are approximately 65,000 pizzerias in
Alibaba Shines in Calendar First Quarter
May 9, 2015
Why are we talking about Alibaba (BABA)? First, for investors looking for opportunities outside of the US, Alibaba should certainly be on the list, one that should also include former Best Ideas Newsletter portfolio holding Baidu (BIDU)—two companies that are tied to the secular growth of e-commerce in China. Valuentum covers a broad swath of non-US companies from China, Europe, Australia, Brazil, Canada, and beyond. Our international coverage continues to expand every day. Second, Alibaba is currently a holding in the Best Ideas Newsletter portfolio. Our team passionately follows ideas we add to the newsletter portfolios and provides updates when warranted. You can read about the tremendous track record of ideas added to the Best Ideas Newsletter portfolio in the
Priceline Sets Up for Second-Quarter Beat
May 8, 2015
Priceline.com (PCLN) is a 1.8% weighting in the Best Ideas Newsletter portfolio. The global online hotel reservation leader turned heads when it reported first-quarter results May 7, but it was Priceline.com’s conservative outlook that traders decided to focus on instead. Frankly, we’re not too concerned with the company’s “soft” second-quarter guidance, and we point to significant fundamental outperformance in the first quarter as to why. We’re not going to punish the company for being conservative in the midst of significantly volatile foreign-exchange conditions. First-quarter gross travel bookings at Priceline.com advanced 26% on a constant-currency basis and 12% on a reported basis year-over year. That’s not bad, especially since management had guided to growth in the range of 2%-9% for the
