The Savvy Strategy of Gilead’s Management
February 4, 2015
Gilead investors’ only thing to fear is fear itself? I never thought I would refer to the first inauguration speech of Great Depression and World War II President Franklin Delano Roosevelt in explaining the situation with Gilead Sciences (GILD), but I just did. The psychology of the markets is perhaps the most difficult to assess, and I can almost feel portfolio managers behind their multi-screen terminals just scratching their heads, saying “Am I missing something?” To them, I say “No, you’re not.” Gilead’s shares are trading at bargain-basement levels, and its fourth-quarter results were stellar. Yet, to their dismay, they will wake up tomorrow to find Gilead’s shares trading lower than the day prior. It is almost as though the
Goodbye Radio Shack, Hello Office Products Behemoth
February 3, 2015
RadioShack will close its doors, while Staples and Office Depot are planning to tie the knot. 3D printing stocks may be in for a world of hurt in 2016, while GM and Ford benefit from strong employment and low gas prices. RadioShack (RSH) has finally defaulted on its debt. The company is reportedly in talks to sell half of its stores to Sprint (S) and close the remainder, should Amazon (AMZN) lose interest. Standard General, the largest shareholder in the archaic electronics retailer holds most all the cards, however, and we’ll soon see whether complete liquidation is in RadioShack’s future in the coming days. The sad reality is that the struggling electronics store chain may only have its real estate
New England Wins!
February 2, 2015
Does that mean we’re doomed in 2015? Don’t be silly. The Super Bowl indicator, which says that if a team from the NFC wins we’re in for a good year, is akin to reading the stars. But the AFC’s Patriots won the big game – so does that mean 2015 will disappoint? Perhaps 2015 will…but certainly not because of the Patriots won the Super Bowl. A person doesn’t have to look much further than the NFC’s New York Giants winning the Super Bowl in 2008 to understand why such things just don’t matter. The dawn of the Financial Crisis that year sent stocks a-tumbling. It’s unfortunate that such things get so much attention because it makes it sound like the
Dividend Increases/Decreases for the Week Ending January 30
February 2, 2015
Let’s take a look at dividend increases/decreases for the week ending January 30.
Wealth or Income? You Decide.
January 31, 2015
I know better than to jump up and down in sheer bliss with the S&P 500 (SPY) basing at 2,000. Frankly, the chart looks toppy and “tired,” and with the ongoing series of lower tops, I wouldn’t be surprised that we break down in the coming weeks. Earnings disappointments have been rampant, and following one of the strongest periods of economic expansion in some time during the third quarter (+5%), the pace of US GDP growth in the fourth quarter barely edged out half of the preceding period’s rate of expansion (+2.6%). But that’s yesterday’s news (well, last year’s really), and what concerns me most is that first-quarter GDP will be quite disappointing, even with the stimulus brought about by
Understanding Amazon’s Uncertain Earnings Leverage
January 30, 2015
Valuentum’s President Brian Nelson talks about the massive earnings leverage in Amazon’s (AMZN) financial model, and why it creates tremendous uncertainty in estimating the company’s intrinsic worth. An excerpt from Part II of Valuentum’s four part investment education workshop. If you cannot see the video, please click here.
Google’s Cash Is Real
January 30, 2015
Which company ended 2014 with total cash of $64.4 billion and short and long-term debt of $5.2 billion? If you read the title, you can probably guess it without much difficulty: Google (GOOG, GOOGL). Focusing purely on beats and misses of accounting earnings-per-share ignores one of the most important financial statements: the balance sheet. Not considering the financial health of a company, and specifically a firm’s net cash position (its total cash less total debt) is similar to ignoring an individual’s savings account and obligations when calculating his/her net worth. It just doesn’t make any sense. Yet, the industry loves throwing multiples on accounting earnings with little regard to a company’s net cash or net debt position. Mr. Market’s love
We’ve Raised Our Fair Value Estimate of Alibaba
January 29, 2015
We have raised our fair value estimate of Chinese e-commerce giant Alibaba (BABA) on account of the firm’s stronger than expected earnings and faster pace of top-line expansion relative to our previous future forecasts. Through the first nine months of its fiscal 2015 (ending March), the company’s revenue has expanded at a 45% year-over-year clip thanks in part to strength in mobile, where sales expanded roughly 5-fold in the calendar fourth quarter. Non-GAAP EBITDA margins were an impressive 58% during the three months ending December 2014, and we expect profit margins to remain robust as expenses are scaled with robust revenue expansion. Through the first nine months of its fiscal 2015, Alibaba has generated RMB35.45 billion ($5.7 billion) and RMB31.4
Pain in Oil Not Likely To Subside Soon; Alibaba Disappoints
January 29, 2015
Just how bad are we drowning in crude oil? Yesterday’s inventory report showed the largest weekly supply increase in over 30 years, since 1982. That’s how bad. Yet, knowing that crude oil prices are driven by supply and demand, pundits continue to be optimistic, perhaps overly so, about the timing of the recovery in the price of the black liquid (USO). Let’s first start with OPEC, and the Secretary-General Abdullah al-Badri, who said Tuesday that oil prices have bottomed as he “warned of a risk of a future price spike to $200 a barrel.” With inventories as they are and OPEC not ceding market share to US shale-based plays, we think the Secretary-General is drinking a bit too much Kool-aid.
Commercial Aerospace Flying High
January 28, 2015
Valuentum’s President Brian Nelson talks about the resiliency of the commercial aircraft making business and the massive backlogs that offer a nice tailwind to the supply chain. Source of Images: Boeing (BA), Randy Tinseth (20-year Current Market Outlook, July 2014). If you cannot see the video, please click here. Aerospace Suppliers: AIR, AIRI, AL, ATRO, COL, HEI, HXL, ISSC, PCP, SPR, TATT, TDY, TXT Airlines – Major: AAL, ALK, DAL, JBLU, LUV, SAVE, UAL
