No Interest Rate Hikes Soon, As Expected
February 19, 2015
It wasn’t surprising to read in the FOMC minutes that the Federal Reserve is in no hurry to increase the federal funds rate. The prices of almost every commodity from crude oil and refined energy products to iron ore and copper have fallen sharply in recent months, and the strengthening of the US dollar has only accelerated the declines of dollar-denominated commodities for US-centric operators. While we remain encouraged by the ongoing recovery in the construction and housing markets, pockets of weakness remain, and housing prices have yet to fully recover to pre-crisis levels in many parts of the country. Food prices are dropping, too – can you believe that 10 chicken nuggets at Burger King (QSR) cost a measly $1.49? There
Dividend Increases for the Week Ending February 13
February 16, 2015
Below we provide a list of firms that raised their dividends during the week ending February 13. 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 Allegion (ALLE): now $0.10 per share quarterly dividend, was $0.08. Auburn National (AUBN): now $0.22 per share quarterly dividend, was $0.215. Cisco (CSCO): now $0.21 per share quarterly dividend, was $0.19. Coca-Cola Enterprises (CCE): now $0.28 per share quarterly dividend, was $0.25. Compass Minerals (CMP): now $0.66 per share quarterly dividend, was $0.60. Dominion Resources (D): now $0.6475 per share quarterly dividend, was $0.60. Excel Trust
What Was Once Resistance Is Now Support
February 13, 2015
The S&P 500 (SPY) hit another new high February 13 after basing for much of the past few months. What once was resistance is now support. We find the resilience of the equity markets almost hard-to-believe. Geopolitical uncertainty, threats of an interest rate hike, foreign currency headwinds, slowing growth in the US and China, damage across the energy sector (XLE) and many other commodities, and the list goes on and on… Yet, the broader equity markets continue to notch new highs…this time on news of a whopping 0.3% growth in the Eurozone economy for the fourth quarter. Yes, you read that correctly: 30 basis points, three tenths of one percent, of expansion in a quarter that’s already in the past.
Is Apple Worth More Than $200 Per Share?
February 12, 2015
Possibly. But we do think Apple’s stock is cheap. $727 billion. $727,000,000,000. That’s Apple’s (AAPL) market capitalization as of the close of business February 11. It’s hard to put such a huge number into perspective, but it amounts to roughly the market caps of the next two largest companies on the US market, Exxon Mobil (XOM) and Microsoft (MSFT), combined. From our perspective, Apple is finally getting credit for its sprawling and near-impenetrable ecosystem and dominance in converging technologies from the iPhone to the iPad to wearable devices. In his latest open letter that’s making headlines, Carl Icahn upped his fair value estimate of Apple to $216 from $203 due in part to higher-than-previously-forecast earnings estimates for the current fiscal
$20 Oil Prices…For Real? Investors Drinking Too Much Coke?
February 10, 2015
I had to do a double take. Citigroup’s commodities research department issued a warning that crude oil prices (USO) could plunge to $20 per barrel “for a while.” They believe this time is different. Pointing to an oversupplied market and full storage tanks, the research outfit believes shale-oil in the US has changed the game and may sound the death knell for the cartel. We haven’t seen $20 crude oil prices since the 1990s, and even then, only for a short period of time. This is a big call. Our view, however, is that OPEC remains as powerful as ever. The fact that crude oil prices have reacted so negatively to the cartel’s commitment to producing regardless of the price
Big Buy Backs from Two Dividend Growth Portfolio Holdings
February 9, 2015
Triple-A rated Microsoft and Hasbro are turning up the gears in buying back stock. Following what can best be described as a difficult quarter, Microsoft (MSFT) is stepping up its game in buying back its own undervalued stock. Before the end of 2016, the software giant plans to put to work the $31 billion remaining on its share repurchase program. To help it do so, the company is selling $7+ billion in debt, and the timing couldn’t be better. Shares of Microsoft are hovering just over $40 each, and with our fair value pegged in the mid-$50s, levering up the company via buying its own underpriced stock makes a lot of sense. The financial team at Microsoft is creating significant
Dividend Increases/Decreases for the Week Ending February 6
February 8, 2015
Below we provide a list of firms that raised/lowered their dividends during the week ending February 6. 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 Armada Hoffler Properties (AHH): now $0.17 per share quarterly dividend, was $0.16. Artisan Partners (APAM): now $0.60 per share quarterly dividend, was $0.55. Assured Guaranty (AGO): now $0.12 per share quarterly dividend, was $0.11. Avista (AVA): now $0.33 per share quarterly dividend, was $0.3175. BCE (BCE): now C$0.65 per share quarterly dividend, wasC$0.62. Bemis (BMS): now $0.28 per share annual dividend, was $0.27. Brookfield Renewable Energy
Speculative Euphoria Is Fading
February 8, 2015
Alibaba (BABA) is trying our patience. The company’s performance through the first nine months of its fiscal 2015 has been solid. Revenue advanced 45% year-over-year, non-GAAP EBITDA margins were nearly 60% and adjusted free cash flow came in at ~$5 billion. Yes, that’s right – free cash flow of $5 billion, and we don’t give the company credit for changes in its loan receivables in that mark. Disappointing? Hardly. Alibaba’s EBITDA increase in its most recently-reported quarter of 34%, to $2.43 billion, was better than expectations calling for ~24% growth. In our opinion, earnings matter – and Alibaba’s were good! The company’s shares, however, have fallen into the mid-$80s from ~$120 per share, and I fear that if they break
A Meaningful Rate Hike? No Way
February 7, 2015
Inflation? What inflation? Crude oil prices have been cut in half, iron ore prices have absolutely been pummeled, copper has seen better days, and the last time I checked the value of my house, it is still not up to the price I bought at. What inflation, I say? For those that may not be familiar with the so-called dual mandate of the Fed, here it is: “The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”
