Quick Take: Intel’s Fourth-Quarter Results
January 15, 2015
Guess which stock was the best performer in the Dow during 2014 and a holding in the Best Ideas portfolio? Yep, that’s right: Intel (INTC). The company finished 2014 up more than 40%! The chip giant reported solid fourth-quarter results January 15, beating expectations on both the top and bottom line. The key word in the press release: record. Intel put up record full-year revenue and fourth-quarter revenue and record chip shipments that go into PCs, servers, tablets, phones and Internet of Things. The company is seemingly doing everything right, as it pleases dividend growth investors. On an annual basis, all key financial metrics advanced nicely. Image Source: Intel Management commentary was also encouraging: “We met or exceeded several important
Your “Consider Selling” List
January 15, 2015
Let’s put in this way. The markets look vulnerable. We failed to put in a new high during the latest market advance, and it’s very likely that we’re setting the stage for a multi-month downtrend. Please don’t be silly and panic though! The goals of investing are to achieve long-term goals, not for one’s picks to go straight up. Sticking with your long-term plan, however, does not mean “buy and pray” that things will work out. Here’s what I want you to do right now. Go through each one of your holdings and evaluate their net balance sheet position (i.e. subtract the firm’s total debt from its cash positon). If the firm’s net debt position is massive relative to its
Reiterating Our $20 Per Share Fair Value Estimate on Ford
January 15, 2015
Ford (F) has been in the news quite a bit as of late. On January 8, we learned that Ford’s sales in China rose an impressive 19% to 1.114 million vehicles in 2014. As followers have come to expect, the automaker is executing well and gaining ground in the country, a central part of our thesis. That same day we also received word that Ford raised its dividend 20%, to $0.15 per share on a quarterly basis. That’s nearly a 4% annual dividend yield based on current prices! Though the firm’s dividend is not as safe as those in the Dividend Growth portfolio on the basis of its Dividend Cushion ratio, we do view the dividend as icing on the cake with respect to Ford’s overall investment thesis. On
Recent Illustration of Philosophy in Oil Equities
January 15, 2015
Those that apply the Valuentum framework are less likely to be involved in value or income traps because, among other variables, they demand material revenue and earnings growth for firms to earn a 10 on the Valuentum Buying Index. Value and income traps often occur as a result of secular declines in a firm’s products or services, resulting in deteriorating revenue and earnings trends (and a falling stock price). Value and income traps can also result from abrupt cyclical shocks that cause vast shifts in a company’s future free cash flows, or that which happened to firms such as Seadrill (SDRL) and Linn Energy (LINE). Users of the Valuentum approach are less likely to be exposed to these “falling knives”
RadioShack Files, Blackberry Flies Then Denies
January 15, 2015
The end is nigh for RadioShack (RSH). After years and years on its path toward obsolescence, RadioShack may be finally throwing in the towel. The Wall Street Journal reported January 14 that the electronic gadget store that shares its name with the technology of yesteryear is prepping for a bankruptcy filing as early as February. The penny stock once traded north of $20 as recently as a few years ago, and forever, Radio Shack will be an excellent example of why share buybacks aren’t always a good thing. Should RadioShack sign the bottom line sealing its fate, there are a few things that could happen with the equity. The first is obvious. RadioShack’s equity will be cancelled at the end
BHP or Rio Tinto? Is That the Right Question?
January 14, 2015
Dr. Copper is speaking, and we don’t like what he’s saying. For those long-tenured market participants, a look at the copper markets (JJC, CPER, CUPM) generally provides insight into the health of the global economy. Copper is used in just about everything related to construction and manufacturing, and the price of the metal signals the relationship between its supply and demand. A strong copper price, therefore, indicates that demand for the metal is healthy, and that in most cases and by extension, the general economy is healthy as well. What we are witnessing in the copper markets, however, is something else, and on a high level, no different than the shellacking the crude oil markets have been experiencing in recent
Alcoa Kicks Off Fourth Quarter Earnings Season
January 13, 2015
Would we ever considering owning Alcoa (AA) near a cyclical peak in economic demand, roughly 5-7 years into one of the strongest stock-market recoveries in history, or said differently, in the current environment? The short answer is: No. Market veterans know that the time to consider buying Alcoa is at a cyclical trough, not at peaks, and only then if there is no tangible risk of default. Alcoa may not be as much of an economic bellwether as it once was when the US was a much larger manufacturer of goods, but the aluminum giant is still relevant in assessing underlying demand trends in various end markets across the globe. The lightweight metal producer finds its way into just about
Dividend Increases for the Week Ending January 9
January 12, 2015
Below we provide a list of firms that raised their dividends during the week ending January 9. 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 ADT (ADT): now $0.21 per share quarterly dividend, was $0.20. BP Prudhoe Bay Royalty Trust (BPT): now $2.69 per share quarterly dividend, was $2.03. DDR (DDR): now $0.1725 per share quarterly dividend, was $0.155. Ford (F): now $0.15 per share quarterly dividend, was $0.125. Nordic American Tankers (NAT): now $0.22 per share quarterly dividend, was $0.14. Plains All American Pipeline (PAA): now $0.675 per share quarterly
Reiterating Our $100 Per Share Valuation of Facebook
January 8, 2015
Summary: We think Facebook has just scratched the surface of its earnings potential. Let’s address the potential for a single stock bubble in Facebook, the company’s most recent results, and why we think it garners a very attractive Economic Castle rating. We value shares of Facebook at $100 each, implying roughly 25% upside based on the firm’s most recent closing price. ———- “Intrinsic value represents the conclusion to any and all stock research: What is the company worth? DCF valuation captures the expectations of a firm’s competitive advantages, growth prospects, strategic endeavors, and any other qualitative factor. No other process does this. Putting to numbers a plethora of advanced fundamental items in arriving at a fair value estimate is the
4 Opportunistic Stocks To Consider Buying in 2015
January 5, 2015
The Valuentum Buying Index (VBI) is a philosophy that considers the valuation of a company and the likelihood that a company’s stock will converge to a cash-flow derived fair value estimate. The VBI accepts the view that value is based on the sum of a company’s future expected discounted free cash flows and the excess cash on its balance sheet, while acknowledging that market participants must eventually agree with a firm’s underpricing (and buy the stock) in order to drive the stock’s price to fair value. An underpriced stock with no buying support is not poised to generate good returns, nor is an overpriced stock with good momentum as it will eventually succumb to panic selling once euphoria fades. Stocks
