Third Quarter Earnings Season Pushes Forward
November 6, 2014
The equity markets continue to propel higher despite what we would describe to be a mixed third-quarter earnings season. Let’s walk through a number of earnings reports from popular companies reporting so far this week. Some of them we include in the newsletter portfolios. Others we don’t. But all are worth keeping tabs on. Annaly (NLY) Annaly is a mortgage REIT (mREIT) with principal business objective to generate net income for distribution to shareholders. Being critical of the mREIT business is certainly unpopular, and we understand that many retirees generate vital income streams from such investments. Bulls and bears, however, both benefit from our independent voice, and we call out risks as we see them. Annaly and American Capital Agency
Sprint Falls Back Down to Under $5 Per Share
November 6, 2014
To us, there really never was an investment case for Sprint (S). Let us explain. In investing, the “capital stack” represents the firm’s capital structure, beginning with net debt at the bottom and moving up to equity at the top. In order for any firm to have any equity value, the present value of its risk-adjusted future free cash flows must sum to a value greater than its net debt. The hypothetical firm shown below in the image has equity value because the present value of its risk-adjusted future free cash flows is greater than the sum of its net debt. At Valuentum, we spend most of our time paying attention to the firm’s regulatory filings. In Sprint’s most recent
Alibaba Still Has Upside to $125+ Per Share
November 5, 2014
Warren Buffett (BRK.A, BRK.B) hasn’t bought an initial public offering (IPO) in fifty years. The Oracle of Omaha has often said that IPOs are almost always bad investments, which may often be the case. Such a view is great guidance for new and inexperienced investors, but the key word of emphasis in his view is ‘almost.’ Some IPOs are, in fact, worth looking into. Remember: an asset in any form can be mispriced, whether it is a house, rental car, piece of equipment, secondary stock sale, and yes, even an IPO. An asset’s value in any and all cases will be the present value of risk-adjusted future free cash flows after accounting for the current balance sheet net cash/debt position
AIG Still Our Best Idea in Insurance
November 4, 2014
Members know that we’re not fans of the investment prospects of the insurance industry, but they also know that we have liked American International Group (AIG) for some time. We were saying that shares were attractive as early as November 2012, and we reiterated the opinion that AIG was our favorite idea in the insurance industry in November 2013. Today, the company registers a 9 on the Valuentum Buying Index, and . Shares closed at $53.80 each yesterday. AIG reported excellent third-quarter results that revealed outperformance relative to expectations on both the top and bottom lines. Third-quarter after-tax operating income advanced 23% to $1.7 billion, or $1.21 per diluted share (up from $0.96 in the year-ago period). AIG noted that
Apple: “We’ve Got a New Watch Launch Coming in the Spring”
November 3, 2014
News leaked that the new Apple Watch will launch in the spring, an update from previous expectations of “early 2015.” Though the news is a bit inconsequential, it has shares of the Best Ideas portfolio and Dividend Growth portfolio holding approaching $110 each. To continue reading >>
How About Teva Pharmaceuticals?
November 3, 2014
We care very much about our members. We listen to every comment. We read every email. We take everything to heart. We know we’re not supposed to, but we can’t help but be passionate about our work. We strive for your success, and we take failure personally. There are some investors that want our best ideas to work out yesterday. That’s just not going to happen. Aside from yesterday being in the past, our best ideas tend to work out over a 12-24 month time period. This is a reasonable time period to expect price-to-fair-value convergence on stocks with good momentum. From our experience, this is the time period in which the Valuentum process has its greatest efficacy, and no
The November Edition of the Dividend Growth Newsletter!
November 2, 2014
Please download the November edition of the Dividend Growth Newsletter .
Dividend Increases for the Week Ending October 31
November 1, 2014
Below we provide a list of firms that raised their dividends during the week ending October 31. 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 Access Midstream Partners (ACMP): now $0.615 per share quarterly distribution, was $0.5950. AFLAC (AFL): now $0.39 per share quarterly dividend, was $0.37. Allison Transmission (ALSN): now $0.15 per share quarterly dividend, was $0.12. Associated Banc (ASBC): now $0.10 per share quarterly dividend, was $0.09. Atlas Energy (ATLS): now $0.52 per share quarterly distribution, was $0.49. Atlas Pipeline (APL): now $0.64 per share quarterly distribution, was $0.63.
We’re At New Highs Again
October 31, 2014
The taper came and went, and the markets don’t seem to care. The S&P 500 notched yet another high this week. The correction that we warned about came and went as well, almost as if market forces created such an event just to move higher. From my experience, the market, at the present moment, is trading almost purely on technicals. For example, once we touched the 10% official mark of a correction, we started to move higher, and once the markets started to move higher, the move accelerated. Consecutive gap ups following pull-backs have become the norm. This market has become almost a pure technical market, where traders and moving averages are taking precedent over fundamentals. This won’t last forever. The
Nothing Wrong at the Monthly Dividend Company
October 30, 2014
“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” — Warren Buffett One of the most important duties of our team is to keep bad ideas from creeping into your portfolio–bad ideas like American Realty Capital (ARCP). Accounting issues at American Realty Capital have recently cost its stockholders dearly, with the REIT’s shares down 30% from the announcement. Only after the fact did brokerage houses JP Morgan, BMO Capital and Capital One downgrade the REIT’s shares. Even some of the most-read REIT authors on blogs had bought into ARCP’s hype. Not us. Realty Income (O)—nicknamed the Monthly Dividend Company–remains our standout dividend growth REIT pick, and investors have flocked to its shares amid the chaos. Realty Income’s shares
