Wow…Nike. Wow. Innovation Brews Growth.
September 28, 2014
Home to some of the strongest brands on the planet, Nike (NKE) is simply a fantastic company. Brand value is quantifiable through the company’s ability to monetize it in the form of future free cash flows, but while the company’s future free cash flows don’t justify scooping up shares at present levels of ~$90 per share, fundamentals at the company have never been stronger. Nike’s fiscal 2015 first quarter results, released September 25, were nothing short of impressive. Revenue jumped 15%, while diluted earnings per share leapt 27% during the period. A shift in mix to higher-margin products, higher average selling prices and continued growth in its higher-margin direct-to-consumer business drove the firm’s gross margin higher. A lower tax rate
Starboard and Yahoo
September 28, 2014
The Marissa Mayer hype has been exciting and refreshing. But with Mayer and the executive suite having done little to turn around the core operations of Yahoo (YHOO), and more recently snubbing talks about tying the knot with AOL (AOL), the time may be ripe for a shakeup. Activist investor and investment management firm Starboard Value thinks so. In an open letter to Mayer and the board of directors of Yahoo, Starboard Value announced that it has acquired a significant ownership stake in the beleaguered, and once-relevant, Internet portal. Starboard outlined a case for Yahoo to monetize the company’s non-core minority equity investments (Alibaba, Yahoo Japan) in a tax-efficient manner and tie-up with AOL, which itself has been on the
Ugly Week Thus Far on Wall Street
September 25, 2014
By Brian Nelson, CFA What does straight up look like, you may ask? Try the S&P 500 (SPY) since the fourth quarter of 2011. Today marked the largest sell-off in stocks since July 31 of this year. The Dow fell 1.5% to 16,952, the S&P 500 dropped 1.6% to 1966.27, and the Nasdaq tumbled 1.9% to 4,456.75. The S&P 500 tripped below its widely-followed 50-day moving average, and the large cap index is now back to levels reached months ago. All 30 Dow components fell during today’s trading session, with only a handful keeping the losses to less than a percent. Did you remember to build an arc like Bill DeShurko? What more does the market have to prove? The
Gaming Troubles: Macau Gaming Revenue Under Pressure
September 24, 2014
Gambling in Macau, the Las Vegas of China or the “Monte Carlo of the Orient,” continues to fall, with September likely marking the fourth consecutive month of declines. According to some estimates, the gaming revenue drop in September will be in the double-digits. There are several issues plaguing Macau and driving uncertainty for many of the operators. Casino City Times perhaps said it best in their piece: Macau mired in cold streak: The mainland Chinese government is on an anti-corruption crusade, which has frightened off some high-end customers. Meanwhile, new visa restrictions implemented by Beijing have slowed visitation from neighboring provinces. A smoking ban on mass-market gaming floors will be implemented Oct. 6, adding uncertainty to revenue trends. Also in
Biggest News of the Day: Hasbro Beats Mattel and Jakks Pacific for Frozen Dolls
September 24, 2014
Mattel (MAT) could have been thought of as a lock to win a new merchandising agreement with Disney (DIS) to sell the princess dolls of Elsa and Anna from the blockbuster animated movie Frozen. After all, Mattel is widely-known for its dominance in the doll category thanks to its Barbie line-up. If not Mattel, surely it would be Jakks Pacific (JAKK), who currently sells a variety of Disney fairies dolls, playsets, dress-up and accessories. But both of these companies lost out to Habro (HAS), which today landed a new strategic merchandising relationship with Disney Consumer Products and Frozen Properties beginning in 2016. We think this news is huge and further supports our valuation and dividend thesis on the Dividend Growth
Don’t Fire Your Stock Picker!
September 24, 2014
2014 has been an interesting year. According to S&P Capital IQ Fund Research, “80% of running large-cap mutual funds have underperformed the S&P 500 in 2014.” The S&P SPDR (SPY) is simply not an easy index to beat, though we’ve been able to do so in the Best Ideas portfolio since inception. To nobody’s surprise, many investors have been lured to indexing thanks in part to the promise of mediocrity. But even for a tried-and true indexer (a Boglehead), it is quite valuable to keep a good stock-picker handy. Think about the boost from just adding a few shares of Best Ideas portfolio holding Apple (AAPL) or Altria (MO), or from completing the round trip in Baidu (BIDU) from buy
Turn Off the TV
September 23, 2014
By Brian Nelson, CFA 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 cornerstone–and the most critical component–of any stock research analysis. Without an in-depth intrinsic-value assessment, research is but a story that has no ending. — Brian Nelson, President, Valuentum Securities, 2011 Having worked on the buyside for a top-performing small-capitalization fund and on the independent/sell-side for a number of years in methodology development and optimization, I can tell you
Merger Activity Has Stepped Up Again as Stock Market Strengthens
September 22, 2014
Let’s bring to your attention the many deals that hit the wires the past couple days. Siemens Announces Agreement to Acquire Dresser-Rand Takeover bid for Dresser-Rand has a total transaction value of $7.6 billion Acquisition strengthens Siemens’ portfolio for oil & gas industry Complementary regional footprint and product portfolio Siemens executes on its Vision 2020 with a decisive move to strengthen its core. The company has entered into an agreement with Dresser-Rand (DRC), which is listed on the New York Stock Exchange, to acquire all of the issued and outstanding common shares of Dresser-Rand by way of a friendly takeover bid. Siemens’ bid is unanimously supported by Dresser-Rand’s Board of Directors. The offer price is $83 per common share in
Question About the September Best Ideas Newsletter
September 22, 2014
Q: I’m curious – how does BWLD go from a Valuentum 6 rating to a 3 with no earnings in the interim and price movement to the downside in the ensuing 30 day period? Was there a calculation error? Thank you for the question. The Valuentum Buying Index is not a step function tool (e.g. the score moves from 3 to 4 to 5). The Valuentum Buying Index considers a discounted cash flow process, a relative valuation process, and a technical/momentum assessment. It has components of both a value-based system and a momentum-based system. Any one of these parameters can influence a change in the rating, so there are a number of variables that can cause a multiple notch move
Dividend Increases/Decreases for the Week Ending September 19
September 22, 2014
Below we provide a list of firms that raised/lowered their dividends during the week ending September 19. 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 Apollo Residential Mortgage (AMTG): now $0.44 per share quarterly dividend, was $0.42. Artesian Resources (ARTNA): now $0.2151 per share quarterly dividend, was $0.2119. Atlantic Tele-Network (ATNI): now $0.29 per share quarterly dividend, was $0.27. Blackstone Mortgage (BXMT): now $0.50 per share quarterly dividend, was $0.48. Covanta (CVA): now $0.25 per share quarterly dividend, was $0.18. Covidien (COV): now $0.36 per share quarterly dividend, was $0.32. Elmer
