Coca-Cola Expanding Its Dominance; SodaStream in Play
August 18, 2014
Coca-Cola (KO) has recently become a savvy asset manager, and we think recent moves speak volumes about the company’s strategy to retain dominance in the non-alcoholic beverage space for decades to come. Coca-Cola’s management is capitalizing on what we’d describe to be the ‘Hidden Advantage‘—something more commonly witnessed in activist dealings in which small initial stakes turn into large gains once news is made public. In February, for example, Coca-Cola scooped up 10% of Green Mountain at $74.98 per share (it subsequently increased its stake to 16%). With shares of Green Mountain (GMCR) now trading at ~$115 each, the deal for just a small portion of Green Mountain looks incredibly savvy—especially in the event Coca-Cola ends up buying Green Mountain
Dividend Increases/Decreases for the Week Ending August 15
August 18, 2014
Below we provide a list of firms that raised/lowered their dividends during the week ending August 15. 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 Briggs & Stratton (BGG): now $0.125 per share quarterly dividend, was $0.12. CAE (CAE): now C$0.07 per share quarterly dividend, was $0.06. Connecticut Water Service (CTWS): now $0.2575 per share quarterly dividend, was $0.2475. General Growth Properties (GGP): now $0.16 per share quarterly dividend, was $0.15. Green Plains Renewable Energy (GPRE): now $0.08 per share quarterly dividend, was $0.04. Home Loan Servicing Solutions (HLSS): now $0.18
Valuentum’s August Edition of Its Best Ideas Newsletter!
August 16, 2014
Please download the August edition of the Best Ideas Newsletter .
Cisco: Not the Best Idea in Big Cap Tech
August 14, 2014
It’s hard not to like Cisco’s (CSCO) strong free cash flow generation, solid cash balance, and dominance in the communications networking market, but fiscal fourth-quarter results (ended July 26), released Wednesday after the close, weren’t great. We continue to prefer Apple (AAPL) in the Best Ideas portfolio and Microsoft (MSFT) in the Dividend Growth portfolio as the large cap technology exposure, among others. The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds each idea from a Valuentum Buying Index rating of a 9 or 10 (consider buying) to a rating of a 1 or 2 (consider selling). The goal of the Best Ideas portfolio is to generate a positive return
Kinder Morgan Grows Leery of MLP Structure; Consolidates Holdings
August 11, 2014
Kinder Morgan is the largest midstream and the fourth-largest energy company (based on combined enterprise value) in North America. The entity owns an interest in or operates ~80,000 miles of pipelines and 180 terminals. The firm’s publicly-traded companies include Kinder Morgan (KMI), Dividend Growth portfolio holding Kinder Morgan Energy Partners (KMP), Kinder Morgan Management (KMR) and El Paso Pipeline (EPB). KMI owns the general partner and limited partner interests in both KMP and EPB. KMP is one of the largest publicly traded pipeline master limited partnerships in America. KMR is a limited liability company and its only significant assets are the partnership units it owns in KMP. EPB is a publicly traded pipeline master limited partnership. — source The convoluted
Rio Tinto Remains One of Our Favorite Ideas for Commodities Exposure
August 9, 2014
Firms in commodities-driven industries are notoriously difficult to value–not only is there execution risk related to their cost structures but the price they receive for the respective commodities that they produce is cyclical—and driven by external factors beyond their individual control. For example, BHP Billiton (BHP) can’t necessarily raise its prices on standard-grade iron-ore at a high-single-digit pace unless the market colludes (others follow along with its price hike). This is unlike a company such as Hershey (HSY) that can hike prices almost at will to offset rising cocoa costs. That’s why commodities firms can only carve out competitive advantages by being the low-cost provider (their prices are set by the marketplace). Though it is more difficult for a commodities-producing
Dividend Increases for the Week Ending August 8
August 9, 2014
Below we provide a list of firms that raised their dividends during the week ending August 8. 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 Alon (ALJ): now $0.10 per share quarterly dividend, was $0.06. Aqua America (WTR): now $0.165 per share quarterly dividend, was $0.152. Arsenal Energy (AEYIF): now $0.07 per share quarterly dividend, was $0.065. Avnet (AVT): now $0.16 per share quarterly dividend, was $0.15. Badger Meter (BMI): now $0.19 per share quarterly dividend, was $0.18. Bank of America (BAC): now $0.05 per share quarterly dividend, was $0.01. Carlisle
Energy Transfer Partners’ Solid Distribution Coverage Ratio
August 9, 2014
By Brian Nelson, CFA We understand that to many dividend growth investors the dividend/distribution isn’t everything–it is the only thing. That’s why we spend a considerable amount of time assessing the health and growth potential of dividends/distributions. To us, a master limited partnership’s (MLP) distribution is inherently risky. One of my former colleagues at Morningstar, Jason Stevens, emphasized in an April 2013 research piece on the group what Valuentum has been telling investors for a while: Another implication of MLP distribution policies that is important to understand is the impact of high distribution payouts on MLPs’ capital spending. Unlike corporations, which can use retained earnings and excess cash for growth purposes, MLPs retain very little of the cash generated each
M&A Environment Cracks: Sprint and Fox
August 6, 2014
One of the most important concepts for any investor to accept is the following: price is different than value. Price is what you pay for shares of a company. Price is driven by buying and selling and the collective monetary-driven outcome of all investors’ opinions. Price can be influenced by dividend payments, news, rumors and other dynamics that influence the buying and selling of stock. Value, on the other, is based purely on future expectations of a company’s entire future free cash flow stream (and the firm’s non-operating, excess net cash on the balance sheet). Value considers a company’s competitive advantages (patents, intellectual property, network effect and the like) and compresses these complex qualitative variables into a future free cash
Big Oil Round Up: Earnings Portal
August 5, 2014
Our take on the major oil and gas space remains little changed as a result of second-quarter results from the majors. We continue to expect rising energy prices over the long haul, and we highly encourage new readers to take a look at our comprehensive outlook for oil and gas prices. Please access it at the following link: ‘Our Comprehensive Outlook for Crude Oil and Natural Gas Prices.’ We have a very unique thesis on the group, and for holders of exploration and production entities, we expect a long-term tailwind in investors’ favor. Generally,it’s difficult not to like many entities in the large oil and gas space. ConocoPhillips continues to execute nicely, while Exxon remains a consistently strong economic-value generator
