Realty Income: Portfolio Risks Are Exaggerated
May 4, 2014
Realty Income (O), the ‘Monthly Dividend Company’ is our top choice for income exposure to the real estate investment trust (REIT) industry. Though the REIT may not have the allure of healthcare REITs such as Health Care REIT (HCN) or Omega Healthcare (OHI), which are benefiting from aging-demographic tailwinds, or Digital Realty Trust (DLR), which is tied to data-center proliferation and boasts Facebook (FB) as a top-10 customer, we think many investors are growing more and more cautious on Realty Income’s retail exposure, and it is partly because of this reason that we think an opportunity in shares exists. Said differently, investors aren’t giving Realty Income a fair shake, and we think its retail portfolio risks are exaggerated. First, however,
Dividend Increases for the Week Ending May 2
May 4, 2014
Below we provide a list of firms that raised their dividends during the week ending May 2. 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 Airgas (ARG): now $0.55 per share quarterly dividend, was $0.48. American Campus Communities (ACC): now $0.38 per share quarterly dividend, was $0.36. Ameriprise Financial (AMP): now $0.58 per share quarterly dividend, was $0.52. BB&T Corporation (BBT): now $0.24 per share quarterly dividend, was $0.23. Chevron (CVX): now $1.07 per share quarterly dividend, was $1.00. CorEnergy Infrastructure Trust (CORR): now $0.129 per share quarterly distribution, was $0.125
Teva Pharma: Underpriced and Misunderstood
May 3, 2014
One of the key benefits of using a discounted cash-flow model is that it allows the user to adequately price a variety of businesses, irrespective of where they are in the economic or product cycle or whether they are engaged in a turnaround or reaching peak levels of operating performance. Unlike a forward price-to-earnings (PE) ratio or even a price-earnings-to-growth (PEG) ratio, where near-term performance can cause mis-valuations at times, the DCF allows the user to forecast fundamentals through the course of the business cycle or through the course of the product cycle in order to arrive at mid-cycle profit projections, which remain critical within the framework of intrinsic value estimation. Though Big Pharma continues to steal headlines via Pfizer’s
Valuentum’s May Edition of Its Dividend Growth Newsletter!
May 2, 2014
April Was A Great Month! by Brian Nelson, CFA I’m very excited about this edition of the Dividend Growth Newsletter! For starters, two of the holdings in the Dividend Growth portfolio – Johnson & Johnson (JNJ) and Kinder Morgan Energy Partners (KMP) – increased their respective payouts since the last update. Kinder Morgan Energy Partners now yields in excess of 7%, while Johnson & Johnson has been such an excellent performer, surpassing $100 per share, that its yield is now just shy of 3% (following the raise). We’re very happy about the pace of income growth from portfolio constituents and expect this to continue. In this edition, we highlight Abbott (ABT), as one of the ideas that we’re hoping to add
Highly-Rated Best Ideas Portfolio Holding DirecTV Catches a Bid
May 1, 2014
At Valuentum, we think companies that are attractive from a variety of different investment perspectives–whether it be growth, value, income, momentum, etc.–have the greatest probability of capital appreciation and relative outperformance. By definition, these stocks, which we call Valuentum stocks, have strong valuation and pricing support coupled with solid revenue/earnings expansion potential and, where applicable, strong dividend growth prospects. We accept the technical market dynamic that the more deep-pocketed institutional investors that are interested in a stock for reasons based on their respective investment mandates (or preferences), the more likely it will be bought and the more likely the price will move higher to converge to its true cash-flow-derived intrinsic value (the action of buying a stock pushes its price
Earnings from 3 Internet Giants: eBay, Facebook, and Twitter
April 30, 2014
By Brian Nelson, CFA We often receive questions about our methodology. For our new members, the Valuentum style has three distinct components: a discounted cash flow assessment (intrinsic value calculation), a relative valuation assessment, and a timeliness assessment. We’ll focus on the first pillar in this article. The Valuentum process is grounded in financial statement analysis, where our analyst team derives the ValueCreation, ValueRisk, and ValueTrend ratings of a company. Together, these ratings provide a quantitative and objective assessment of the strength of a firm’s competitive advantages, or in Warren Buffet’s terminology, the firm’s economic moat. To derive the ValueCreation rating of each company, the Valuentum team compares a company’s return on invested capital (ROIC) to its estimate of its
Earnings from 8 Interesting Ideas
April 29, 2014
By Brian Nelson, CFA “’I believe you have to be willing to be misunderstood if you’re going to innovate.’ You can’t outperform the market if you are the market. Similarly, you must adopt a non-consensus view and be right about that view to beat competitors.” CEO of Amazon Jeff Bezos with ‘Source: 25iq’ commentary Many members have expressed to me that they just can’t believe investors select stocks in a different way than the Valuentum style (absent dividend growth investors, which have carved out a unique niche in their own right). Some of our new members think the Valuentum process is the principal and dominant framework for investing – or how the majority of investors look at things. This view
Pounding the Table on Apple’s Shares…Again
April 28, 2014
Apple (AAPL) is a top weighting in both the Best Ideas portfolio and Dividend Growth portfolio. Need we say more? The company announced today that it is making preparations for a hefty bond sale to fund its stock repurchase program, a move that is driving the company’s shares to ‘break out’ (more info). The company looks poised for rapid price-to-fair value convergence. We think Apple is worth more than $700 per share on a split-unadjusted basis (more than $100 per share after the impending 7-for-1 split). The firm’s 16-page report and dividend report have now been updated to reflect its improving technical/momentum considerations and recent dividend increase. Shown below is how the Valuentum Buying Index helped us time our entry
Dividend Increases for the Week Ending April 25
April 28, 2014
Below we provide a list of firms that raised their dividends during the week ending April 11. 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 1st Source Corp (SRCE): now $0.18 per share quarterly dividend, was $0.17. Altra Holdings (AIMC): now $0.12 per share quarterly dividend, was $0.10. Apple (AAPL): now $3.29 per share quarterly dividend, was $3.05. Aspen Insurance Holdings (AHL): now $0.20 per share quarterly dividend, was $0.18. Avery Dennison (AVY): now $0.35 per share quarterly dividend, was $0.29. BCB Bancorp (BCBP): now $0.14 per share quarterly dividend, was
Baidu’s Internet Presence in China Is Phenomenal
April 25, 2014
By Brian Nelson, CFA With a population of over 1.3 billion people, more than 4 times the population of the US, China is flush with opportunities. We at Valuentum think one of the greatest long-term investment opportunities in the country has to do with ongoing Internet penetration, specifically related to search engine use and technology. Baidu (BIDU) is at the forefront of increased Internet penetration in China, and its recent results have showed fantastic sales expansion. For example, the firm noted that total revenue advanced nearly 60% in its most recently-reported first quarter from the corresponding period in 2013. For me, the relationship with Baidu goes back almost ten years when I worked at a buyside firm that was lucky to
