Intuitive Surgical Soars!
April 1, 2014
…A few years ago, I decided I wasn’t going to take on any more unreasonable, dangerous clients. I had too much responsibility to the households I was taking care of to allow a handful of lunatics distract me or goad me into investing behavior that I knew for a fact was stupid. Anyone who’s been in my line of work has likely reached a similar moment of clarity at some point. Or, at least, they will. A small but vocal minority of wealthy people in this world believe that because they’ve been successful in their career, this success ought to automatically translate to any endeavor they get involved with (think about a retired major league baseball player opening a fine
General Electric and Johnson & Johnson Shed Assets
April 1, 2014
When dividend growth companies shed assets, the proceeds can be used for further dividend expansion. We like this quite a bit. General Electric (GE), a holding in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio, continues to streamline and optimize its portfolio of businesses. We’ve long held the belief that General Electric needs to simplify its business focus, a view that has been supported by its dividend cut in 2009. Global economic conditions and the credit crunch threatened GE Capital (GECC) at the time, and management’s moves since then have been to diversify away from its financial subsidiary. The industrial and finance conglomerate is far healthier than it was at the depths of the Great Recession in 2009, and the
Dividend Increases for the Week Ending March 28
March 30, 2014
Below we provide a list of firms that raised their dividends during the week ending March 28. 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 Air Industries (AIRI): now $0.15 per share quarterly dividend, was $0.125. Banner Corp (BANR): now $0.18 per share quarterly dividend, was $0.15. City Holding Company (CHCO): now $0.40 per share quarterly dividend, was $0.37. DiamondRock Hospitality (DRH): now $0.1025 per share quarterly dividend, was $0.085 JPMorgan Chase & Co. (JPM): now $0.40 per share quarterly dividend, was $0.38. Kayne Anderson Energy (KED): now $0.51 per share
Dish Network May Finally Tie the Knot with DirecTV
March 26, 2014
Though this shouldn’t have come as a surprise to Valuentum members, Bloomberg has reported that Dish Network’s (DISH) CEO Charlie Ergen has approached DirecTV’s (DTV) CEO Mike White about a merger. We have held DirecTV in the Best Ideas portfolio for some time, and here’s what we wrote just over a month ago on February 20: Competition continues to heat up, and Comcast’s (CMCSA) decision to merge with Time Warner Cable (TWC) creates a larger, formidable foe (see details here). However, it also increases the likelihood of a long-anticipated DirecTV-Dish Network tie-up. Though we acknowledge the risks related to a fast-changing industry landscape, our primary thesis on DirecTV is valuation-based. At the time of this writing, we think shares are
Apple’s iPhone 6: The Catalyst to Send Shares to Intrinsic Value
March 24, 2014
We recently published an article on the irrational exuberance exhibited within small capitalization stocks. We think as the hype inevitably comes out of the small capitalization space in coming periods, this “speculative” capital, assuming some of it can cross cap restrictions, will flow into underpriced (yet growth-y) equities with extremely strong fundamentals, companies like portfolio holdings Apple (AAPL) and eBay (EBAY) that have tremendous upside potential. Carl Icahn is working diligently to reveal the significant underpricing of eBay in requesting a spin-off of PayPal to unlock value much like that of Yahoo (YHOO) unlocking value via its initial public offering of Alibaba. Yahoo’s shares have performed wonderfully in the wake of the Alibaba IPO. We think Icahn will inevitably get
Small Capitalization Stocks Officially in Bubble
March 24, 2014
Tulip mania was a period in the 17th century during which prices for tulip bulbs reached irrationally high levels and then collapsed almost overnight. The picture to the right is a tulip, known as “the Viceroy”, as displayed in a Dutch catalog of the time. The picture serves as a reminder to us of the potential madness of crowds, perhaps no better popularized by Charles Mackay’s 1841 book Extraordinary Popular Delusions and the Madness of Crowds, which outlined such behavior: Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last
Software: Adobe Keeps Rolling; Oracle Hit by Venezuela Forex Issues
March 23, 2014
On Thursday, Adobe (ADBE) put up better-than-expected fiscal first-quarter performance and issued a strong outlook, while Oracle’s (ORCL) fiscal third-quarter results faced currency challenges and its forward guidance came in about as expected. Adobe achieved revenue of $1 billion, at the high end of the targeted range (and above consensus), and exited the fiscal first quarter with an impressive 1.84 million paid Creative Cloud subscriptions, an increase of 405,000 on a sequential basis. Adobe Marketing Cloud quarterly revenue jumped 24% during the period, to $267 million, a nice showing. Diluted earnings per share on a non-GAAP basis came in at $0.30, beating the consensus figure by $0.05. The fiscal first-quarter results were solid, but the company’s outlook was even better.
Tiffany and Nike Disappoint in China
March 23, 2014
Valuentum previously outlined the importance of brand strength in its comprehensive piece: “Valuentum’s Comprehensive Report on Retail Brands.” This article will focus on Tiffany’s (TIF) and Nike’s (NKE) performance in the Asia-Pacific, and where applicable, China, a country that we believe is vital for long-term expansion and to support our fair value estimates of both firms. Recent reports have put a damper on the outlook for luxury spending in China during 2014. Though the outlook is consistent with data points we’ve received with respect to slowing, but still robust, economic expansion in China, the commentary is worth nothing: Wealthy Chinese are likely to buy fewer luxury goods again this year after the steepest cut-back on spending in at least five
Only One Bank Fails Fed’s Stress Test
March 23, 2014
The banking industry is based almost entirely on the confidence of intermediaries and counterparties that make up the building blocks of the financial system. An investment in a bank or money center must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Though we don’t expect one anytime soon, it’s worth noting that there have been three significant banking crises during the past three decades alone: the savings and loan crisis of the late 1980s/early 1990s; the fall of Long-Term Capital Management and the Russian/Asian financial crisis of the late 1990s; and the Great Recession of the last decade that not only toppled Lehman Brothers, Bear Stearns, Washington Mutual,
Baidu Dollars Likely Shifting to Alibaba Near Term; Raising Our Fair Value of Yahoo
March 23, 2014
Valuentum previewed the valuation of Chinese e-commerce giant Alibaba in October 2013. Today, we’ve updated our analysis of the company in the table below and have raised our intrinsic value estimate to approximately $100 billion from $75 billion previously. This revision has had a relatively large per-share upward re-valuation of the shares of 24%-owner Yahoo (YHOO) in its 16-page report. Softbank, which owns more than 35% of Alibaba, will also see a more optimistic slant towards its own valuation in coming periods. Our updated valuation details of Alibaba are shown below. The previous table had a typo regarding the long-term growth rate of the perpetuity calculation, which has been corrected in the table above. Though we think our forecasts are
