EXCLUSIVE ALERT: Addressing Kinder Morgan Energy Partners and the MLPs in General
February 28, 2014
There’s one thing for sure about Valuentum: as a member, you get the truth, the whole truth, and nothing but the truth. That’s why our members love us! We’re completely independent and completely tied to your best financial interests. You know we’ve never been shy about outlining the risks related to MLPs – for one, you don’t have to look far to see this warning (source) on the front page of every one of their 16-page reports (at the bottom): Firms in the oil and gas pipeline industry own or operate thousands of miles of pipelines and terminals—assets that are nearly impossible/uneconomical to replicate. Most companies act as a toll road and receive a fee for transporting natural gas, crude
The Twilight Zone: JC Penney and Best Buy Report Better-Than-Feared Performance
February 27, 2014
Shares of JC Penney (JCP) and Best Buy (BBY) are currently engaging in a classic “dead cat bounce” with the equity prices of both firms experiencing modest appreciation after reporting their respective fourth-quarter results recently. JC Penney is trading just over $7 per share, down from about $70 per share in 2007, while Best Buy is hovering at about $27 per share, down from more than $40 per share, a level achieved only a few months ago. We continue to believe both companies are far from healthy. What’s the news that has JC Penney’s shares spiking to $7 and change? The firm reported a loss per share of $0.68 in its fourth-quarter report, released February 26, beating estimates that had
The Valuentum Buying Index Doesn’t Disappoint: Highest-Rated Baidu Reports
February 27, 2014
Article updated to reflect pricing open. We’re still navigating through a rough patch in growing the outperformance of the Best Ideas portfolio, but we were very pleased to see continued validation of the efficacy of the Valuentum Buying Index, our stock-selection methodology, with Best Ideas portfolio holding Baidu (BIDU) reporting excellent fourth-quarter results after the market close Wednesday. Chinese Internet search giant Baidu is one of the top-rated firms registering a pristine 10 on the Valuentum Buying Index and one of the latest inclusions to the Best Ideas portfolio, added August 1, 2013 (view email transaction alert archive here). Shares were trading at $133.60 at the time of the alert, representing more than a 30% move in just the past
Carl Icahn Keeps Pressure on eBay’s Board; Shares Continue to Rally
February 26, 2014
On Wednesday, activist-investor Carl Icahn issued another open letter to shareholders of eBay (EBAY) following the company’s response to his original open letter here. We’ve reproduced the most recent letter below. Though the likelihood and/or timing of an eBay-PayPal split is highly uncertain at this juncture (his proposal), Icahn’s pressure on eBay’s board is bringing to light the significant underpricing of eBay on a sum-of-the-parts basis (as reflected in the 16-page report), in our view. From a shareholder standpoint, the latter may be equally as important as the former, as it will inevitably result in share-price appreciation. We continue to believe that eBay is worth $78 per share, and we expect the company’s shares to converge to those levels. Here
First Solar Disappoints
February 26, 2014
The solar industry is extremely competitive and continually evolving as constituents strive to differentiate themselves to better compete within the broader electric power industry. Significant price reductions (per watt), reduced margins, and drastic market share shifts have become commonplace for participants. Profitability can be negatively impacted from government subsidies and sovereign capital that allow firms to operate unprofitably for extended periods of time. Production overcapacity is another major concern and will likely persist for some time. We think the structure of the solar industry is very poor, and First Solar reminded us of this when it reported fourth-quarter results Tuesday. The leading global provider of photovoltaic (PV) solar energy solutions reported revenue in the fourth quarter that declined nearly $500
Seadrill’s 10%+ Annual Dividend Yield Is a Long-term Fantasy
February 25, 2014
As many investors know, firms can often become cheap for good reasons. That is, they are not trading cheaply because of Mr. Market’s irrational behavior, but instead are trading at depressed levels due to deteriorating underlying fundamental characteristics that actually justify its current share price, even if traditional valuation techniques (such as P/E multiple analysis) suggest the firm’s shares are inexpensive. On a similar note, firms that boast high dividend yields may do so because the market has little confidence in the sustainability of its dividend and believes a cut may be just around the corner. Though we fall short of saying that offshore deep-water drilling company Seadrill (SDRL) will slash its dividend tomorrow, our dividend-cut predictive indicator—the Valuentum Dividend
Home Depot Posts Solid Fourth Quarter Results, Hikes Dividend
February 25, 2014
The world’s largest home improvement retailer reported solid fourth quarter results Tuesday. Comparable store sales advanced 4.4% in the period, while comp sales for US stores jumped 4.9%. Adjusting for the extra week in the same quarter a year ago, net earnings jumped nearly 20% in the fourth quarter, a very impressive showing. 2013 marked the company’s strongest comparable store sales growth in 14 years thanks in part to solid execution and a recovering housing market. Free cash flow for the year totaled $6.2 billion, about 7.9% of sales and up from $5.7 billion last year. Thanks to the strong cash flow performance, Home Depot increased its quarterly dividend to $0.47 per share ($1.88 per share on an annual basis, representing
Carl Icahn’s Open Letter to eBay Shareholders Sends Stock Higher
February 24, 2014
On Monday, eBay (EBAY) responded to Carl Icahn’s open letter to shareholders. We have provided Carl Icahn’s open letter to eBay shareholders and a link to eBay’s response below. We like the byproduct of Carl Icahn is pushing the company to separate its PayPal unit from its legacy auction website: it forces the market to value eBay on a sum-of-the-parts basis, the value of which we believe to be significantly higher than its current price. We continue to hold shares of eBay in the portfolio of the Best Ideas Newsletter. Shares of eBay are worth $78 each, offering investors material upside. Here is Carl Icahn’s proposal to eBay shareholders (source): —————————————————- Dear Fellow eBay Stockholders, We have recently accumulated a
Surveying Recent M&A Action
February 24, 2014
The environment for merger and acquisition (M&A) activity has arguably never been better thanks to healthy balance sheets, historically low interest rates, and equity prices that speak of optimistic times. Just in the past few weeks, we’ve witnessed a number of deals come to the fore. Let’s take a look at a few of these deals and offer our quick take on the transaction. Healthcare Actavis (ACT) – Forest Labs (FRX) DUBLIN, Ireland and NEW YORK, Feb. 18, 2014 /PRNewswire/ — Actavis plc (NYSE: ACT) and Forest Laboratories, Inc. (NYSE: FRX)…announced that they have entered into a definitive agreement under which Actavis will acquire Forest for a combination of cash and equity valued at approximately $25 billion or $89.48 per
Energy Transfer Partners’ Improved Distribution Coverage Ratio
February 20, 2014
Energy Transfer Partners (ETP) reported solid fourth-quarter results Wednesday. Adjusted EBITDA for the master limited partnership increased $38 million from the same period a year ago, to $986 million. Distributable cash flow attributable to the partners of ETP for the quarter totaled $530 million, up $284 million from the same period a year ago. Though the increases in adjusted EBITDA and distributable cash flow were due in part to acquisitions, we’re very pleased at the significant improvement in the entity’s distribution coverage ratio, which advanced to 1.09x from 0.63x in the same period a year ago. For dividend growth investors, we’re laser-focused on the distribution coverage, as it reveals both the security of the distribution as well as the excess
