What If You Joined Valuentum on January 1, 2013 and Followed Our Transaction Alert Emails…
February 7, 2014
Let’s get this out of the way first: we’re not perfect. Though investors can look at our track record over a longer horizon to great satisfaction, as the Best Ideas portfolio (click here) and Dividend Growth portfolio (click here) are doing quite well for long-time members, what about new members that may have joined recently? How would they have fared by following our transaction alert emails? Would they have made money on our ideas? Before we answer these questions, let’s walk through a few ways members use our services. Many like to replicate the actively-managed portfolios that are housed in the monthly newsletters in their personal accounts in their entirety. Others like to use our transaction alert emails for incremental
Nelson Says Be Prepared: Almost Everything Points to a Return to 1670 on the S&P 500 by the End of 2014
February 6, 2014
Executive Summary: Investors should be cognizant that the recent pullback in the S&P 500 from all-time highs has been minimal in the context of the broader equity market performance in recent years. A fundamental, valuation-driven analysis suggests the S&P could correct to 1670, and a technical-driven analysis indicates a return to a similar level. Coincidence? Perhaps. But when most investors are expecting the same thing in the stock market, the stock market is usually quick to reflect the collective view of its participants (the Valuentum framework). The S&P 500 is trading at roughly 1750 at present, and we wouldn’t think anything of another 5% fall from current levels. By Brian Nelson The equity markets have certainly had a very nice
Altria’s Long-term Dividend Growth Remains Intact
February 5, 2014
Altria (MO) followed up decent fourth-quarter earnings (click here), released January 30, with the announcement that it will acquire the e-vapor business of Green Smoke February 3 (click here). Though the move is immaterial to our valuation of the firm at this time, we like that Altria continues to focus on the long-term (the growth of e-cigarettes) as it delivers solid dividend growth to investors. Altria’s fourth-quarter results showed decent 3.6% adjusted earnings expansion, to $0.57 per share, and the company guided 2014 full-year adjusted diluted earnings per share to be in the range of $2.52-$2.59, representing a growth rate of 6%-9% from an adjusted diluted EPS base of $2.38 in 2013. We think Moody’s updated credit opinion on Altria sums
AT&T Is Not a Position in Valuentum’s Dividend Growth Portfolio
February 4, 2014
Sometimes it’s difficult to entertain a variant perspective on a tried-and-true investment. But that’s what we think investors should do when they think about AT&T’s dividend growth potential. AT&T’s Valuentum Dividend Cushion score is below 1 (meaning that the sum of our expectations of the company’s future dividend payments and existing debt balance overwhelms the sum of its future expected free cash flow and existing cash balance). We don’t expect this telecom bellwether to cut its dividend anytime soon (especially given its shareholder base, which comprises mostly of investors holding shares for the dividend payment), but we think there are many other more attractive places for long-term dividend growth than AT&T’s equity. The historical track record of a company’s dividend
Chipotle’s Fourth Quarter Was Impressive; Shares Still Expensive
February 4, 2014
On January 30, Chipotle (CMG) registered arguably one of the best reports during fourth-quarter earnings season. The burrito maker grew revenue nearly 21% in the quarter, as comparable restaurant sales jumped more than 9% thanks to increased traffic, significantly better than the market’s expectations. Though Chipotle had previously announced that its fourth-quarter comp would be better than the 6.2% pace it registered in the third quarter, the performance exceeded expectations by a material margin. We saw similar strength at Starbucks (SBUX) with respect to the composition of its same-store sales growth in the period (mostly traffic expansion), and we think each firm benefited from strategically convenient locations as the industry battled one of the worst winters in the US on
Yum! Brands Long-term Growth Outlook Intact; Shares Not Cheap
February 4, 2014
“Brian Nelson, President of Equity Research at Valuentum Securities, says Yum Brands should look to preserving its KFC brand name in China if it wants greater growth opportunities.” — CNBC Select here to view the video on CNBC.
PotashCorp’s 2014 Earnings Will Decline Due to Pricing Pressure
February 3, 2014
On January 30, PotashCorp (POT) reported fourth-quarter and full-year 2013 results. The fertilizer giant faced challenging market conditions during much of the year, and PotashCorp CEO Bill Doyle was quick to note that “this past quarter was a difficult one. Pricing headwinds – most notably in potash – weighed on (its) performance, although there were signs as the quarter came to a close that the uncertainty in global markets was beginning to abate. (Its) focus remain(s) on those things (it) can influence, and (it) took important steps to enhance (its) competitive position across all three nutrients and prepare the company to deliver better performance.” Unfortunately, the most important “thing” is something that PotashCorp cannot control: pricing. Competitive pressures and a
Previewing Yum! Brands’ Fourth Quarter Results
February 3, 2014
Yum! Brands (YUM), the owner of KFC, Pizza Hut, and Taco Bell, will report its fourth-quarter results after the market close Monday. The quick-service restaurant giant is a global powerhouse with solid brands and strong cash-flow generating capacity. Yum! Brands has generated cash flow from operations of $1 billion or more in each of the past 10 years, with the firm pulling in more than $2 billion in each of the past two years. The company’s greatest growth opportunity resides with its KFC brand in China. Per one million people, there are just 3 KFC units in China. In other Asian countries, this ratio is closer to 20 to 1, implying significant long-term expansion in the country. China’s consumer class
Google Shows Why Patience and Perspective Are Important
January 31, 2014
By Brian Nelson, CFA The equity markets are an interesting beast. In October 2012, we pounded the table on adding Google (GOOG) to the Best Ideas portfolio (see email transaction alert archive here), which followed the September 2012 edition of the Best Ideas Newsletter, where we highlighted the company as the latest example of the power of the Valuentum Buying Index (see edition here), our stock-selection methodology. Part of the reason why I wanted to bring this up is not to pat ourselves on the back, but instead to reiterate the importance of ‘patience’ and ‘perspective’ in investing, regardless of the process you pursue. Let’s look at the following chart of Google from the date of the release of the
