Investors Will Continue to Be Rewarded in eBay; If Nothing Else, Icahn’s Entrance Will Drive an Upward Re-Valuation of the Equity
January 23, 2014
Auctions and payments provider eBay (EBAY) has been a great success story for many Valuentum members, having registered a 70%+ gain since the company was added to the Best Ideas portfolio. We’ve often used eBay as an example of the Valuentum process in action (see here) and below: “(eBay) initially flashed a (Valuentum Buying Index) rating of 10 in late September 2011 (at $32 per share), and we added it to (the) Best Ideas portfolio. The VBI rating changed to a 6 in December 2011 and then back to a 10 in May 2012. Because the rating never breached a 1 or 2, we did not remove the position from our portfolio. In fact, we tactically added to it. eBay
Icahn’s In-depth Letter to Apple Must Remove the Time Horizon Associated with the Buyback Proposal in Order to Receive Valuentum’s Approval
January 23, 2014
Carl Icahn announced Wednesday on Twitter (TWTR), his favorite news distribution mechanism, that he has “purchased $500 million more Apple (AAPL) shares in the last two weeks” and that his investment in the iPad-maker is now worth more than $3 billion. Though the total value of his holdings is still less than 1% of Apple’s $496 billion market capitalization (as of the end of trading Wednesday), the news is making quite the splash. Having purchased $500 million more $AAPL shares in the last two weeks, our investment has crossed the $3 billion mark yesterday.— Carl Icahn (@Carl_C_Icahn) January 22, 2014 In early December, Carl Icahn released Proposal No. 10, which is a non-binding advisory resolution that the firm complete
Verizon Posts Highest Adjusted EBITDA Margin in 8 years; Pro forma Debt Load Reduces Attractiveness of Idea
January 21, 2014
On Tuesday, Verizon’s (VZ) fourth-quarter performance showed us why we had been considering the firm for inclusion in the Dividend Growth Newsletter. The company experienced revenue growth across all strategic areas (84% of business), showcasing 3.4% year-over-year expansion. The most recent quarter marked the fifth consecutive period of at least 8% service revenue year-over-year growth. The communication giant’s strong cost management controls sent its full-year adjusted EBITDA margin to the highest levels in 8 years (34.9%), a very impressive showing. Wireless segment EBITDA jumped more than 22% from last year’s quarter. Verizon’s fourth-quarter adjusted earnings-per-share of $0.66 was also impressive, coming in nearly 74% higher than the level posted in the same period a year ago. For all of 2013, the
Johnson & Johnson Registers Strong Fourth Quarter Performance; 2014 Outlook Conservative
January 21, 2014
Johnson & Johnson (JNJ) has built one of the most comprehensive bases of health care businesses and generates an impressive 70% of revenue from top positions in the respective markets in which it operates. The health care and consumer giant remains focused on innovation and generating incremental revenue from new products as it broadens its geographic presence. Johnson & Johnson’s fourth-quarter performance, released Tuesday, showed that it continues to execute at a very high level. The company’s sales advanced 4.5% in the fourth quarter (6.3% excluding currency) thanks to strong top-line performance in its pharmaceutical division, which witnessed revenue expand more than 13%, excluding the impact from currency. Domestic sales leapt 7.4%, while international sales increased 2.4% (5.6% excluding currency).
GE’s Fourth Quarter Results Were Excellent
January 18, 2014
On Friday, GE (GE) reported excellent fourth-quarter results that showed robust order and backlog growth. The company’s revenue nudged 3% higher in the period as industrial sales advanced 6% (5% organic) offset in part by an expected decline in revenue from its finance arm, GE Capital. Industrial segment profit jumped 12%, with six of seven segments growing earnings. The conglomerate’s industrial segment margins during the period advanced an impressive 100 basis points, to 18.3%. Fourth-quarter operating earnings per share leapt 20%, to $0.53. GE’s cash flow performance continues to be top-notch, with full-year cash from GE operating activities (CFOA) coming in at $17.4 billion. GE’s infrastructure orders for the fourth quarter leapt 8%, ‘growth market’ orders increased 13%, and expansion
Intel Reveals Stabilizing PC Demand
January 17, 2014
Intel told us what we wanted to hear about PC demand, but indicated margins might be a little light in its outlook. Still, the company offers investors a lot of positives to consider.
Rio Tinto Announced Record Production for Iron Ore in 2013
January 16, 2014
Rio Tinto remains one of our favorite ideas in the basic materials sector on the basis of its valuation upside potential.
Surveying Fourth Quarter Performance at the Money Center Banks
January 15, 2014
Let’s examine a number of reasons why we don’t prefer banking entities and take a look at recent performance from industry constituents. A challenging rate environment and declining mortgage originations offer key headwinds.
Intuitive Surgical Surges Back to Life
January 14, 2014
The maker of the da Vinci Surgical System, Intuitive Surgical (ISRG) has been under a tremendous amount of equity pricing pressure following a short attack and controversial comments from the American Congress of OB/GYN (ACOG) president James T. Breeden. We think Intuitive Surgical has managed well in what we’d describe to be a “perfect storm of negativity.” On Tuesday, Intuitive Surgical revealed a sense of resiliency when it issued preliminary fourth quarter and full-year 2013 results. The company noted that it expects revenue for the fourth quarter to fall just 5% from the fourth quarter of 2012, a huge win for a company that has been pummeled from almost every direction. For the full year, the company expects total revenue to advance 4%. Intuitive
M&A Heating Up
January 13, 2014
When money is cheap (i.e. when interest rates are low) and equity price euphoria is running wild, deals will happen. Last Wednesday, activist hedge fund Elliot Management launched an opportunistic bid to acquire all of the outstanding shares of Riverbed (RVBD) for $19 per share in cash. We think the offer is too low on the basis of our fair value estimate, and we don’t think Riverbed will accept terms as they currently stand (the board is still evaluating); it remains uncertain whether a higher offer from Elliot is an eventuality. We think a fair price for Riverbed is $22 per share (our fair value), and we’re reiterating this opinion. Before the bid, we believed Riverbed was undervalued on both a
