Has the Time for Robots Finally Arrived?
December 17, 2013
The 1980s were filled with ideas that robots would take over our personal lives. There was, of course, The Terminator, which ingrained a sense of fear within society about the potential dangers of advanced robotic use. But there were other “friendlier” movies, too. Who could forget the beloved ‘Johnny 5’ in Short Circuit or Paulie’s robot “girlfriend” in the fourth installment of the Rocky series? Unlike depicting a robotic assassin from a post-apocalyptic future, these movies showed the humanization of robots with feelings like fear and love. Are we now re-living a bout of 1980s nostalgia, with Amazon (AMZN) and UPS (UPS) recently talking about unmanned flying drones delivering packages to consumers’ door steps? It’s probably not too far of
The Dichotomy of Airlines and Aerospace
December 16, 2013
On Monday, top insurance idea AIG (AIG) announced that it would sell International Lease Finance Corporation (ILFC) to aircraft leasing firm AerCap Holdings (AER) for $5.4 billion, consisting of $3 billion in cash and the balance in newly-issued AerCap common shares. Though we think ILFC was one of the crown jewels of AIG’s business particularly considering the prospects for global air travel demand in coming years, the price is fair and opportunistic, especially since AerCap is risking its investment-grade status to facilitate the deal. We don’t think better terms could have been had by either party, given financial constraints, and shares of both entities are moving higher on the news. The combined AerCap-ILFC will be #2 on the world stage
Valuentum’s December Edition of Its Best Ideas Newsletter!
December 16, 2013
Prudence Will Be Rewarded, by Brian Nelson, CFA There are a number of ways members use our research. Some members use the Best Ideas portfolio and Dividend Growth portfolio for idea generation; others like our systematic stock-selection process (fair value estimates, Valuentum Buying Index ratings) that allows for the comparison of ideas across sectors and industries, while others like to evaluate the incremental ideas that we add to the portfolios via transaction alert emails and/or the next idea that registers a 9 or 10 on the Valuentum Buying Index, our stock-selection methodology. This month, we were very pleased to see the valuation thesis on new portfolio addition, Chinese search giant Baidu (BIDU) come to fruition in such a short time.
Industrial Conglomerates Dominate News on Friday
December 13, 2013
The latter part of this week brought about a plethora of news from the ‘Industrial Conglomerates’ industry. On Friday, General Electric (GE) announced a 16% increase to its quarterly dividend to $0.22 per share (a 3.3% annual yield). The industrial behemoth was just added to the portfolio of our Dividend Growth Newsletter October 21 on account of its fantastic Dividend Cushion score and solid third-quarter performance. General Electric’s dividend report will be updated with the new information shortly. Also on Friday, Honeywell (HON) approved an authorization to repurchase up to $5 billion of its common stock, now that the firm’s previous $3 billion share repurchase program approved in 2011 is substantially complete. We encourage Honeywell management to be a bit
Cisco’s Investor Update Reveals Challenges
December 12, 2013
On Thursday, switching and routing giant Cisco (CSCO) hosted its 2013 Financial Analyst Conference, and management’s commentary during the meeting wasn’t encouraging. The firm’s fiscal first quarter 2014 results, released mid-November, had showcased significant order weakness (see here) and commentary on the company’s fiscal first-quarter conference call indicated that the firm did not anticipate material improvement in its order growth during the second quarter, but CEO John Chambers’ reiteration of his view today that emerging markets remain “extremely challenged,” particularly in Brazil and Russia, has sent shockwaves across much of the networking industry. It appears the market had been building in expectations that some order stabilization would occur at this point during the quarter, and Chambers comments may have mitigated
Toll Brothers Sees Leveling of Demand But Outlook Remains Strong
December 12, 2013
On Tuesday, one of the largest luxury homebuilders in the US, Toll Brothers (TOL) released its results for the fiscal fourth quarter (ended October 31, 2013). Revenue growth and unit delivery expansion were fantastic, up 65% in dollars and 36% in units compared to the prior-year quarter. Net signed contracts of $839 million and 1,163 units rose 23% in dollars and 6% in units compared to last year’s period, while on a per-community basis, the fourth quarter witnessed net signed contracts per community (5.17) that was the highest for any fourth quarter since 2005. Backlog of $2.63 billion and 3,679 units rose 57% in dollars and 43% in units compared to the year-ago mark. The average price of homes delivered
Miners Continue to Be Cautious
December 11, 2013
Though profit margins on iron ore operations are hefty, swings in commodity prices translate into large swings in equity prices as mid-cycle valuations are tweaked. Management teams within the mining space are well-aware of the boom-and-bust cycles of their business, and recent tactical moves indicate that constituents continue to be very cautious. We commented on Rio Tinto’s (RIO) and Vale’s (VALE) decision to cut spending, and recent news suggests that BHP (BHP) will also look to keep annual spending below $15 billion, a large cut from the $21.7 billion the firm spent in the previous fiscal year. The billions of dollars in reduced mining equipment spending doesn’t bode well for firms specializing in earth-moving equipment such as Caterpillar (CAT) and
Baidu Up Big Since August Email Transaction Alert; Valuentum Members Cheer!
December 11, 2013
Valuentum has two actively-managed portfolios, one is its Best Ideas portfolio (housed in its Best Ideas Newsletter) and the other is its Dividend Growth Newsletter (housed in its Dividend Growth Newsletter). Each edition of its Best Ideas Newsletter is released on the 15th of the month, while each edition of its Dividend Growth Newsletter is released on the 1st of each month. Though not all members use the newsletters, the monthly publications represent the avenues through which we deliver the respective actively-managed portfolios that ultimately are the gauge we use to measure performance. We send out email transaction alerts to members to keep them abreast of new additions to and removals from these portfolios, as well as any weighting changes
Lumber Liquidators Is Still Pricey Even After Fall
December 10, 2013
Traditionally, when a firm makes the list of the ’Top 25 Most Overvalued Firms’ in the stock market, the primary reason is that market participants have built in expectations far greater than what the firm can reasonably achieve. Lumber Liquidators (LL) has been on our ‘Top 25 Most Overvalued Firms’ list for some time, and the recent update to its outlook December 9, which came in below consensus expectations, sent shares tumbling. The specialty retailer of hardwood flooring in North America provided the following for its outlook for 2013 and 2014: Company Outlook for 2013 Based on year-to-date results and current trends, the company now expects to achieve the following for the full year 2013: Net sales in the range of
Surveying Results at the Auto Parts Retailers
December 10, 2013
Monday was a day auto-parts retailer Pep Boys (PBY) would rather soon forget. The company reported fiscal third-quarter results (ending November 2013) that came up short with consensus expectations. Comparable same-store sales at the automotive retail chain declined 2.8% (well below its targets for low-single-digit expansion), consisting of a 0.5% comparable service revenue increase and a 3.6% comparable merchandise sales decrease. The firm swung to a modest quarterly net profit during the period, but its nine-month diluted earnings per share profit of $0.19 was significantly worse than the $0.51 per share profit recorded in the prior-year period. Same-store sales are decelerating as the quarterly mark (-2.8%) is materially worse than the nine-month tally, which was -1%. Through the first nine-months of
