Jana Bets Big on Outerwall
October 8, 2013
Great investors are often a wonderful source of investment ideas and opportunities—imagine capitalizing on a great Buffett idea like Coca-Cola (click ticker for report: ) in the late 1980’s. However, blindly following an elite investor can have disastrous consequences—think following Bill Ackman into J.C. Penney (click ticker for report: ). Valuentum helps you sort out the good ideas from the bad. Still, when an investor with a superb track record takes a sizable stake in a troubled company, we tend to pay attention. Barry Rosenstein’s Jana Partners has trounced the S&P 500 since its inception, achieving annual compounded returns of 12.7% versus 1.7% for the S&P 500 over the same time frame. Jana is known as an activist shareholder that
Pandora: Don’t Be Misled by September Metrics
October 7, 2013
Shares of Pandora (click ticker for report: ) have been on a wild ride lately as a result of the combination of strong listening metrics and the announcement of a new competitor in the form of Apple’s iTunes Radio (click ticker for report: ). We continue to steer clear of shares. Here’s why. Share Offering Though shareholders rarely ever want to see companies issue equity as Pandora did when it sold 18.2 million shares of its overvalued stock at $25 per share September 24, when a firm sells overpriced shares, the process actually creates value for existing shareholders. Think of it this way. If you can get more money for something than it is actually worth, you’re creating
Ads Are (Finally) Coming to Instagram
October 7, 2013
Facebook-owned (click ticker for report: ) picture and video sharing social network Instagram announced Thursday that it will begin displaying ad content. Although several brands are already active on the network, this will be the first time that companies will pay to reach Instagram’s 150 million users. Since Facebook paid $1 billion for the company back in April 2012, we think advertising was an inevitable development. Some users will be upset about Instagram introducing ads (the image below is taken from the announcement page), but users also predicted the demise of Facebook and Twitter advertising. Source: Instagram Yet, the popularity of Facebook and Twitter has remained resilient. As long as Instagram delivers relevant content in a reasonable amount, we doubt
Monsanto Reports Fourth Quarter Results and Moves into Data
October 4, 2013
Agricultural biotechnology giant Monsanto (click ticker for report: ) posted slightly disappointing fourth quarter results Wednesday morning. For the full year, revenue increased 8.7% year-over-year to $14.8 billion, while quarterly revenue rose 4.9% year-over-year to $2.2 billion–a touch short of consensus estimates. Earnings per share for the full year advanced 21% year-over-year to $4.60, with the firm’s quarterly loss increasing by five cents to $0.47 per share–worse than consensus expectations. Free cash flow during fiscal year 2013 was $2 billion, equal to 13.2% of total revenue. The fourth quarter isn’t much of a revenue driver or profit driver for Monsanto, so we find it more prudent to take a closer look at full-year results. Image Source: Monsanto The firm’s ‘Corn
President Obama Tells Wall Street to Worry
October 4, 2013
“I think this time is different. I think they (Wall Street) should be concerned.” — Barack Obama Wednesday afternoon, President Barack Obama sat down with CNBC’s John Harwood to discuss the government shutdown, the next debt ceiling debate, and other pertinent topics. Obama’s warnings are very real, and we’re taking notice. Government Shutdown The government shutdown remains top of mind since it occurred earlier this week, and it continues on with no clear end in sight. President Obama made a fiery speech Thursday morning blaming House Speaker John Boehner for not allowing a vote on the issue in the House of Representatives. Regardless, the primary issue remains that certain members of the Republican Party would like to repeal the Affordable
Plenty of Growth Ahead for Chinese Internet Companies
October 4, 2013
The Chinese Internet space has been a fantastic growth story through the course of 2013. Shares of Best Ideas Newsletter portfolio holding Baidu (click ticker for report: ), Qihoo (QIHU), Sohu.com (click ticker for report: ), and Tencent (click ticker for report: ) are all up at least 50% year-to-date. What do all of these companies have in common? They all have exposure to China’s rapidly-growing Internet usage as well as the country’s Internet search market. Search growth in China is phenomenal. Image Source: China Internet Watch In the second quarter of 2013, the value of the Chinese search market surged approximately 35% year-over-year (shown above), lapping a very robust growth rate well above 50% during the same period of 2012. Chinese search
Phillips 66 Hikes Dividend 25%!
October 3, 2013
Dividend Growth Newsletter portfolio holding Phillips 66 (click ticker for report: ) announced on Tuesday that it would raise its quarterly dividend 25% to $0.39 per share. This equates to an annual dividend of $1.56 per share, and an annual yield of 2.6% at current levels. We applaud the move, though we aren’t surprised, as we have long believed that the firm has excellent dividend safety and growth potential. In our view, the longer-term fundamental story for Phillips 66 and the broader industry continues to look positive as refining capacity remains constrained and more advantaged crude flows through North American pipelines. At this time, Philips 66 remains our favorite idea in the refinery space and a holding in the portfolio
Strong Prescription Comps Drive Walgreens
October 3, 2013
On Tuesday, pharmacy giant Walgreens (click ticker for report: ) posted strong fourth-quarter results bolstered by solid prescription comps. Sales increased 5.1% year-over-year to $17.9 billion, roughly in-line with consensus estimates. Adjusted earnings per share increased 16% year-over-year to $0.73, also in-line with consensus expectations. For the full fiscal year, Walgreens generated free cash flow around $3 billion, equal to 4.3% of revenue. Comps Source: Company Filings, Valuentum Although the 2-year trend remains negative, Walgreens posted positive same-store sales during the fourth quarter, with front-end sales up 1.6% year-over-year and prescription sales up 6.4% year-over-year (resulting in total same-store sales growth of 4.6%). The comp gains came in spite of declining traffic, leading us to believe that new initiatives such
Ford Once Again Leads the Pack with September Sales
October 3, 2013
September auto sales once again revealed a strong US auto market that continues to capitalize on pent-up demand. Though the seasonally adjusted annual rate (SAAR) fell from its 16 million-unit rate in August to 15.3 million units in September, the sequential decline seems mostly attributable to a timing shift (there were two fewer selling days in September than a year ago), and we’re not reading too much into the perceived modest industry-wide slowdown. As we can see from the chart below, there is plenty of volatility in the numbers from month to month, something that investors should continue to expect. Source: NADA Ford Best Ideas Newsletter portfolio holding Ford (click ticker for report: ) exceeded consensus estimates calling for flat
Jobs Slashed in Hopes of Operating Margin Expansion
October 2, 2013
As the battle over the budget rages on, pharmaceuticals giant Merck (click ticker for report: ) and German conglomerate Siemens AG (click ticker for report: ) announced massive job cuts targeted at reducing annual operating expenses. Merck On Tuesday, Merck announced a bold plan to cut $2.5 billion in annual operating expenses, with the lion’s share of savings derived from marketing and R&D cuts. The firm anticipates $1 billion in cost savings by the end of 2014, with the remainder realized in 2015. 7,500 jobs have already been cut, but the firm will slash an additional 8,500 jobs in order to achieve its targeted cost savings. The restructuring is expected to result in pre-tax costs of $2.5-$3 billion, though only
