Market Yawns at Government Shutdown
October 2, 2013
It finally happened Monday night. After weeks of discussing the possibility of a government shutdown, the US government came to a standstill over the Affordable Healthcare Act and the budget, forcing governmental agencies to shutter doors and not pay employees on Tuesday. The shutdown impacts the Department of Defense most, where 400,000 workers out of the total 800,000 on leave are employed. The Department of Energy, Department of Commerce, and Department of Transportation are all also meaningfully impacted. At this time, the duration of the shutdown is unknown. It may not last long. We think most market participants are not expecting a prolonged shutdown. Political parties should be sufficiently embarrassed, pride will be swallowed, and a deal will eventually
Valuentum’s October Edition of Its Dividend Growth Newsletter!
October 2, 2013
Three Reasons Why Dividend Growth Investors Are Quite Savvy by Brian Nelson, CFA There are many different approaches to investing, but we think dividend growth investors are quite savvy, especially when they combine a rigorous dividend growth process in the form of the Valuentum Dividend Cushion with the valuation rigors behind the Valuentum Buying Index. Let’s examine the three reasons why we think dividend growth investors are a smart group. #1. Fool Me Once, Shame on You…Fool Me Twice, Shame on Me Today’s dividend growth crowd has seen enough. First, they witnessed the dot-com bubble (1997-2000), a period in stock market history where firms’ stock prices soared in some cases as a result of just adding an “e-“ prefix to their
J.C. Penney: Equity Offering Shows Desperation; Shares Score a 1 on the VBI; Lights Out by Mid-2014?
October 1, 2013
With sales declining precipitously and bankruptcy looking like a real possibility, we have materially lowered our equity fair value estimate on retailer J.C. Penney (click ticker for report: ) to $3 per share. The firm now scores a 1 on the Valuentum Buying Index, and we’re avoiding shares at all costs in the portfolio of our Best Ideas Newsletter. Why Now? We haven’t liked J.C. Penney since former CEO Ron Johnson’s plan showed signs it clearly wasn’t working, and we have consistently maintained that Penney’s business model was obsolete and doomed to fail over the long term, even before Johnson made changes. Still, earlier this year, the firm improved its liquidity position when it raised over $2 billion in cash via debt with an interest
Nike Marks a Strong Start to Earnings Season
September 30, 2013
After becoming the newest member of the Dow Jones Industrial Average, athletic apparel giant Nike (click ticker for report: ) posted a fantastic start to its 2014 fiscal year. First quarter revenue jumped 8% year-over-year to $7 billion, roughly in-line with consensus estimates. Earnings per share, on the other hand, soared past consensus expectations, growing 37% year-over-year to $0.86. Free cash flow totaled $379 million, equal to 5.4% of net revenue. Product Demand Remains Robust The primary reason behind Nike’s continued strength in the athletic apparel space is the robust demand for its products. The firm continues to innovate, particularly in the running and basketball spaces, and the innovations helped demand remain strong across all geographies. Revenue in North America,
Keeping Some Dry Powder
September 29, 2013
A young cowboy named Billy Joe grew restless on the farm A boy filled with wonderlust who really meant no harm He changed his clothes and shined his boots And combed his dark hair down And his mother cried as he walked out Don’t take your guns to town son Leave your guns at home Bill Don’t take your guns to town — Johnny Cash “Don’t Take Your Guns to Town” << What does it mean to have “dry powder”? Valuentum pursues a standard quarterly report update cycle, and our latest update of companies in the Electrical Equipment industry was quite informative. This group includes many companies that operate within the heart of the industrial economy but fall short of
Third Quarter Results at Lennar and KB Home Were Resilient
September 27, 2013
We were hit with a flood of housing data during the past week, with two of the nation’s largest homebuilders posting decent third-quarter results. Recent data also revealed a continued upward trajectory in home prices across the US. Let’s dig into the developments. Housing Price Improvements The S&P/Case Shiller 20-City Composite Home Price Index (1) increased 1.84% sequentially to 162.49, revealing that housing prices have now finally recovered to 2004 levels. The pace of expansion is off slightly from the previous sequential month’s rate of 2.2% growth, but we do not believe the slight slowdown in the rate of growth is enough to draw any significant conclusions with respect to the pace of the upward trajectory. All of the 20 cities measured in the index showed
Braintree Is an Intriguing Acquisition for eBay
September 27, 2013
Thursday morning, Best Ideas Newsletter portfolio holding eBay (click ticker for report: ) announced the acquisition of Chicago-based payment platform Braintree for $800 million in cash. Braintree is best known for accepting mobile transactions, and it is currently on pace to process $12 billion in net payment value for 2013. What is Braintree? Braintree is a fairly straightforward payment processing platform. While some processors demand variable fees and certain payment thresholds, Braintree is a simple 2.9% + $0.30 per transaction. Importantly, the transactions process in just two days, allowing small or capital hungry firms to access cash at a quick pace. Of the forecast for net payment volume of $12 billion in 2013, the firm expects $4 billion to be
Dividend Increases for the Week Ending September 27
September 27, 2013
Below we provide a list of firms that raised their dividends for the week ending September 27. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here (or use our ‘Symbol’ search box in our website header). Firms Raising Their Dividends This Week Accenture (ACN): now $0.93 per share semi-annual dividend, was $0.81. Alico (ALCO): now $0.12 per share quarterly dividend, was $0.06. Bank of South Carolina Corp (BKSC): now $0.13 per share quarterly dividend, was $0.12. Banner Corp (BANR): now $0.15 per share quarterly dividend, was $0.12. Campbell Soup (CPB): now $0.312 per share quarterly dividend, was $0.29. Hingham Institution for Savings (HIFS): now$0.27 per share
Bakken Production Is Booming and Continental Resources Is a Winner
September 26, 2013
Key Takeaways: · Continental Resources is an oil and gas E&P with the largest shale position in the Bakken. · Production and proved reserves have significant room to grow. · A supermajor oil company like Exxon or Chevron could be interested in acquiring Continental. · We believe shares have 35% upside from current levels. Production of shale oil in the Bakken (1) continues to grow rapidly, and the long-term production fortunes in the region remain as positive as ever. Let’s take a look at Continental Resources (click ticker for report: ), a firm we believe has 35% upside from current levels and one that recently made our list of The 25 Cheapest Stocks on the Market. (1) The Bakken field
Bed Bath & Beyond Rides the Housing Wave
September 26, 2013
Wednesday afternoon, home goods retailer Bed Bath & Beyond (click ticker for report: ) posted solid second quarter results thanks to an improving housing market. Revenue increased 8.9% year-over-year to $2.8 billion, slightly above consensus estimates. Earnings-per-share of $1.16 was an improvement of 18% compared to the year-prior and a penny above consensus expectations. Year-to-date, free cash flow sits at $365 million, equal to 6.7% of revenue. Comp Sales Growth Image Source: Company Filings, Valuentum Comparable sales growth accelerated during the second quarter, registering a number that was 3.7% higher than that of the previous year. The two-year stacked comp for the period sits at 7.2%, which we believe is a solid growth rate in a modest retailing environment. Management offers
