The Quick-Serve Restaurant Space Could Be Poised for a Rebound
March 19, 2013
Wendy’s Every time we look at the restaurant space, we are surprised to see at how small Wendy’s (click ticker for report: ) market capitalization is. Shares have been stuck in neutral for the past year, even though we think the company is in a much better competitive position. Unlike McDonald’s (click ticker for report: ), which has distinctly made itself the preeminent value chain, Wendy’s has mostly held the line on pricing. Wendy’s “Right Price, Right Size” menu has helped, but overall the company has lost traffic. If economic conditions improve, we think Wendy’s could be a beneficiary versus its peers because it has maintained its quality reputation. While the levels of price differences in the burger space (Wendy’s/McDonald’s/Burger
A Dish/DirecTV Merger Would Be Golden
March 18, 2013
After a potential acquisition target of DirecTV (click ticker for report: ) was taken off the market, chatter of a DirecTV-Dish Network (click ticker for report: ) merger has escalated. The big obstacle, in our view, would be anti-trust hurdles, and given recent trends in US anti-trust regulation, that could be difficult to defeat. However, let’s take a look at what could happen if regulators allow it. Increased Leverage Over Content Creators One of the consistent themes we’ve been hitting on over the past year in the media space has been the rising cost of content. Netflix (click ticker for report: ), Coinstar (click ticker for report: ), Amazon (click ticker for report: ), Hulu, cable, and satellite are all
EDAC Tech Offered $17.75 Per Share To Go Private
March 18, 2013
Shares of Best Ideas Newsletter holding EDAC (click ticker for report: ) are hitting a new all-time high after the firm entered into a merger agreement with Greenbriar Equity Group. Details of the deal can be found here. We’re a little surprised by the deal, especially since the future outlook continues to look wonderful. However, management and the Board of Directors readily tendered its 18.2% of the company, so perhaps the $17.75 per share bid, which is in-line with the low-end of our fair value range, exceeded the level of share appreciation the firm thought possible in the near-term. The terms of this deal also beg the question of whether EDAC’s recent share price surge was composed of Greenbriar building
Intuitive Surgical’s Shares Are Slumping Today
March 15, 2013
Shares of Best Ideas Newsletter holding Intuitive Surgical (click ticker for report: ) are experiencing some relative weakness today after negative commentary from the American Congress of OB/GYN’s president questioned the cost effectiveness of robotic surgery. To read more, please click here. We identified this as the major risk for the company going forward, and we’ll be keeping a tight leash on the position going forward. Momentum is working against the company at this time, and the fundamental position could deteriorate. Still, we like the long-term trend at work for robotic surgery, even if there are some near-term headwinds.
Firms Raising Their Dividends In The Week Ending March 15
March 15, 2013
We saw a number of firms raise their dividends during the week ending March 15. To access our dividend reports, please click here. Firms Raising Their Dividends This Week: Alexandria Real Estate Equities (ARE): now $0.60 per share quarterly dividend, was $0.56. Avago Technologies (AVGO): now $0.19 per share quarterly dividend, was $0.17. Capital One Financial (COF): now $0.30 per share quarterly dividend, was $0.05. CapLease (LSE): now $0.0775 per share quarterly dividend, was $0.075. Capstead Mortgage Corporation (CMO): now $0.31 per share quarterly dividend, was $0.30. Cohen & Steers (CNS): now $0.20 per share quarterly dividend, was $0.18. Discover Financial Services (DFS): now $0.20 per share quarterly dividend, was $0.14. Equity LifeStyle (ELS): now $0.50 per share quarterly dividend, was $0.4375.
Ulta’s Fall Is Justified
March 14, 2013
Cosmetics retailer Ulta (click ticker for report: ) reported better than anticipated fourth-quarter results Thursday that were overshadowed by the company’s light guidance. Revenue growth remained stellar, growing 30% year-over-year to $759 million, exceeding consensus estimates. Earnings were also stronger than the consensus anticipated, growing 30% year-over-year to $0.95 per share (excluding the impact of the extra week). Same-store sales jumped 8% during the fourth quarter (on top of a same-store sales gain of 11.5% in 2011), suggesting how strong the momentum in the underlying business is. After its CEO mysteriously resigned to join Michael’s Arts and Crafts in February, the stock has been under pressure, and investors have been looking for any signs of weakness to dump shares. The most
RR Donnelley’s Dividend Isn’t Safe
March 14, 2013
Every month in our Dividend Growth Newsletter, we identify firms that may need to cut dividend payments in the future. Timing the dividend cut is difficult (and somewhat arbitrary) as companies can do a number of things to prop up dividends until cash flow situation becomes dire, as we’ve seen at firms like SuperValu (click ticker for report: ) and Roundy’s (click ticker for report: ). However, our forward-looking Valuentum Dividend Cushion has caught a number of dividend cuts during the past year, including JC Penney’s (click ticker for report: ), CenturyLink (click ticker for report: ), and Exelon (click ticker for report: ). We’re not sure RR Donnelley’s (click ticker for report: ) dividend will be the next to go, but
Casey’s General Is Almost Cheap
March 13, 2013
Convenience store chain Casey’s General (click ticker for report: ) has seen its share price take a small haircut after reporting third quarter results earlier this week. Revenue rose 5% year-over-year to $1.7 billion, falling a tad shy of consensus estimates. Earnings fell 7% year-over-year to $0.40 per share, falling well below consensus expectations. Because of its large amount of retail fuel sales, revenue itself isn’t the best metric to measure Casey’s performance, but the firm provides plenty of other useful data points. Same-store gasoline volumes rose 0.6% at an average margin 13.8 cents—just short of the firm’s targets of 1% and 14 cents, respectively. The margin was slightly ahead of last year’s pace. The price of gas went up
Best Idea Buffalo Wild Wings Making 2013 Highs
March 13, 2013
Although the company had its fourth quarter earnings squeezed due to higher chicken wing prices, Best Ideas Newsletter holding Buffalo Wild Wings (click ticker for report: ) is approaching new highs for 2013, trading north of $85 per share. Hedge fund Citadel recently upped its stake in the company to 5.15%, and we think the firm has a strong quarter ahead with March Madness, the NHL playoffs, and the NBA playoffs all quickly approaching. We think shares have some additional upside from current levels, so we’re holding steady in the portfolio of our Best Ideas Newsletter.
FAA Clears the Boeing Battery Solution; Supply-Chain Value Still Evident
March 13, 2013
Late yesterday afternoon, airplane manufacturer and designer Boeing (click ticker for report: ) received approval for the company’s plan to test and certify batteries for its 787 Dreamliner jet. Boeing’s lithium ion battery issues plagued several of its new jets, including many in Japan, which caused substantial weakness in shares even though orders remained strong, and several industry insiders indicated the problem wasn’t anything out of the ordinary. On January 17th, we called for the bottom in sentiment regarding the Boeing 787, and shares of the company have rallied 13% since. Although we did not believe the lithium ion battery would be a long-term headwind for Boeing, several market participants wondered if the company could develop a satisfactory solution, weighing
