Taking a Look at Main Street Capital
February 27, 2013
Business development companies (BDCs), which help small companies in early stages of development (similar to venture capital firms), have been around in the US since 1980 when Congress amended the Investment Company Act of 1940. The amendment essentially gave individual investors the opportunity to invest in a publicly-traded private-equity firm. Though many are not as prominent as firms such as KKR, Bain Capital, or TPG Capital, there are a number of prominent business development companies that are publicly traded, including Apollo Investment Corp (AINV), American Capital Strategies (ACAS), and Ares Capital (ARCC). Since these investment vehicles have become increasingly popular with income-seeking investors, we’ve decided to take a deep look at the sector, and Main Street Capital (MAIN) in particular. Main
Best Ideas Portfolio Holding EDAC Tech Surges to All-Time High!
February 27, 2013
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RadioShack’s Slide Continues; Cash Flow is Terrible
February 26, 2013
Electronics retailer RadioShack (click ticker for report: ) reported a terrible fourth quarter Tuesday morning. Sales fell 7% year-over-year to $1.3 billion, below already tempered consensus estimates. Earnings per share were a disaster, falling from $0.12 in the fourth quarter of 2011 to a loss of $0.63 in the fourth quarter of 2012—though this number was negatively impacted by a $67 million non-cash charge. We’re steering clear of shares in the portfolio of our Best Ideas Newsletter. Consistent with what we’ve seen all year, the company’s core business continues to deteriorate, with same-store sales dropping 7% during the fourth quarter. The firm also announced earlier in the year that its mobile-store relationship with Target (click ticker for report: ) has
Lowe’s Posts a Solid Fourth Quarter…Thanks Sandy
February 26, 2013
Home improvement retailer Lowe’s (click ticker for report: ) reported modestly better than anticipated fourth quarter results Monday morning. Revenue fell 5% year-over-year to $11 billion, which was a touch better than expected. Earnings were flat compared to the year-ago quarter, coming in at $0.26 per share, but that figure also exceeded the consensus expectation. Though Lowe’s benefited from an extra selling week in fiscal year 2012 (ended January 2013), the results were solid. Hurricane Sandy rebuilding efforts helped stores remain productive after a decent third quarter, with same-store sales rising 1.9%. In total, management believes hurricane-related purchases added 70 basis points to same-store sales growth, and the firm anticipates Sandy will have a positive influence on fiscal year 2013
With M&A Popping, We Think More Deals Lie Ahead
February 26, 2013
Monday morning, Barnes and Noble’s (BKS) Chairman Leonard Riggio announced that he will finance a bid to take the company’s retail operations private. This comes after the announcement of several other major deals, including the OfficeMax/Office Depot Merger, Berkshire (BRK.A) and 3G Capital’s acquisition of Heinz (HNZ), and Michael Dell’s bid for Dell (click ticker for report: ). Let’s take a look at some potential targets. Apollo Group Results in the for-profit education space have experienced significant downward pressure during the past few years. Apollo Group (click ticker for report: ), owner of the University of Phoenix, has seen its share price cut by 64% during the past year, after being a cash-generating darling just a few years ago. The
Changes Flow at Abercrombie & Fitch
February 25, 2013
Friday morning, teen clothing retailer Abercrombie & Fitch (click ticker for report: ) announced fourth quarter results, a dividend hike, and a change in method of accounting for inventory. Revenue increased 11% year-over-year to $1.5 billion, falling slightly below consensus expectations. Earnings per share easily exceeded expectations under the retail method, growing 97% year-over-year to $2.21 per share. Under the cost method, which Abercrombie will use going forward, they grew nearly 10 fold year-over-year to $2.15 per share. Abercrombie’s new accounting method is designed to more accurately reflect gross margins and provide greater consistency with respect to inventory. Although the move will cause us to adjust our financial model, we think it will more accurately reflect the company’s operating performance.
Nordstrom Is the Best Omni-Channel Retailer
February 23, 2013
Thursday afternoon, department store and discounter Nordstrom (click ticker for report: ) reported strong fourth-quarter results. Revenue jumped 14% year-over-year to $3.6 billion, roughly in line with consensus figures. Earnings were better than anticipated but boosted by the extra week, growing 26% year-over-year to $1.40 per share. Aggregate same-store sales jumped 6.3% during the quarter, driven mostly by strength at Nordstrom Rack. As we’ve mentioned before with regards to TJX (click ticker for report: ) and Ross Stores (click ticker for report: ), Nordstrom Rack is a wonderful business that delivers designer names at a discount to consumers. More importantly, its experience cannot be replicated nearly as easily online. eBay (click ticker for report: ) and Amazon (click ticker for
HP’s Turnaround Plugs Along
February 22, 2013
After its fourth quarter revealed the Autonomy scandal, Hewlett-Packard (click ticker for report: ) announced decent first-quarter results for its 2013 fiscal year. Revenue fell 6% year-over-year to $28.4 billion, which was actually far better than consensus estimates. Earnings also fell, down 11% year-over-year to $0.82 per share. However, the number beat consensus, and it also exceeded HP’s internal guidance (Image Source: HPQ). On a geographic basis, we were pleased to see the pace of HP’s revenue declines moderate across the board, except for Europe (only Asia-Pacific posted growth—of 1%). The enterprise technology space is tempered, and we believe demand will improve once economic conditions cooperate (Image Source: HPQ). The firm’s Personal Systems segment continued to experience profit deterioration, with margins falling 250 basis
Dividend Increases for the Week Ending February 22
February 22, 2013
This week was jam-packed with companies raising their quarterly cash dividends. Below we provide a list of firms that upped their dividends for the week ending February 22. 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. Firms Raising Their Dividends This Week Abercrombie & Fitch (ANF): now $0.20 per share quarterly dividend, was $0.175. Analog Devices (ADI): now $0.34 per share quarterly dividend, was $0.30. Chemung Financial (CHMG): now $0.26 per share quarterly dividend, was $0.25. Chesapeake Lodging Trust (CHSP): now $0.24 per share quarterly dividend, was $0.22. Cheviot Financial Corp. (CHEV): now $0.09 per share quarterly dividend, was $0.08 Corrections Corp of America
Wal-Mart Posts a Solid Fourth Quarter; Boosts Dividend
February 22, 2013
Retailing goliath Wal-Mart (click ticker for report: ) announced decent fourth quarter results yesterday. Revenue increased 3.9% during the quarter to $127.1 billion, just a touch below consensus expectations. Earnings were better than expected, but boosted by a favorable tax rate, growing 11% year-over-year to $1.67 per share. Although the quarter was by no means a blockbuster one, we thought results were acceptable. Wal-Mart’s core US namesake business experienced 2.6% sales growth thanks to same-store sales that increased 1% (1.8% ex-fuel). Traffic declined marginally, down 0.1%, but average tickets were 1.1% higher than the year prior, and NPD indicated that the firm grew market share over the holiday season. Let’s not forget that Wal-Mart registered sales of nearly $75 billion during
