Enbridge Capitalizes on Fantastic Shale Oil Growth
December 7, 2012
Energy transporter Enbridge (click ticker for report: ) held its annual guidance conference for 2013 this Thursday. The company raised its dividend 12% to $1.26 per share, which is in-line with its current 10-year growth trajectory. Shareholders have seen fantastic dividend growth during the past decade, and we think the company remains in a strong position to keep raising its dividend going forward. Image Source: Enbridge On top of a strong dividend increase, Enbridge guided to 12% earnings growth in 2013 (based on current projections). Image Source: Enbridge Due to the hefty demand of Canadian and North Dakota-based shale oil, the company is investing heavily in new pipelines to bring product to market and distribution centers. Enbridge announced plans to spend
Dividends at Financial Services Firms
December 7, 2012
After getting slammed by one of the most vicious financial crises in modern history, financial services firms sit on much more solid ground. In fact, several have taken to returning cash to shareholders via dividends. Let’s take a look at a few names in the space that recently made headlines with their dividend policies. T. Rowe Price Money manager T. Rowe Price (TROW) was hit pretty hard by contracting balance sheets and retirement accounts, as it saw revenue fall for two consecutive years. However, as accounts recovered, the company has returned to solid revenue growth, easily eclipsing its 2006-2007 numbers. The firm has raised its dividend 10% this year to $1.36 per share, and it recently announced a special dividend
Lululemon’s Growth Hasn’t Stalled
December 6, 2012
Yoga pants and athletic apparel maker Lululemon (click ticker for report: ) reported fantastic third quarter results Thursday morning. Revenue jumped 37% year-over-year to $316.5 million, slightly better than consensus expectations. Earnings jumped 44% year-over-year to $0.39 per share, which was also slightly better than anticipated. Yet again, the company proved to be immune from broader macroeconomic pressures, with same-store sales jumping 18% compared to the same period last year. Gross margins fell but held up fairly well, dropping only 40 basis points year-over-year to 55.4%. Fourth quarter guidance implies that margins will be lower in the next quarter as well, but with sales growing at such a rapid clip, we think some slight compression is to be expected. Still,
FAQ: Why Doesn’t the ‘Percentage Undervalued/Overvalued’ Match Up to the Actual Discount/Premium to Valuentum’s Fair Value Estimate of the Company?
December 6, 2012
We view the intrinsic value of a firm as a range, not a single point estimate. So instead of us saying that a company is worth exactly $55 per share, for example, instead we’d say it is worth between $50 (low end) and $60 per share (high end) — think of this range as our margin of safety. We use a margin of safety due to the inherent uncertainty of predicting with absolute precision a firm’s future free cash flow stream — a firm’s future free cash flows determine our estimate of the company’s intrinsic value, and the future is not known yet. As a result, the ‘percentage undervalued/overvalued’ (as shown on our 16-page reports) is calculated by comparing the firm’s current price with the
Freeport McMoRan Following the BHP Model
December 6, 2012
Early Wednesday morning, leading copper and gold miner Freeport McMoRan (click ticker for report: ) announced a $9 billion blockbuster deal to acquire its former holding McMoRan Oil & Gas (click ticker for report: ) and independent oil and gas company Plains Exploration & Production (PXP). The deal itself values Plains at approximately $45-50 per share ($25 per share cash/0.6531 shares of FCX per share), while Freeport will pay $14.75 per share for McMoRan Oil & Gas. Given the cloudy long-term outlook for copper and gold mining, mainly a result of the often unfriendly places these resources reside, we think the company is happy to purchase operations in the Gulf and continental US. We’ve seen mine nationalization in both South
Inside Intel’s Debt Offering
December 5, 2012
Chipmaker Intel (click ticker for report: ) has seen its share price take a large haircut this year, as investors worry about the decline of the PC, as well as Intel’s lack of presence in the mobile ecosystem. Still, the company sits on a $10.4 billion cash ($3 billion net cash) hoard, continues to make strides in mobile (though it’s not there yet), and it has continued to do well in the enterprise market. So why did the company just announce that it will raise $6 billion of debt? The first obvious reason is to capitalize on low interest rates. The 5 year notes of the offering will yield a paltry 1.35% ($3b), the 10 year notes will yield 2.7% ($1.5b),
Auto Parts Retailers Feeling the Auto Recovery
December 5, 2012
With the auto recovery in full swing, we’re starting to see a momentum swing from one of the best performing sectors of the past few years, the auto parts retailers. Instead of buying a new Ford (click ticker for report: ) or Toyota (click ticker for report: ), which require heavy capital investments, consumers have opted to repair their cars (whether at an auto shop or by themselves) instead of purchasing a new one. But, with the SAAR exceeding 15.2 million units in November, it’s clear that the fleet replacement is in full swing, in our view. AutoZone (click ticker for report: ) reported first quarter results Tuesday morning. Overall sales increased 3.5% year-over-year to $2 billion, which was roughly
FAQ: How Is Your Best Ideas Portfolio Doing This Year?
December 5, 2012
At Valuentum, we task ourselves with a tall order. While most investment newsletters compare themselves to a market benchmark, we go one step further. We want to deliver positive returns to you, our subscriber, year after year, in addition to outperforming the market benchmark. Below, we outline a table that shows the outperformance we provided to our members since the time they joined. So, for example, if you joined as a member on April 13, 2012 our Best Ideas portfolio has offered 3.8 percentage points of outperformance. Or, if you joined on July 13, 2011, our Best Ideas portfolio has offered 22 percentage points of outperformance. Importantly, did you know that, according to Advisor One, only 13% of hedge funds are beating the S&P
Darden Struggling to Remain Relevant
December 4, 2012
Restaurant group Darden (click ticker for report: ), owner of chains like LongHorn Steakhouse, Red Lobster, Olive Garden, and Yard House, warned that its second quarter results will be weaker than expected. Net operating earnings are expected to total $0.25-$0.26 per share, well below the consensus estimate of $0.46 per share, with $0.05 lost due to the acquisition of Yard House and one penny lost to Hurricane Sandy. Perhaps the most surprising portion of the announcement was the momentum we were seeing going into the quarter, particularly at Red Lobster and LongHorn. Olive Garden saw same-store sales fall 3.8% in September, 3.9% in October, and 2% in November, driven mostly by huge drops in traffic. Red Lobster, which had finally
Toll Brothers’ Fourth Quarter Results Were Fantastic
December 4, 2012
Tuesday morning, one of the nation’s premier homebuilders, Toll Brothers (click ticker for report: ) reported spectacular fourth quarter results. Revenues surged 48% year-over-year to $632.8 million, well ahead of consensus expectations. Earnings per share jumped to $2.35 per share from $0.09 a year ago thanks to the release of deferred tax assets. Pretax income jumped nearly 300% year-over-year to $60.7 million. Key metrics for Toll’s business were mostly strong across the board. Net signed contracts in the fourth quarter jumped 70% year-over-year to 1,098 units, with a 75% surge in value to $684.1 million. The firm’s backlog jumped 54% to 2,569 units, with the value of that backlog increasing 70% to $1.67 billion. Stronger pricing also helped gross margins
