Alphabet, Microsoft Remain Cash-Rich, Secular Growth Powerhouses
January 31, 2024
Image Source: Shawn Carpenter By Brian Nelson, CFA All eyes were on Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) after the bell January 30. We include both Alphabet and Microsoft in the newsletter portfolios due to their tremendous cash-based sources of intrinsic value: net cash on the balance sheet and free cash flow generation. It would take a monumental shift in the trajectory of these fantastic businesses for us to ever consider removing them from the newsletter portfolios, and we’re reiterating our favorable long-term view on both following their respective calendar fourth-quarter reports. Let’s first start with Alphabet. Revenue advanced ~13% on a year-over-year basis in the fourth quarter, while the company’s operating margin expanded ~3 percentage points, to 27%. Net
Energy Transfer Making a Comeback, Shares Yield ~8.7%
January 28, 2024
Image: Energy Transfer is working its way back after a long stretch of underperformance. By Brian Nelson, CFA Energy Transfer (ET) is one of the largest midstream, transportation and storage companies for natural gas, crude oil, NGLs (natural gas liquids), and other refined products, and the firm has investments in Sunoco LP (SUN) and USA Compression Partners (USAC). The company is nowhere near the bubble levels of 2015, but the pipeline operator has been staging a comeback backed by traditional free cash flow, and we are warming up to this dividend payer. Shares yield ~8.7% at the time of this writing. In the pipeline space, investors tend to pay attention to a metric called distributable cash flow [DCF], not to
14%+ Yielding AGNC Investment May Be Worth a Trade
January 28, 2024
Image: Mortgage REITs have performed horribly since we warned about them back in May 2013. By Brian Nelson, CFA Mortgage REITs (REM) are popular vehicles because of their deceptively enticing dividend yields, but we’ve never been bullish on the group. We’re reiterating our take today that these instruments are not for the individual investor or even prudent financial advisor and are more complicated vehicles than many investors believe. In May 2013, we first starting warning about the group, and the performance, as shown in the image above, hasn’t been pretty. On a price-only basis, the iShares Mortgage Real Estate ETF is trailing the simpleton S&P 500 index by 250+ percentage points since we first laid out our thesis on the
Earnings Roundup: V, INTC, HUM, PYPL
January 28, 2024
By Brian Nelson, CFA Visa (V) Operating and Free Cash Flow Margins Remain Robust, Consumer Spending Remains Resilient Image: Visa’s operating margins are phenomenal. Image Source: Visa On January 25, top-weighted Best Ideas Newsletter portfolio holding Visa reported excellent first-quarter fiscal 2024 results that beat on the top and bottom lines. Net revenues advanced 9% on a year-over-year basis, while the firm was able to drive non-GAAP net income 8% higher and non-GAAP earnings per share 11% higher. In the quarter, payments volume advanced 8%, cross-border volume advanced 16%, and processed transactions increased 9%, all on a year-over-year basis. The company’s operating margin came in at an impressive 69% in the quarter, and it hauled in ~$3.35 billion in free
Earnings Roundup: TSLA, NEE, IBM, CMCSA, NOW
January 25, 2024
By Brian Nelson, CFA Tesla (TSLA) Misses Fourth-Quarter Expectations as Continued Uncertainty Looms Image: The Model Y was the best-selling vehicle globally in 2023. Image Source: Tesla Tesla missed fourth-quarter expectations on January 24, and the market continues to shy away from the electric-vehicle maker surrounding continued controversy over CEO Elon Musk’s request to have greater voting control over the company. We think Tesla may be past its prime heyday years, and while the firm hauled in a nice chunk of free cash flow during 2023 ($4.4 billion) as it retains a net cash position ($29.1 billion), the company will likely never find its way into the newsletter portfolios, which house our favorite ideas for consideration. In the quarter, Tesla’s
Earnings Roundup: NFLX, ASML, T, ABT
January 24, 2024
By Brian Nelson, CFA Netflix (NFLX) Lands WWE Raw and Puts Up Huge Streaming Paid Member Number Image: Netflix’s substantially improved free cash flow has made it a clear winner in the streaming wars. Image Source: Netflix. On January 23, Netflix reported mixed fourth-quarter results that showed a beat on the top line, but a bottom-line miss. The mixed performance, however, was overshadowed by a huge growth number in new global streaming paid memberships of 13.12 million during the quarter and a landmark $5 billion deal with TKO Group (TKO) to begin streaming WWE Raw exclusively on Netflix beginning in January 2025. 2023 was a banner year for Netflix. The company grew revenue 12% (up from 6% last year), pushed
Earnings Roundup: LMT, PG, MMM, GE, JNJ, VZ
January 23, 2024
By Brian Nelson, CFA Lockheed Martin’s (LMT) Backlog Reaches Record Highs Dividend Growth Newsletter portfolio holding Lockheed Martin reported solid fourth-quarter 2023 results January 23 that showed a beat on both the top and bottom lines, but revenue growth remained challenged in the quarter, declining on a year-over-year basis. The defense contractor continues to be shareholder-friendly, returning a nice chunk of the $6.2 billion in free cash flow it generated during 2023. Lockheed Martin ended the year with a record backlog of $160.6 billion and remains well-positioned to support the U.S. and its allies with myriad defense technologies. The company is targeting 2024 revenue in the range of $68.5-$70 billion, a modest increase from the $67.6 billion it posted in
Chinese Equities Still Uninvestable
January 22, 2024
Image: Large cap Chinese equities are back to levels first reached in 2005, almost two decades ago. By Brian Nelson, CFA Chinese equities (MCHI) used to be praised for their diversification benefits in a global portfolio, but over the past 20 years, they haven’t done much. The iShares China Large-Cap ETF (FXI) is now back to levels first reached in 2005, and we see little reason why Chinese equities will catch a bid given the strength in other alternatives, namely U.S. indices, particularly the Nasdaq (QQQ), and in risk-free assets, including certificates of deposit at local and online banks. On January 22, Reuters reported that China’s major state-owned banks are working to support the yuan, while selling U.S. dollars, so
3 Substantial Benefits of Dividend Growth Investing
January 21, 2024
Dear members: There are three primary benefits of a well-executed dividend growth strategy, one that is carried out with prudence and care and one that pays careful attention to the intrinsic value of the stock and its critical cash-based components. Albert Einstein is reported to have called compound interest the “eighth wonder of the world,” but dividend growth investing has the potential to offer long-term investors so much more! Let’s explain. 1) Reinvested Dividends Compound Over Time Over the past decade, I have grown to appreciate the compounding dynamics of reinvested dividends on appreciating stocks even more than historical studies have revealed. The strategy of dividend growth investing not only benefits from the reinvestment of dividends into the purchase of
Stock Reports on 25 Dividend Kings to Pad Your Dividend Growth Portfolio
January 19, 2024
Image Source: Jason Train By Valuentum Analysts Investors love dividends! After all, research has shown that companies that have paid an ever-increasing dividend for a long time do quite well in the stock market. In this note, you can download the stock reports of 25 Dividend Kings, or stocks that have raised their dividends in each of the past 50 years! Please select the company’s name/symbol below to download the 16-page report. Don’t forget that we also have Dividend Reports for these companies, too! —– Genuine Parts (GPC) — 67 Years Parker-Hannifin (PH) — 67 Years Procter & Gamble (PG) — 67 Years Emerson Electric (EMR) — 66 Years 3M (MMM) — 65 Years Coca-Cola
