The Power of Expectations: How Financial Advisors Can Improve Client Retention
March 21, 2023
Image Source: Frédéric Glorieux By Brian Nelson, CFA There’s a reason why Twitter is one of the most successful news outlets today. The same reason may be why football has largely replaced baseball as the most popular sport in America — despite baseball tracing its roots to the Civil War in the mid-19th century. This reason, too, may be why motor sports (think NASCAR) are America’s second-most watched sport after football. Look at the popularity of casinos. And of course, how can we forget when people quit their jobs in the late-1990s to become day-trading experts at the peak of the dot-com bubble—only to lose it all. Oh, and the excitement of winning the lottery! The reason behind these phenomena is
Berkshire Hathaway’s 2022 Shareholder Letter Addresses Buybacks
March 14, 2023
Image: Berkshire Hathaway has held up fairly well following the market rout in 2022. Image Source: TradingView — “A very minor gain in per-share intrinsic value took place in 2022 through Berkshire share repurchases as well as similar moves at Apple and American Express, both significant investees of ours. At Berkshire, we directly increased your interest in our unique collection of businesses by repurchasing 1.2% of the company’s outstanding shares. At Apple and Amex, repurchases increased Berkshire’s ownership a bit without any cost to us. The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices. Just as surely, when a company
Norfolk Southern’s Environmental and Safety Troubles Plague Stock
March 14, 2023
Image: Norfolk Southern’s environmental troubles have sent its stock back to pre-pandemic levels. The company is yet another example of why companies cannot take for granted how their operations can negatively impact the environment. Image Source: TradingView By Brian Nelson, CFA Environment, Social, and Governance (ESG) dynamics have always commanded a large share of executives’ mindshare, but ESG investing has taken on a more prominent role in investing given the preference of many investors to hold stock in companies that share their personal values. But this isn’t lip service. Entities that aren’t taking the highest care when it comes to protecting the environment and ensuring employee/consumer safety can face a whirlwind of negative publicity and huge backlash that can have
ALERT: We’re ‘Raising Cash’ in the Newsletter Portfolios
March 13, 2023
Image: American Union Bank, New York City. April 26, 1932. Public Domain “We firmly believe that an investment in a bank must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Why? Banks do not keep a 100% reserve against deposits. Our good friend George Bailey knew this very well when he tried to discourage Bedford Falls residents from making a “run” on the famous and beloved Building and Loan.” – Brian Nelson, CFA, September 4, 2013 SUMMARY OF CHANGES Best Ideas Newsletter Portfolio Johnson & Johnson (JNJ): 4%-6% à 0% Exxon Mobil (XOM): 4%-6% à 0% Chevron (CVX) 3%-5% à 0% Dollar General (DG): 3%-5% à 0% Korn/Ferry (KFY): 1%-2% à 0%
SVB Financial, Silvergate Capital, Credit Suisse Reveal Cracks in Global Financial System
March 9, 2023
Image: SVB Financial looks to be collateral damage of the Fed’s rate-hiking cycle, and we can’t rule out that other regional banks could have also managed interest-rate risk wrong. Shares of SVB Financial have collapsed, and other banks could be facing similar issues that have yet to come to light. Image Source: TradingView By Brian Nelson, CFA We don’t include any banks in the newsletter portfolios, but we include slight “exposure” to the Financial Select Sector SPDR (XLF) in the Best Ideas Newsletter portfolio, primarily for diversification reasons. We have never been fans of the banking business model, and here is what we wrote in the first edition of Value Trap: Theory of Universal Valuation: It’s likely we will have
We Woke Up on the Wrong Side of the Bed
March 9, 2023
By Brian Nelson, CFA Large Cap Growth Still Dominating Small Cap Value After the ‘value factor’ put up its worst performance in history during 2020, some retracement should have been expected in the subsequent 12-18 months, but large cap growth – our favorite stylistic area – continues to outperform. Since the publishing of the first edition of Value Trap: Theory of Universal Valuation in December 19, 2018, an ETF that tracks large cap growth (SCHG) has outperformed an ETF that tracks small cap value (IWN) by more than 45 percentage points. Using data that goes back to before the invention of the computer and television, researchers will tell you that there’s something called a small cap value premium. However, in
Dividend Growth Newsletter Portfolio Holding Dick’s Sporting Goods Doubles Dividend, Shares Soar!
March 7, 2023
Image Source: Dick’s Sporting Goods’ shares are breaking out of a very nice technical cup-and-handle pattern, and we continue to like shares as an idea in the Dividend Growth Newsletter portfolio. Image: TradingView By Brian Nelson, CFA We include Dick’s Sporting Goods (DKS) as an idea in the Dividend Growth Newsletter portfolio. On March 7, the company reported its fourth-quarter results for the three months ended January 28, 2023. Comparable store sales growth in the quarter came in at 5.3%, which was more than double that which consensus was looking for. The executive team also more than doubled its dividend (105%+), to $4.00 per share on an annualized basis, resulting in a ~2.8% forward estimated dividend yield on the basis
Markets Bounce Off Technical Support But Not Out of the Woods
March 6, 2023
Image: The market-cap weighted S&P 500 (SPY) bounced off technical support last week, both the 200-day moving average as well as the breakout of the downtrend line, but while this may push off any leg down in the near term, we won’t hesitate to “raise cash” on a few newsletter portfolio names if a breakthrough of support to the downside happens. Image Source: TradingView By Brian Nelson, CFA The 200-day moving average remains a key technical level for the market-cap weighted S&P 500. The risks that the market may break through both the 200-day moving average and the breakout of the technical downtrend line remain elevated, but the past week showed a successful test of technical support levels, in our
