Honeywell Jumps on Third-Quarter Report, Strong Guidance
October 27, 2022
Image Source: Honeywell By Brian Nelson, CFA On October 27, Dividend Growth Newsletter portfolio holding Honeywell International (HON) reported solid third-quarter performance and provided higher guidance for the full-year 2022. We continue to like the company as an idea in the simulated Dividend Growth Newsletter portfolio, as we expect robust dividend growth in the coming years. The high end of our fair value estimate of Honeywell stands at $224 per share. Shares yield ~2.2% at the time of this writing. During the third quarter of 2022, Honeywell reported organic sales growth of 9%, pointing to a double-digit pace of expansion in ‘Honeywell Building Technologies,’ ‘Performance Materials and Technologies,’ and ‘Aerospace.’ The firm’s operating margin also advanced 90 basis points higher,
McDonald’s, Chipotle’s Third-Quarter Results Were Solid, Strong Comp Performance
October 27, 2022
Image Source: Valuentum By Brian Nelson, CFA On a day where a high-profile stock such as Meta Platforms (META) is down more than 20%, it’s difficult to focus on the positives. But we are – we recently replaced Meta Platforms with McDonald’s (MCD) in the simulated Best Ideas Newsletter portfolio, and we’re not looking back. McDonald’s is popping nearly 4% during the trading session October 27, and we continue to point to the high end of the fair value estimate range for shares as a reasonable intermediate term target ($300 per share). We’ve been quite concerned about the macro environment during the past several months as inflation changed from a positive catalyst to business pricing and strong equity returns in
Visa’s Stock Remains Resilient, Huge Free Cash Flow Margins
October 26, 2022
Image Source: Visa By Brian Nelson, CFA Visa Inc. (V) is one of our top ideas in the simulated Best Ideas Newsletter portfolio. As a 10%-12% “weighting,” we have been very pleased to see its share price hold up during what is turning into one of the most difficult years for investors in a long time. Year-to-date in 2022, Visa’s shares are down less than 7%, as the ~6% pop during the trading session October 26 (at the time of this writing) has cushioned the blow. Our fair value estimate of Visa stands at $227 as shares yield ~0.93% on a forward annual estimated basis. We’re huge fans of Visa for three reasons. First, the company operates as a
Microsoft, Alphabet Calendar 3Q Reports As Expected; Pressured By Weakening Economy
October 26, 2022
Image Source: Abi Begum By Brian Nelson, CFA We’re playing the long game in the simulated Best Ideas Newsletter portfolio, and we still like large cap growth and big cap tech as a way to generate significant capital appreciation over the long haul. 2022 hasn’t been the best year for these areas, but as with any drawdown in some of the strongest free-cash-flow generating, net-cash-rich, secular-growth powerhouses, we believe that they once again will reach new highs — it may take a bit longer than previously expected, however. On October 25, 2022, two of our favorite companies, Microsoft (MSFT) and Alphabet (GOOG) (GOOGL) reported calendar third-quarter results. We had been expecting weakness in the PC market as well as in
Chip Stocks — Geopolitical Uncertainty Heightens in China; ASML, QCOM Still Strong Long-Term Considerations, But Expect Near-Term Fundamental Weakness
October 24, 2022
Image Source: The U.S. Department of Commerce By The Valuentum Team The global economic environment continues to reel from heightened inflation, which is pressuring consumer discretionary spending, but geopolitical uncertainty remains at a fever pitch. Russia’s invasion of Ukraine has unsettled investors, but the back-and-forth between the U.S. and China has chipmakers in the crosshairs. On October 7, 2022, the U.S. Department of Commerce released the following report aimed to restrict China’s ability to attain advanced computer chip technology: The Department of Commerce’s Bureau of Industry and Security (BIS) is implementing a series of targeted updates to its export controls as part of BIS’s ongoing efforts to protect U.S. national security and foreign policy interests. These updates will restrict the
Must Watch: MPT Failures and High Yield Dividend Breakdown Spiral!
October 23, 2022
Did you know that Valuentum’s income ideas are holding up great this year, far better than the traditional 60/40 stock/bond portfolio and what some call “sucker” yields, those companies with 8% dividend yields or higher? — The 60/40 stock/bond portfolio is down ~20% so far in 2022 and some high-yield stocks like mortgage REITs are down nearly 40%, but Valuentum’s income-oriented simulated newsletter portfolios, the Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio, are estimated to be down just 8.4% and just 10.1%, respectively, in 2022. — Preventing huge drawdowns in retirement is the name of the game, and those pursuing modern portfolio theory (MPT) have been caught by surprise, while income investors reaching for 8%+ yields may have just experienced permanent
AT&T’s Free Cash Flow Coverage of Its Dividend Is Looking Better But Economic Malaise Awaits
October 20, 2022
Image: AT&T’s dividend obligations have been substantially reduced, aiding in its coverage of the payout with free cash flow. Image Source: AT&T. By Brian Nelson, CFA AT&T Inc. (T) has taken investors on a wild ride the past couple years, first saying it would support its payout as recently as early 2021, and then cutting it as it pulled a 180 on its strategic vision. However, in the communication giant’s third-quarter report, released October 20, AT&T showed robust free cash flow generation ($3.84 billion) that nearly doubled cash dividends paid in the period ($2.01 billion). We liked this a lot as it reveals marked improvement in coverage on a year-over-year basis. However, the uncertain economic climate coupled with inflationary pressures
