Brian Nelson

Amazon’s Fair Value $4,000+ at the High End of the Range

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Image: Amazon By Brian Nelson, CFA We recently wrote a note about how lucky Amazon (AMZN) is to even be in existence today, “The Role of Luck in Investing and How To Think About It:” As investors, we underestimate the role of luck in a company’s long-term success. In February 2000, a month before the dot-com market crash, a fledgling Amazon raised $672 million in convertible notes to European investors. If the company hadn’t done so, there’d likely be no Amazon today, and one of the wealthiest men in the world, Jeff Bezos, might have just been a mere footnote in stock market history. Amazon would have been insolvent in 2001-2002 just like many of its other dot-com peers. That’s … Read more

General Motors Playing Catch Up

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Image: Hummer EV. According to General Motors’ website, the Hummer EV will be a “zero emissions, zero limits all-electric supertruck.” By Brian Nelson, CFA Most of the headlines focused on General Motors (GM) the past couple months had to do with its relationship with flailing electric heavy truck maker Nikola (NKLA). With GM’s executive suite largely distracted from the goings on at Nikola, Tesla (TSLA) has quietly changed the game in the bread-and-butter pickup heavy duty pickup truck market with last year’s launch of the company’s Cybertruck (view the unveil here). Investors will be hearing more about the Cybertruck soon. From our perspective, General Motors is playing catch up. It took Tesla’s successful launch of the Cybertruck in November 2019 … Read more

Best Ideas Newsletter Portfolio Holdings Are Surging!

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Image: The holdings in the Best Ideas Newsletter during the trading session November 4. We continue to pound the table on our best ideas. By Brian Nelson, CFA If you were like me, you stayed up as long as you could last night watching the U.S. election coverage before it became too difficult to keep your eyes open. When I went to sleep, it seemed as though Donald Trump would be re-elected. The only state that appeared to flip to the Democrats from the 2016 election was Arizona, meaning Trump would still retain greater than the 270 electoral votes required to gain re-election. Well, that was last night, and this is today. As more and more votes came in last … Read more

Our Thoughts on Magellan Midstream’s Latest Earnings

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Image Shown: Keeping the many headwinds facing the energy infrastructure space in mind, Magellan Midstream Partners LP remains one of our favorite midstream master limited partnerships. Image Source: Magellan Midstream Partners LP – October 2020 IR Presentation By Callum Turcan On October 30, Magellan Midstream Partners LP (MMP) reported third quarter 2020 earnings that beat both top- and bottom-line consensus estimates. The midstream master limited partnership (‘MLP’) space has faced enormous headwinds due to the ongoing coronavirus (‘COVID-19’) pandemic, though the firm was still able to generate sizable free cash flows during the first nine months of 2020. Magellan Midstream is a modestly-weighted holding in the High Yield Dividend Newsletter portfolio, and as of this writing, units of MMP yield … Read more

We Expect to Raise Our Fair Value Estimate of Honeywell

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Image: Honeywell’s Third Quarter 2020 Earnings Release Slide Deck By Brian Nelson, CFA With GE’s (GE) fall from grace years ago, Honeywell (HON) has taken the reigns as one of Valuentum’s top industrial ideas. That said, we don’t include Honeywell in any newsletter portfolio given weakening fundamentals and an increased net debt position, but it remains top of mind should our existing holdings start to register ratings on the Valuentum Buying Index that may start to point to some profit taking. Honeywell yields just north of 2%. We continue to expect our newsletter holdings to perform relatively better against a strengthening economic backdrop, and that means for us, Honeywell will remain on the bench. During Honeywell’s third quarter, results released … Read more

Coca-Cola’s 3.3% Dividend Yield Not Bad

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Image: Coca-Cola By Brian Nelson, CFA There are few companies that have stood the test of time like Coca-Cola (KO). With consumer preferences seemingly changing at the drop of a hat, it is hard to believe that the first glass of Coca-Cola was served in Atlanta more than 100 years ago, in 1886. That’s just 10 years after the first commercially successful combustion engine was invented and more than 20 years before the first Model T Ford rolled off the production line. The next 100 years for Coca-Cola won’t be as easy as the first, in our view, given health trends against sugar consumption and efforts to combat the obesity epidemic, but ongoing innovation may continue to keep this beverage … Read more

Digital Realty’s Momentum Continues, Raises Outlook

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Image Shown: An overview of Digital Realty Trust Inc’s asset base. Image Source: Digital Realty Trust Inc – Third Quarter of 2020 IR Earnings Presentation By Callum Turcan On October 29, the data center real estate investment trust (‘REIT’) Digital Realty Trust Inc (DLR) reported third quarter 2020 earnings that beat consensus revenue estimates and consensus funds from operations (‘FFO’) estimates. Please note that while FFO is an imperfect metric, particularly because it does not incorporate the REIT-in-question’s need to refinance maturing debt and tap capital markets for funds for growth, it provides a useful snapshot of how well the REIT-in-question can maintain its dividend in the near term. Digital Realty posted $1.54 per share in core FFO last quarter … Read more

We’re Reiterating Our $200 Fair Value Estimate for PayPal

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We continue to be big fans of PayPal. The company has a pristine balance sheet, high quality cash flow profile, impressive growth outlook, and is trading well below its fair value estimate as of this writing. Though investors initially sold off shares of PYPL following its third-quarter report November 2 due to its expected growth trajectory slowing down in the near term, we’re reiterating our fair value estimate of $200 per share as PayPal continues to deliver impressive fundamental performance. PayPal’s medium- and long-term growth outlooks remain stellar. Venmo could be a source of significant upside in the medium-term, and we are monitoring events closely. By Callum Turcan On November 2, PayPal Holdings Inc (PYPL) reported third quarter 2020 earnings … Read more

Kraft Heinz Shows the Power of the VBI

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Image: Years ago, shares of Kraft Heinz registered a rating of 1 on the Valuentum Buying Index (VBI) on two separate occasions, highlighting the company’s overpriced nature and weakening technicals. Rare and extreme ratings on the VBI, 1 = worst; 10 = best, tend to be the most informative and/or the most actionable for investors.    There are just too many net cash rich, free cash flow generating powerhouses with tremendous competitively advantaged business models tied to secular growth tailwinds that taking a flier on an overleveraged turnaround such as Kraft Heinz almost feels irresponsible. That said, shares yield ~5.2% as of this writing, so income investors might find a decent risk reward at the right price. With a 27% stake, … Read more

ICYMI — Dividend Growth Strategies Struggle

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Image: A large cap growth ETF (orange) has significantly outperformed an ETF tied to a dividend growth strategy, the SPDR S&P Dividend ETF (SDY), which mirrors the total return performance of the S&P High Yield Dividend Aristocrats Index. — By Brian Nelson, CFA — To no surprise to many members, several dividend growth strategies have faced tremendous pressure during 2020. The Journal recently wrote a piece on the topic, but from our perspective, the problem with many dividend growth strategies is that they tend to be balance-sheet agnostic and pay little attention to traditional free cash flow expectations, focusing only on the yield itself, sometimes dismissing future fundamentals in favor of historical growth trends and the inferior EPS-based dividend payout ratio. — In many dividend-targeted … Read more