Brian Nelson

The Valuentum Team Talks Powell Speech and Threat of Global Recession

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Last week, China issued retaliatory tariffs on US goods, and Trump responded in kind, escalating trade tensions. Caught in the middle of this US-China trade war is the Fed, however. Let’s sit down with the Valuentum team and kick things off with our thoughts on Fed Chairman Powell’s speech, Challenges for Monetary Policy issued August 23 in Jackson Hole, WY. Our latest Economic Roundtable can be accessed here. Matthew Warren: Powell is certainly leaving the door open for cuts if needed. To me, it’s largely pushing on a string. I don’t think cost of capital is the problem. Capital is already cheap. Mortgages aren’t even following the 10-year (TLT, TBT) down fully. Banks (XLF) won’t take credit card rates down … Read more

Not Worried About Cisco

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Image Source: Fiscal fourth-quarter 2019 press release We think the market is overreacting when it comes to Cisco’s outlook. Our fair value estimate remains in the mid-$50s, and Cisco’s Dividend Cushion ratio is still very healthy at ~2.8x. By Brian Nelson, CFA On August 14, Cisco (CSCO) reported solid fiscal fourth-quarter results (ends July 2019) that showed revenue growth of 6% on a year-over-year basis, while non-GAAP earnings per share leapt 19%. The performance was roughly in-line with the growth rates for full-year fiscal 2019, which came in at 7% and 20%, respectively. The pace of expansion was solid, its transition to a business model with software subscriptions continues nicely (now at 70% of its software revenue, up 12 points … Read more

Trump “Tweet Storm” Reveals Increased Frustration with Fed, China

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— Markets are starting to look toppy. — By Brian Nelson, CFA — The markets are under heavy pressure Friday, August 23, as China escalated the trade war with new retaliatory tariffs on $75 billion worth of U.S. goods (soybeans and autos), including a 5% tariff on U.S. crude oil prices. Removing the Energy Select Sector SPDR (XLE) from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio August 14 looks to have been a savvy move. Following the much-anticipated speech from Fed Chairman Powell today, President Trump responded with a series of tweets that showed tremendous frustration with the current situation. Here is the Twitter thread, reproduced below: — As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or … Read more

Kinder Morgan Reaches a Deal to Divest Stake in Canadian Spin-Off

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Image Shown: A look at Kinder Morgan Inc’s (KMI) massive oil & gas infrastructure operations that crisscross North America. The natural gas midstream giant is selling its Canadian segment by divesting its 70% equity stake in Kinder Morgan Canada and the US portion of the Cochin pipeline to Pembina Pipeline Corporation (PBA). Image Source: Kinder Morgan Inc – IR Presentation By Callum Turcan Dividend Growth Newsletter portfolio holding Kinder Morgan Inc (KMI), a giant in the natural gas midstream space, finally reached a deal to sell the remaining stake in its Canadian spin-off. On August 21, Kinder Morgan announced that it had sold its 70% equity stake in TSX-listed Kinder Morgan Canada Limited (KMLGF) along with the US portion of … Read more

Dividend Increases/Decreases for the Week Ending August 23

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Below we provide a list of firms that raised their dividends during the week ending August 23. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Altria (MO): now $0.84 per share quarterly dividend, was $0.80. Atrion (ATRI): now $1.55 per share quarterly dividend, was $1.35. Avnet (AVT): now $0.21 per share quarterly dividend, was $0.20. Canadian Banc Corp (CNDCF): now CAD 0.0875 per share monthly dividend, was CAD 0.0865. Canadian Imperial Bank (CM): now CAD 1.44 per share quarterly dividend, was CAD 1.40. Community Bank System (CBU): now $0.41 per share … Read more

What’s on the Valuentum Team’s Mind?

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Let’s get the Valuentum team’s thoughts on recent developments. No changes to newsletter portfolios. Last Friday, August 16, Bank of America (BAC) CEO Brian Moynihan said in a Bloomberg interview, “We have nothing to fear about a recession right now except for fear of recession.” We sat down with the Valuentum team to get their thoughts. Let’s go around the horn. Callum Turcan: Interesting take, and I get why he thinks that way. The feedback loop of recession fears prompting businesses to invest less which in turn hurts consumer spending by weakening wage growth/employment growth rates thus leading to additional reductions in business investment. However, I think we are past the point of fear being the main enemy. Poor industrial … Read more

Target Stuns, Shares Jump Higher

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Image Shown: Shares of Target Corporation (TGT) leapt higher on August 21 on the back of its strong performance during the second quarter of FY2019. In particular, the retailer’s comparable same store sales growth was quite impressive given the hard comparison period, with e-commerce and same-day fulfillment leading the way. By Callum Turcan On August 21, Target Corp (TGT) reported very strong second quarter FY2019 earnings (three months ended August 3) that sent shares up ~20% on the trading session. For starters, comparable store sales growth clocked in at 3.4% year-over-year and was up 9.9% on a two-year basis (adding comp growth from the second quarter of 2018 and 2019 together). That indicates this was much more than just a … Read more

Home Depot, Lowe’s Largely Unfazed By Lumber Price Deflation

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Image Source: Mike Mozart The home improvement retailing market appears very, very healthy, and while consumers could have already taken advantage of ultra-low rates to do home repairs, additional Fed cuts certainly won’t hurt the backdrop for home improvement retailers. Home Depot and Lowe’s continue to put up solid results. By Brian Nelson, CFA On August 20, Home Depot (HD) reported decent second-quarter results, with total reported sales advancing 1.2% on a year-over-year basis thanks to solid comparable store sales expansion of 3% (3.1% in the U.S.). Net earnings came in at $3.17 per share, growing 3.9% from the same period a year ago. Though many viewed the comp performance as somewhat disappointing, management noted that it experienced “accelerating comp … Read more

Nvidia Beats Low Expectations and Shares are Rewarded Accordingly

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Image Source: Nvidia Corporation – IR Presentation By Callum Turcan Nvidia Corporation (NVDA), like the rest of the semiconductor industry, has been on a wild ride over the past few years. On the one hand, the industry has benefited from the cloud-computing build out and the rise of smartphones, along with the emergence of autonomous driving, the internet of things (“IoT”), machine learning, and artificial intelligence. On the other hand, semiconductors are now contending with headwinds from the bust in the cryptocurrency craze, the sharp slowdown in data center investments due in part to ongoing trade wars, and other factors like excess inventory. Expectations were very low for Nvidia heading into its second quarter FY2020 earnings, released August 15, which … Read more

Owens-Illinois’ Debt Load Is Daunting, We Are Staying Away From This Value Trap

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Image Source: Owens-Illinois Inc – IR Presentation By Callum Turcan Owens-Illinois Inc (OI) is a global manufacturer of glass packaging products, and we see the firm as a major beneficiary of the shift in consumer preferences towards non-plastic packaging options for health and environmental reasons. As of this writing, shares of OI yield 1.9% on a forward-looking basis after management initiated a new dividend policy that saw common quarterly payouts commence in 2019. While Owens-Illinois’ share price below $11/share, as it is at the time of this writing, appears cheap at first glance because shares are trading at a steep discount to our $17 per share fair value estimate, we caution that its technicals are telling another story. Investors were … Read more