Brian Nelson

No Recession At Walmart; Estee Lauder Not Cheap

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Image Source: Mike Mozart Walmart’s results were quite reassuring regarding the health of the economy. There are also pockets of significant strength, with prestige beauty being catapulted by a “selfie generation.”  By Brian Nelson, CFA No Recession At Walmart Following what can best be described as “carnage” across the retail sector when Macy’s reported August 14, Walmart (WMT) eased some of the concerns in the retail sector when the bellwether reported August 15. Although Amazon (AMZN) seems to get most of the attention when it comes to assessing the health of the consumer, Walmart remains twice as large, as measured by revenue. Walmart generated ~$514 billion in revenue during its last fiscal year, while Amazon hauled in ~$233 billion. If the … Read more

Investors Aren’t Sold on Lear’s Ostensibly “Cheap” Valuation and Neither Are We

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Image Shown: While Lear Corporation appears attractive at first glance, its technical performance tells a different story. The market is concerned that the global synchronized downturn that has emerged will get worse, which would weigh on Lear’s expected financial trajectory. Global automotive sales are already coming under pressure, and there’s not much Lear, as a leading auto parts supplier, can do about that. We think the market might be right on this one. By Callum Turcan On August 16, we updated our reports for the auto parts supplier industry and those updated reports can be accessed here. Lear Corporation (LEA) stood out right away. The company supplies auto parts to customers all around the world, namely electrical power management systems … Read more

Our Reports on Stocks in the Broad Line Semiconductor Industry

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Image Source: Laineema Structure of the Broad Line Semiconductor Industry The broad line semiconductor industry is characterized by intense competition, rapid technological change, and frequent product introductions. The number and variety of computing devices have expanded rapidly, creating a connected landscape between suppliers and competitors. New market segments have emerged rapidly (smartphones, tablets), and constituents must continuously innovate to maintain share as traditional PC demand faces pressure. Though some firms may gain advantages via the combination of their manufacturing/test facilities with their design teams, we think the structure of the group is poor. We’ve optimized our tehnology coverage. To access the reports, please select here.

Ebix Might Be a Value Trap

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Image Source: Ebix Inc – IR Presentation By Callum Turcan Ebix Inc (EBIX) is a leading international provider of on-demand software and e-commerce services to the healthcare, insurance, financial, and e-learning industries. In our latest 16-page stock report covering Ebix, which can be viewed here, the low end of the fair value estimate range stands at $44/share. With shares of Ebix trading well below that at ~$34/share as of this writing, it would appear at first glance that the technology company may be an appealing capital appreciation opportunity. However, please note that the firm’s techincals are terrible and have been getting worse after staging a short-lived recovery in early-2019, indicating the firm may represent a Value Trap. As of this … Read more

We Have Dropped Coverage of the Auto Parts Supplier Industry

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Image Source: Don O’Brien, Darryl Braaten Structure of the Auto Parts Supplier Industry The highly-cyclical auto supplier industry depends on economic conditions and consumer confidence. Volatile gas prices impact a supplier’s input costs and the types of vehicles demanded by consumers. OEMs have considerable bargaining power over suppliers in negotiating terms on largely-commoditized parts. The industry is regulated by environmental and safety laws, providing both challenges and opportunities. Suppliers have considerable operating leverage and remain extremely competitive, which prevents outsize economic returns over the long haul. In general, we don’t like the structure of the group. We have dropped coverage of the Auto Parts Supplier industry.

Dividend Increases/Decreases for the Week Ending August 16

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Below we provide a list of firms that raised their dividends during the week ending August 16. 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 CAE (CAE): now CAD 0.11 per share quarterly dividend, was CAD 0.10. Exchange Income (EIFZF): now CAD 0.19 per share monthly dividend, was CAD 0.1825. Farmers National (FMNB): now $0.10 per share quarterly dividend, was $0.09. Group 1 Automotive (GPI): now $0.28 per share quarterly dividend, was $0.26. IF Bancorp (IROQ): now $0.15 per share quarterly dividend, was $0.125. Magic Software (MGIC): now $0.156 per share … Read more

Macy’s Cuts Guidance, Dividend Cut Could Be on the Horizon

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Image Source: Macy’s Inc – IR Presentation By Callum Turcan Retailers (XRT, RTH) have been struggling as the e-commerce shift has stressed margins and hurt foot traffic at stores and malls all across America. Macy’s Inc (M) had fared better than most, but that’s beginning to change. The company reported second quarter FY2019 earnings on August 14 which came with a guidance cut that saw shares of Macy’s plummet below their late-2017 lows. While Macy’s recovered throughout the trading day, the market is clearly signaling that investors are expecting more pain is ahead. As of this writing, shares of Macy’s yield ~9.0%, a major red flag. Guidance Cut Management cut earnings guidance for the full fiscal year while keeping estimates … Read more

Our Reports on Stocks in the Software Industry

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Structure of the Software Industry Firms that serve the mature software markets—or those consisting of basic business applications—have powerful distribution channels, large installed bases, and fortress balance sheets. These entrenched competitors benefit from significant customer switching costs, which make it nearly impossible for new entrants to gain a foothold. Participants generally benefit from high-margin license revenue and generate significant returns on investment. Still, the shift to cloud computing has created both opportunities and challenges, and the enterprise software landscape continues to evolve. We like the group. We’ve optimized our tehnology coverage. To access the reports, please select here.

Alert: Markets Weakening, Raising Cash

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Image Shown: In our December 26, 2018, note to members, we moved the simulated Best Ideas Newsletter and simulated Dividend Growth Newsletter portfolio to “fully invested” from a cash “allocation” of 30% and 20%, respectively at the high end of the range. We are raising cash today. — This article was emailed to members here. — Alert: Markets Weakening, Raising Cash — Notification: Removing the Energy Select Sector SPDR (XLE) and the Financial Select Sector SPDR (XLF) from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. —Hi everyone, — It looks like it’s shaping up for another ugly and volatile day in the markets. — There are myriad risks as we near the end of this now-decade long bull market: … Read more

A Tale of Two Big Agricultural Industries: Protein Producers Win and Farm Equipment Manufacturers Lose After Recent USDA Report

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Image Shown: The tale of two big agricultural companies in one chart, with shares of poultry producer Sanderson Farms Inc (SAFM) shooting up on Monday, August 12, as chicken feed prices fell after a recent USDA report (which sent corn prices sharply lower) while shares of agricultural equipment manufacturer AGCO Corporation (AGCO) tanked as the market priced in continued pressure on US farm incomes and the dynamic impact that has on demand for farm equipment. By Callum Turcan On August 12, the USDA released a report that stated US farmers had planted more corn than expected at 90 million acres (2.6% higher than consensus estimates) and that forecasted corn yields were also higher than expected at 169.5 bushels an acre … Read more