Brian Nelson

Brian Nelson – Author – Value Trap – Valuentum

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READ: PRAISE FOR VALUE TRAP: THEORY OF UNIVERSAL VALUATION ———- Wall Street doesn’t know it has a problem. Index and quantitative investors have been free-riding on the backs of active managers for years, but growth in price-agnostic trading may finally have reached the tipping point. Brian Nelson, former Director of Methodology at Morningstar and President of Investment Research at Valuentum, explains how enterprise valuation forms the Theory of Universal Valuation and why a focus on it may not only help you avoid value traps, but also save you from the next financial crisis. This is a 356 page book, including Preface, Notes, Bibliography and Index. Download the electronic sell sheet here (pdf). The text is a response to many worrisome trends … Read more

Xilinx Rides Momentum to Impressive Free Cash Flow Generation

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Image Source: Xilinx Analyst Day presentation Recent addition to the simulated Dividend Growth Newsletter portfolio Xilinx continues to impress with its robust free cash flow generating capacity, and the company is taking advantage of momentum in key end markets as its top-line growth has been nothing short of impressive. By Kris Rosemann Shares of recent addition to the simulated Dividend Growth Newsletter portfolio Xilinx (XLNX) soared after it surpassed market expectations in its fiscal third quarter and provided compelling upside guidance for its final quarter of fiscal 2019. The company continues to be a tremendous example of free cash flow efficiency, and we think it makes up for its relatively small dividend yield with its robust dividend growth potential. Shares … Read more

Our Report on the Regional Banks and Asset Management Stocks

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Image Source: Carlssa Rogers Structure of the Regional Banks/Asset Management Industry The regional banking and asset management industry is based almost entirely on the confidence of intermediaries and counterparties that make up the building blocks of the financial system. An investment in a bank or asset management firm must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Though we don’t expect one anytime soon given the recent favorable stress-test results of the largest US banks, it’s worth noting that there have been three significant banking crises during the past three decades alone: the savings and loan crisis of the late 1980s/early 1990s; the fall of Long-Term Capital … Read more

Consumer Staples Giants Fight Input Cost Inflation

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Image source: Procter & Gamble fiscal second quarter presentation Procter & Gamble and Kimberly-Clark reported calendar fourth quarter earnings January 23, and both were able to deliver organic sales growth in the period. Commodity cost inflation and currency weakness are key headwinds to keep an eye on moving forward as they have weighed on margin performance, particularly at Kimberly-Clark as Procter & Gamble reported impressive productivity cost savings. By Kris Rosemann Consumer staples giants Procter & Gamble (PG) and Kimberly-Clark (KMB) are working to offset the impact of input cost inflation with pricing power and cost saving and productivity initiatives. Currency headwinds have proved to be a material drag on reported sales growth of late, but both companies were able … Read more

Consider Selling Discipline = Systematic, Forward-looking, Repeatable

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Image shown: An illustration of Valuentum’s call on Kinder Morgan during 2015. You can read about this in more detail in the Preface of Value Trap: Theory of Universal Valuation. For a consider-selling discipline to be successful, it must be systematic, forward-looking and repeatable. The Valuentum process worked equally well with General Electric during 2017 (image later in note). No changes to simulated newsletter portfolios. By Brian Nelson, CFA Good morning everyone! The markets took a shellacking yesterday with the Dow Jones Industrial Average (DIA) falling over 300 points during the trading session January 22. Had there not been a near-100 point leap in the Dow during the past few minutes of trading, the fallout may have been worse. Most are … Read more

Johnson & Johnson Overcoming Pharma Pricing Pressure

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Image Source: Johnson & Johnson fourth quarter presentation Johnson & Johnson’s ‘Pharmaceutical’ segment continues to deliver top-line growth despite ongoing headwinds related to net price decreases in the US pharma space. The company remains one of our favorite dividend growth ideas as its higher-growth ‘Pharmaceutical’ segment is augmented by a solid ‘Consumer’ business and improving ‘Medical Devices’ business. By Kris Rosemann Simulated newsletter portfolio idea Johnson & Johnson (JNJ) is simply a powerhouse, but that does not mean its shares are immune to broader market volatility, global economic expectations, and headline risk. While the final of those factors via ongoing legal issues has provided an overhang on shares of the consumer and pharmaceutical giant, its track record of consistency cannot … Read more

Conference Call Coming Soon, Catch Up This Weekend

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Image shown: The markets continue to rally significantly since the near-term bottom in December. Here’s the email we sent to members December 26.  No changes to simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio (contact us if you missed the latest notification regarding the simulated High Yield Dividend Newsletter portfolio). This article was sent to members via email January 19. That email can be accessed at the link that follows this article. Conference Call Monday, January 28, 11amET/10amCT. We’ll talk about website navigation, how to use the stock and dividend reports, and dig deep into our capital-appreciation and dividend growth methodology. Details to follow, but add this date/time to your calendar. Read what some of our members have … Read more

Markets Continue to Recover

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Image shown: The markets continue to rally significantly since the near-term bottom in December. The decision to move the cash “weightings” to zero in the simulated portfolios of the Best Ideas Newsletter and Dividend Growth Newsletter during the trading session December 27 has been quite rewarding for members that have been following our research and newsletters. The S&P 500 SPDR. No Changes to Simulated Newsletter portfolios. This article was sent to members via email January 18. The original email can be accessed via the link that follows this article. Brian Nelson, CFA The S&P 500 (SPY) continues to march higher in this young 2019, and we trust many of you are pleased with what is turning into quite a nice … Read more

Schlumberger Enters 2019 with Optimism

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Image source: Schlumberger investor presentation We recently put Schlumberger on members’ radars, and it appears as though the market is picking up on what we’ve been highlighting as shares surged following its fourth quarter report. By Kris Rosemann  Shares of leading energy equipment and services provider Schlumberger (SLB) received a nice boost following its fourth-quarter 2018 earnings report, released January 18, thanks to expectations for a positive supply/demand balance to drive a gradual recovery in oil prices in 2019. Uncertainty in its North American onshore outlook continues to raise concerns, but management is anticipating solid single-digit growth in international markets in 2019. Here’s what we had to say about the company prior to the release of its earnings report: —– Schlumberger has been hurt by … Read more

Kinder Morgan Reiterates Dividend Growth Intention

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Image shown: Kinder Morgan’s pipeline network and estimated breakdown of 2018 EBDA. Source: Kinder Morgan investor presentation Pipeline operator Kinder Morgan has benefited from a significant increase in natural gas supply and demand of late, and it expects more of the same in 2019. Management continues to execute on its capital allocation priorities, and it reiterated previously-announced guidance for dividend growth in the years ahead.  By Kris Rosemann 2018 was a transformative year for Kinder Morgan (KMI). The once-troubled pipeline operator has come a long way in terms of capital allocation since its massive dividend cut in late 2015, but management continues to expect significant growth in the payout in the years ahead. The company’s growth in 2018 (fourth quarter … Read more