Brian Nelson

Buffett’s Berkshire, Corporate Buybacks on Pace for Record; Lithium, Steel Prices on the Move

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Image Source: Berkshire Hathaway, Shareholder Letter (2017). “Fifteen common stock investments at year end that had the largest market value.” “The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.” – Warren Buffett, Shareholder Letter (2017) By Kris Rosemann and Brian Nelson, CFA Simulated Best Ideas Newsletter portfolio holding Berkshire Hathaway’s (BRK.A, BRK.B) fourth-quarter results didn’t disappoint, and commentary from the Oracle of Omaha, Warren Buffett, was at its finest in the company’s Shareholder Letter. The letter was chock full of insights, from an emphasis on normalized earnings power, to buying stocks at a “sensible purchase price,” to warning about the dangers of “purchasing frenzy” with respect to M&A, … Read more

In the News: General Mills, Realty Income, Energy Transfer

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General Mills makes a big deal, Realty Income delivers, while Energy Transfer tries to battle back to even. By Kris Rosemann US Secretary of Defense Jim Mattis came out in support of recommendations from the Commerce Department for targeted tariffs on steel and aluminum. While the Defense Department recognizes that imports of low-cost steel (SLX) and aluminum resulting from unfair trading practices undermine national security, it also warns that more broad action could irritate allies. President Trump has until April to decide whether or not to take action on the recommendations from the Commerce Department for tariffs up to 24% and 7.7% on foreign steel and aluminum, respectively. Consumer food product giant General Mills (GIS) made a splash before the … Read more

Johnson & Johnson in Transition Mode

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Image Source: Johnson & Johnson Fourth Quarter Earnings Presentation Shares of Johnson & Johnson have performed well since being added to both the simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio. We continue to be impressed with the depth of the clinical pipeline as Johnson & Johnson has an appealing mixture of mature and early-stage products that power the portfolio. Let’s examine the three main franchises of the portfolio to gain a better understanding of the depth of Johnson & Johnson’s Pharmaceutical division. By Alexander J. Poulos Immunology The Immunology Division remains the engine that drives performance at Johnson & Johnson (JNJ) as the group accounts for nearly one third of total sales. The division reported operational … Read more

Market Valuations Not “Insane” But Certainly Not Cheap Either

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The stock market is not insanely overpriced, but it is certainly not cheap either. We’re watching the technicals and moves in the 10-year Treasury closely for signs of where the market may go next. We discuss Walmart’s recent disappointment and add another to the list of companies that the Dividend Cushion ratio effectively highlighted the heightened income risk profile of, prior to the dividend cut. Chipotle is on the move! By Kris Rosemann and Brian Nelson, CFA According to the February 16, 2018 release of Factset’s Earnings Insight, the forward 12-month P/E ratio for the S&P 500 is still north of 17 times, above both the 5-year average of 16 and the 10-year average of 14.3. The “right” multiple for … Read more

The Future for Independent Advisors and Planners Is…Stock Selection? What?

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Image Source: 401K Calculator By Brian Nelson, CFA The world is fast-changing, and the financial markets are changing even faster. One of the most influential writers in the blogosphere, Josh Brown (aka the Reformed Broker) wrote one of the most thoughtful pieces I’ve read in a long time last October, “Just own the damn robots.” The gist of the piece is that technology is taking jobs everywhere, and employees that are being displaced may be investing in the same companies that are displacing them as a form of insurance (investing in their “own destruction,” so to speak). It was a fresh read and a fascinating viewpoint. As a former director in Morningstar’s equity and credit department that headed up training … Read more

Our Reports on Stocks in the Hotels Industry

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This listing has been discontinued. Please view the following links for our work on Hotels & Gaming stocks: Gaming & Hotels: BYD, CHDN, HLT, LVS, MAR, MGM, PENN, PNK, WYNN Structure of the Hotels Industry The hotels industry is highly competitive, with over 900 lodging management companies in the US alone. Demand for hotel rooms is very cyclical, and fluctuations in both occupancy rates and revenue per available room (RevPAR) should be expected. Firms deal with the concept of perishable inventory, which tends to create pricing pressure in order to attract customers to meet fixed costs. Aggressive online marketing methods by Internet travel intermediaries can also hurt performance. Brand recognition and location are areas of competitive advantages, but we don’t … Read more

A Key Inflection Point for Gilead Sciences

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We have closely followed events at Gilead Sciences for signs of an inflection point as we have long felt the market is myopically focused on the Hepatitis C franchise instead of cash flows. Our decision to add the idea to the simulated Dividend Growth Newsletter portfolio and the simulated Best Ideas Newsletter portfolio has played out very well as the share price remains locked in an uptrend. We are updating our thesis following the recent conference call. By Alexander J. Poulos Looking Past HCV Image Source: Gilead Sciences Lost in the cacophony of opinions on Gilead (GILD), we are amazed at the intense focus on the Hepatitis C franchise by the investment community. In our opinion, the HCV franchise remains … Read more

Subscribe: The Nelson Exclusive Is Simply One of a Kind

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“I think the Nelson Exclusive publication is worth far more than what we charge for it, and we’re making it even better.” Hi folks, I have to admit that I was quite worried about launching the Nelson Exclusive May 2016. I didn’t know what to expect, and as we’ve progressed with new ideas each and every month, I’ve been working hard to incorporate feedback. For starters, we’re going to be moving to tracking the income characteristics of the income ideas on a go-forward basis as a measure of their success. Many members have voiced this long-term income-oriented preference, and frankly we think it makes a lot of sense. Not one income idea in the Exclusive has cut its dividend! But … Read more

Our Reports on Stocks in the Home Health Care Industry

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Image Source: Addus HomeCare This listing has been discontinued. Please access the following article for our last published analysis and ratings of companies in this industry: /More_Optimizing_to_Maximize_the_Value Structure of the Home Health Care Industry The hospice and home/community-based services industry is subject to extensive federal and state regulation. Hospice care in the US is competitive, and rivalries in the home and community-based services industry are no less so. The market for home and community based services is north of $45 billion in the US and has been expanding at roughly a 10% compound annual growth rate in recent years. Still, barriers to entry are limited (despite requirements for licensing), and the industry remains highly fragmented. There are over 33,000 homecare … Read more

Stocks Stage Comeback, US Government Budget Released

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Image shown: The performance of the Dow Jones Industrial Average since September 2017. The market continues to lick its wounds following the sell-off. We’re watching interest rates and technicals for signs where the market may go next. By Kris Rosemann and Brian Nelson, CFA The US 10-year Treasury yield (TLT, TBT) hit a four-year high before the open February 12, suggesting recent volatility in the equity markets is anything but going away in the near term, despite stocks bouncing back from the rough week that ended February 9. Rising interest rates may not create a financial crisis, but it could challenge the widely-held view that stock prices only increase over long-enough periods of time. After all, the past 40-year bull … Read more