Brian Nelson

PayPal’s Growth Engines Still Firing

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Image: PayPal continues to add millions of active customer accounts each quarter. Source: PayPal’s Q1 2016 Investor Update. By Brian Nelson, CFA Revenue up 23%, excluding foreign exchange rate fluctuations. GAAP operating margin up 90 basis points. GAAP earnings per share up 43%, to $0.30. Operating cash flow of $738 million. Free cash flow of $605 million, up 70% year-over-year. 1.4 billion transactions processed. Ended the quarter with 184 million active customer accounts, up 4.5 million. These were just a few headlines in PayPal’s (PYPL) first-quarter report, released April 27. PayPal is mainstream – it’s no longer just a way to send money between friends, if it truly ever was just this. The secular trend toward a cashless society is … Read more

Facebook: It’s All about The Vanity of the User

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Image Source: Sean MacEntee By Brian Nelson, CFA Our thesis on Facebook (FB) is one grounded on the firm foundation that the company holds one of the strongest competitive advantages of any business model, the network effect. What a network effect creates is quite simple to define, but extremely difficult to replicate. Said differently, as more users become engaged with Facebook, more businesses want to interact with Facebook, and as more businesses interact with Facebook, more users may want to engage within Facebook, and so on. It is a virtuous cycle of proliferating advertising revenue growth and optionality, much like we’ve witnessed with eBay’s (EBAY) auction business in the early days of the Internet and with the likes of MasterCard’s … Read more

Coach: Still On Path to Recovery?

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By Brian Nelson, CFA Why would we include Coach (COH) in the portfolio of the Dividend Growth Newsletter portfolio? This was a question we were asked quite frequently when shares had dipped into the mid-$20s, but we don’t hear it too much now with the company’s shares breaking north of $40 each. The company was added to the Dividend Growth Newsletter portfolio at $37.55 per share in September 2014, but the handbag maker has been paying a rather hefty yield since then, adding up to a respectable total return for the unique exposure within the context of a dividend growth strategy. The position in Coach had given us heartburn in the past, “Coach…Ouch! (April 2015),” and we weren’t exactly pleased … Read more

Rivals Gaining Ground Against B-Dubs?

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By Brian Nelson, CFA It turns out that franchisees selling restaurants back to the franchisor is the red flag we knew it was. If you recall, Buffalo Wild Wings (BWLD) announced deal-related expenses related to the acquisition of more than 40 franchised locations in Texas, New Mexico, and Hawaii, “We’ll Be Looking to Add to B-Dubs Sometime after the Drop (October 2015),” and at the time, we were willing to give the restaurant the benefit of the doubt that this wasn’t the red flag it turned out to be. We were wrong. After all, if owning a B-Dubs is so hot, then why would the franchisee be looking to sell it back to the company, and why to the company? … Read more

Apple: Nowhere To Run, Nowhere To Hide

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By Brian Nelson, CFA Today’s stock market is a difficult one. That Apple (AAPL) is selling off after disappointing fiscal second-quarter results is unfortunately no surprise to us, “Apple Will Go Lower… And It Will Be ‘Forced’ Into Acquisitions (January 2016).” There may be “nowhere to run, nowhere to hide” for market participants seeking full exposure to equities. Unfortunately, it’s no consolation to the reader that missed our profit-taking alert in Apple a few months ago, and our discussion to take even more shares off the table “Looking To Trim Apple… (December 2015).” In August 2015, we removed one third of the position in Apple from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio at $108.92 for a … Read more

Iron Ore Market Stability Still A Ways Off

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Image Source: Peter Craven After an increase in iron ore prices in early 2016, some iron ore producers have warned that the rally may not be sustained, while others believe the beginning of a prolonged rebound may be in place. The Chinese economy (FXI), the largest consumer of iron ore in the world, remains in a transition phase while iron ore producers continue to increase production, with some producing at record levels. Many major suppliers are currently undertaking large investment projects that will create material production capacity growth in the future as well. Though we cannot deny the slight bounce in iron ore prices, we aren’t sure supply and demand rebalancing is right around the corner. Recent headlines may cause … Read more

Dividend Increases/Decreases for the Week Ending April 22

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Below we provide a list of firms that raised/lowered their dividends during the week ending April 22. 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 American Water Works (AWK): now $0.375 per share quarterly dividend, was $0.34. Aspen Insurance Holdings (AHL): now $0.22 per share quarterly dividend, was $0.21. Canadian Pacific Railway (CP): now C$0.50 per share quarterly dividend, was C$0.35. Celanese (CE): now $0.36 per share quarterly dividend, was $0.30.           Charles Schwab (SCHW): now $0.07 per share quarterly dividend, was $0.06. Citizens Financial (CFG): now $0.12 per share quarterly dividend, … Read more

GE Continues Transformation; Steady Growth at Honeywell

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Shown: GE’s backlog of unfulfilled orders remains robust, a sign of durability and strength. Image Source: GE’s earnings presentation. We continue to be encouraged by the progress newsletter portfolio holding General Electric (GE) is showing in its GE Capital exit plan. The firm is now ahead of schedule on that plan, having signed $166 billion in asset sales and closed $146 billion of those sales. Its transformation is now ~80% complete, and it continues to pick up momentum in 2016. The company also submitted its application for de-designation as a systematically important financial institution (SIFI) on March 31. However, as GE continues its transformation, which includes the integration of recent acquisition Alstom, its reported results have become quite convoluted as … Read more

Since 2014: Microsoft Up ~50%; Alphabet Up ~30%, Visa Up ~40%

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Image Source: Brandon Martin-Anderson The past few weeks have been difficult ones for the newsletter portfolios. Sure, we’ve had some great reports from Hasbro (HAS) and Union Pacific (UNP), but the broad performance of some of our high-profile holdings hasn’t been what we’ve grown accustomed to. We’ve been concerned about the market’s “fluff” for some time, but equities have been racing ahead in any case, mostly in light of expectations for ongoing delays in continued contractionary monetary policy by the Fed, so the sluggish reports weren’t exactly what we were looking for to end the week. On Friday, April 22, we were “hit” with three rather glum quarterly reports from Microsoft (MSFT), Google – now known as Alphabet (GOOG, GOOGL), … Read more

The Market – On Its Head

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By Brian Nelson, CFA The sector/theme returns have almost been turned on their head as some of the worst performers in the first few weeks of 2016, namely materials (XLB), energy MLPs (AMLP, AMZ), and energy (XLE), have transformed into leaders through the latest data update, April 21. As we outlined in “Alerts: Adding More High-Quality Exposure, (April 2016)” the dividend “track record” growth craze is on, in our view, and yield-rich exposures from utilities (XLU) to the dividend-growth focus itself (SDY) have rallied more than 9% in the year thus far. The metals gold (GLD) and silver (SLV) have also proved to be good trades out of the gates thus far in 2016, up ~18% and 23%, respectively, though … Read more