Brian Nelson

Dividend Increases/Decreases for the Week Ending January 30

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Let’s take a look at dividend increases/decreases for the week ending January 30.

Wealth or Income? You Decide.

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I know better than to jump up and down in sheer bliss with the S&P 500 (SPY) basing at 2,000. Frankly, the chart looks toppy and “tired,” and with the ongoing series of lower tops, I wouldn’t be surprised that we break down in the coming weeks. Earnings disappointments have been rampant, and following one of the strongest periods of economic expansion in some time during the third quarter (+5%), the pace of US GDP growth in the fourth quarter barely edged out half of the preceding period’s rate of expansion (+2.6%). But that’s yesterday’s news (well, last year’s really), and what concerns me most is that first-quarter GDP will be quite disappointing, even with the stimulus brought about by … Read more

Understanding Amazon’s Uncertain Earnings Leverage

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Valuentum’s President Brian Nelson talks about the massive earnings leverage in Amazon’s (AMZN) financial model, and why it creates tremendous uncertainty in estimating the company’s intrinsic worth. An excerpt from Part II of Valuentum’s four part investment education workshop. If you cannot see the video, please click here.

Google’s Cash Is Real

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Which company ended 2014 with total cash of $64.4 billion and short and long-term debt of $5.2 billion? If you read the title, you can probably guess it without much difficulty: Google (GOOG, GOOGL). Focusing purely on beats and misses of accounting earnings-per-share ignores one of the most important financial statements: the balance sheet. Not considering the financial health of a company, and specifically a firm’s net cash position (its total cash less total debt) is similar to ignoring an individual’s savings account and obligations when calculating his/her net worth. It just doesn’t make any sense. Yet, the industry loves throwing multiples on accounting earnings with little regard to a company’s net cash or net debt position. Mr. Market’s love … Read more

We’ve Raised Our Fair Value Estimate of Alibaba

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We have raised our fair value estimate of Chinese e-commerce giant Alibaba (BABA) on account of the firm’s stronger than expected earnings and faster pace of top-line expansion relative to our previous future forecasts. Through the first nine months of its fiscal 2015 (ending March), the company’s revenue has expanded at a 45% year-over-year clip thanks in part to strength in mobile, where sales expanded roughly 5-fold in the calendar fourth quarter. Non-GAAP EBITDA margins were an impressive 58% during the three months ending December 2014, and we expect profit margins to remain robust as expenses are scaled with robust revenue expansion. Through the first nine months of its fiscal 2015, Alibaba has generated RMB35.45 billion ($5.7 billion) and RMB31.4 … Read more

Pain in Oil Not Likely To Subside Soon; Alibaba Disappoints

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Just how bad are we drowning in crude oil? Yesterday’s inventory report showed the largest weekly supply increase in over 30 years, since 1982. That’s how bad. Yet, knowing that crude oil prices are driven by supply and demand, pundits continue to be optimistic, perhaps overly so, about the timing of the recovery in the price of the black liquid (USO). Let’s first start with OPEC, and the Secretary-General Abdullah al-Badri, who said Tuesday that oil prices have bottomed as he “warned of a risk of a future price spike to $200 a barrel.” With inventories as they are and OPEC not ceding market share to US shale-based plays, we think the Secretary-General is drinking a bit too much Kool-aid. … Read more

Commercial Aerospace Flying High

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Valuentum’s President Brian Nelson talks about the resiliency of the commercial aircraft making business and the massive backlogs that offer a nice tailwind to the supply chain. Source of Images: Boeing (BA), Randy Tinseth (20-year Current Market Outlook, July 2014). If you cannot see the video, please click here. Aerospace Suppliers: AIR, AIRI, AL, ATRO, COL, HEI, HXL, ISSC, PCP, SPR, TATT, TDY, TXT Airlines – Major: AAL, ALK, DAL, JBLU, LUV, SAVE, UAL

Apple’s Powerful “Valuentum-style” Attributes Remain

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We were expecting “an absolute blow-out holiday quarter for Apple,” and the company did not disappoint. Revenue growth of ~30% and earnings per share of $3.06 (up ~50%) blew by analyst expectations and set new records in its fiscal first quarter, as the tech giant sold an all-time quarterly best 74.5 million iPhones, simply a monumental number.   Was there really any doubt that Apple (AAPL) was going to beat expectations?    The iPhone maker’s “Valuentum-style” attributes also remain intact. We talk quite a bit about the importance of combining both valuation and technical/momentum qualities in individual equity analysis, and perhaps the best example of any idea we’ve added to the newsletter portfolios showcasing the efficacy of such a process is Apple.   … Read more