Brian Nelson

Best Ideas Portfolio Holding Visa Doesn’t Disappoint

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It’s hard to find anything wrong with Visa’s (V) business model. The company offers a secure, payment network that is accepted virtually everywhere in the United States. The firm makes money every time a Visa user swipes his or her debit or credit card. The company does not take on credit risk – or the risk that users will pay outstanding balances on the credit cards. This attribute makes its business model much more attractive (less risky) than that of a Discover (DFS), for example. Visa benefits from two fantastic competitive advantages: a network effect and costly initial investment. The network effect is incredibly strong. As of its last update, the firm has more than 2 billion cards outstanding accepted … Read more

Gilead’s Revenue More Than Doubles in Third Quarter

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What more can we say about Gilead (GILD)? The firm’s product line-up is so strong–namely its key hepatitis C virus drug Sovaldi–that it has the government worried about its impact on Medicare, Medicaid and other federal spending. Gilead’s primary areas of focus–HIV/AIDS, hepatitis B and C, as well as serious cardiovascular/metabolic and respiratory conditions–offer key long-term growth opportunities. The firm’s third-quarter report, released October 28, continued to showcase the firm’s expansion potential. Total revenues in the period increased to $6.04 billion compared to $2.78 billion for the third quarter of last year. Net income for the third quarter of 2014 was $2.73 billion, or $1.67 per diluted share compared to $788.6 million or $0.47 per diluted share for the third quarter … Read more

Facebook Has Increased Four-Fold Since Its September 2012 Bottom

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Facebook’s (FB) share price is taking a beating after the company posted better-than-expected third-quarter results. Savvy investors know that the future is all that matters, and once a quarter is complete, the only thing that matters is what the company says about its outlook. What Facebook said about the remainder of 2014 and 2015 wasn’t great with respect to spending guidance. Wise investors, however, will look to 2016 and beyond to assess the firm’s earnings potential. Facebook’s third-quarter results were fine. In fact, they were excellent. Revenue for the third quarter totaled $3.2 billion, a near-60% increase from last year’s quarter. Mobile advertising revenue represented nearly two thirds of advertising revenue during the period, up from about half during the … Read more

Ouch…Coach. Large Cash Balance Offers Flexibility Though.

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We always look for revenue expansion before diving into any idea. Such an approach is the cornerstone of avoiding falling knives (stocks that look like value but yet keep falling). For Coach (COH), we were modeling in a very difficult 2015 and 2016, but we thought 2017 and 2018 would be brighter for the handbag maker as it annualizes weak comparable sales and gets North America back on track. We also thought the firm’s ~3.8% dividend yield would act as support for the firm’s shares. Though most of this may still be true, the company’s calendar third-quarter results left much to be desired. On a constant-currency basis, revenue fell 9% in the period, while net income for the quarter totaled … Read more

Twitter Earns a Penny Per Share in Third Quarter…on a Non-GAAP Basis

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Valuentum may try advertising on Twitter (TWTR) again someday, but probably not anytime soon. Frankly, it’s just too limiting with less than 140 characters to get across a fresh, unique, and interesting concept to readers. In fact, advertising on Twitter may do more harm to a new brand than help it. For products with a relatively steep learning curve, advertising in general is not easy, but the barriers to advertising success on Twitter are monumental for these types of firms. It’s probably not too big of a stretch to assume that if we’re not happy advertising on Twitter, there are millions of other small businesses that aren’t either. We think this troubling dynamic speaks to Twitter’s performance in the third … Read more

American Capital Agency’s Book Value Declines…Again

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The success of mortgage REITs in the past has largely been the result of an unhedged (unprotected) portfolio completely exposed to the vicissitudes of interest rates. Mortgage market dynamics are inherently difficult to predict, and most mortgage REITs can only bolster economic returns as measured through gross ROEs via adding additional leverage. Spread income has always been a less-material driver to book value than other comprehensive losses, or when unrealized losses on a mortgage REIT’s investments are marked to market. Very few analysts have the ability to effectively analyze these complex instruments, and while we’ve been correct about the risks related to their investment opportunities, we continue to believe it is borderline irresponsible for financial advisors to be using mortgage … Read more