Brian Nelson

PPL Beats Expectations and Raises Guidance

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We recently wrote up a relatively extensive piece on ‘Utilities Are Safe Income Vehicles…Most of the Time,” that we think is worth reading before diving into PPL’s (PPL) solid second quarter results, released Thursday. For many income investors, dividends aren’t everything, they are the only thing, and we understand how important it is for us to focus on sustainable dividend growth in any idea that we present within the Dividend Growth portfolio, a collection of equities that we think will continue raising their dividends long into the future. We think PPL is one such company. The company’s second-quarter and first-half earnings from ongoing operations increased 15% over the corresponding periods from 2013. Management couldn’t have said it better: “Strong performance … Read more

Big Pharma Round Up

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Though much has been made about the patent cliff—shorthand for the expiration of the patents of a large number of drugs over a short period of time—we continue to believe that pipelines across much of the pharmaceutical space are flush with new drugs and therapies. Readers may have an individual favorite or two (or three) within the space (and there’s nothing wrong with that), but we think one of the best ways for investors to play the strong pipelines across the healthcare sector—and ongoing consolidation—is through the Health Care Select SPDR ETF (XLV), a holding in the Best Ideas portfolio. The ETF boasts Johnson & Johnson (JNJ), Pfizer (PFE), Merck (MRK), Gilead Sciences (GILD), and AbbVie (ABBV) as its top … Read more

Buffalo Wild Wings’ Pizza Rev Is a Hidden Gem

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Buffalo Wild Wings (BWLD) has been one of the best performing restaurants during the past few years. We credit the restaurant’s strong multi-year run to a solid concept, continued strong same-store sales expansion, and excellent cost containment (via serving size innovation). The restaurant’s second-quarter results, released Tuesday, were solid. Total revenue increased 20% during the quarter, while same-store sales increased 7.7% at company-owned restaurants and 6.5% at franchised restaurants. Net earnings increased nearly 44% to $23.7 million from $16.5 million, and earnings per diluted share increased at a similar pace, to $1.25. The company benefited from lower costs thanks in part to a decrease in the price-per-pound for traditional chicken wings. From the same period in 2013, the company had … Read more

Quick Tip: Keep Things in Perspective

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Best Ideas portfolio holdings Visa (V) and Precision Castparts (PCP) recently reported relatively disappointing calendar second-quarter results (here and here). Share prices of both portfolio constituents sold off a few percentage points following their respective earnings releases. Though growing more concerned when share prices drop is natural (and perhaps rightly so in some cases), one of the most effective approaches to staving off behavioral and psychological pitfalls (e.g. selling at the bottom, truncating gains, etc.) is to keep things in perspective. In situations where a company’s stock has doubled or tripled, for example, a 5%-10% pullback should be viewed as “normal” trading activity, resulting from the concept of ‘profit-taking,’ or when some shareholders take some of their profits off the table … Read more

Dividend Increases/Decreases for the Week Ending July 25

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Below we provide a list of firms that raised/lowered their dividends during the week ending July 25. 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 Alliance Bancorp (ALLB): now $0.06 per share quarterly dividend, was $0.05. Altera (ALTR): now $0.18 per share quarterly dividend, was $0.15. BancorpSouth (BXS): now $0.075 per share quarterly dividend, was $0.05. BankFinancial (BFIN): now $0.02 per share quarterly dividend, was $0.01. Bar Harbor Bankshares (BHB): now $0.23 per share quarterly dividend, was $0.223. BBCN Bancorp (BBCN): now $0.10 per share quarterly dividend, was $0.075. BorgWarner (BWA): … Read more

Defense Industry Round Up

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The ongoing conflict in Ukraine, Israel’s offensive in the West Bank, North Korea calling a US movie an act of war, the latest in Iran, and US troops going back to Iraq suggest there may finally be upside to a defense budget that has experienced nothing but pressure since peak spending at $691 billion in 2010 (see grey bar in image below, from left to right). Image Source: US DoD Fiscal Year 2015 Budget Request With the markets making new highs seemingly every week, bargains have become more difficult to find. We point members to ideas in the Best Ideas portfolio and Dividend Growth portfolio, but an increasingly more uncertain geopolitical backdrop–where defense spending upside is growing more and more … Read more

Baidu Continues to Impress

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For the sake of not repeating the investment thesis on Baidu (BIDU) in this article, we’ve provided the link to ‘Baidu’s Internet Presence in China Is Phenomenal’ for background. Also, please don’t forget to access the company’s 16-page report, if desired. On Thursday, the Chinese Internet search giant reported excellent second-quarter results. Total revenue surged an impressive 58.5% from the same period a year ago, while operating profit advanced 22.5%. Baidu has a clear lead in mobile in China, with mobile revenue now as much as 30% of total revenue. Net income attributable to Baidu leapt more than 34%, to $571.7 million. The growth rates were fantastic, and we think Baidu is now trading more consistently with its blockbuster performance … Read more

Amazon Drops $40 Per Share

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Amazon (AMZN) continues to focus on taking market share and damaging its competitors rather than generating large accounting profits and cash flows. The company’s cash-flow generation should improve if investments turn out to be profitable (and management turns off the expense gushers), but the company remains a low-margin retailing operation. The market has recently grown impatient with the executive suite’s lack of profit focus, and reaction to its second-quarter results, released Thursday, couldn’t have made this point more clear. For a company that boasts a market capitalization of ~$146 billion, one would think the firm is highly profitable. For Amazon, however, this just isn’t the case. We explain why the firm garners such an elevated valuation (despite meager profits) in … Read more

Financial Analysis 501: Why Value Is Always Based on Future Expectations

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A version of this article appeared on our website October 25, 2013. On October 24, 2013, Amazon (AMZN) reported better-than-expected fiscal third-quarter results. Let’s take a look at the firm’s income statement and cash flow statement to explain why value is always based on future expectations of earnings and free cash flow. The concept of value is not based on a firm’s most recent-quarterly performance or its past performance. Amazon currently sports a market capitalization of $166.3 billion as of the time of this writing. Income Statement << What Is the Income Statement? Image Source: Amazon For a company that records $17.1 billion in revenue (the third line down called ‘total net sales’), Amazon’s quarterly ‘loss before income taxes’ of $43 million (negative … Read more

Ford Surprises to the Upside; GM Distracted By Recalls

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Sometimes it’s easy to fall in love with a company and its products. This, unfortunately, can become a behavioral and psychological barrier to financial outperformance. Whether you are a Ford or Chevy guy or gal determines little about how successful you will be as an investor in auto stocks. The most important determinant to financial outperformance in the auto space is not based on which type of car or truck you drive (or like), but instead, it is based on understanding and capitalizing on the factors that drive stock prices. To this point, stock prices are driven, of course, by the buying and selling of shares, and the buying and selling of shares is primarily influenced by a company’s intrinsic … Read more