Brian Nelson

Big Tobacco, Brewers Want to Continue Consolidation; Altria to Benefit

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Altria (MO) is a holding in both the portfolio of the Best Ideas Newsletter and the portfolio of the Dividend Growth Newsletter. The company operates in one of the strongest industries in our coverage universe as it relates to structural composition (think Porter’s 5 forces). The oligopolistic tobacco industry is attractive in a number of ways. Firms in the industry sell an “addictive” product (cigarettes and/or smokeless tobacco), have significant pricing power, generate high margins, and have strong returns on invested capital. Though declining trends in smoking in the US, threats of tobacco-related litigation, new tobacco regulation (labeling) that discourages tobacco use, and excise tax price shocks that may impact demand will always be concerns, we tend to like the structural … Read more

Buffett’s 2013 Annual Letter to Shareholders

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Warren Buffett does a fantastic job communicating the concept of staying humble in his annual letter to shareholders of his firm Berkshire Hathaway (BRK.A, BRK.B). Some may not believe that the Oracle of Omaha—arguably one of the best investors in history—has underperformed the market in 10 of the past 49 years, but it is true. In Nelson’s ‘The 13 Most Important Steps to Understand the Stock Market,’ he talks about the importance of setting expectations about the market and your portfolio appropriately. Having the right perspective could save you from a lot of portfolio churn as well as a lot of misplaced disappointment. Here’s the excerpt from Nelson’s ‘13 Steps’ (source): You Will Be Wrong. Individual investors sometimes think that every … Read more

Valuentum’s March Edition of Its Dividend Growth Newsletter!

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Stay Alert! But Participate. by Brian Nelson, CFA The markets set a new high…again. We like that the Dividend Growth portfolio continues to perform fantastically, but we also think that prudence and caution are still in order. The past 14 months have simply been incredible for equity holders (please see the performance of the S&P 500 in the graph below). Last month, we outlined how the broad market indices are overvalued on the basis of historical forward price-to-earnings measures, especially after factoring in the current pace of expansion and how far we are into the ongoing economic recovery. We’re not making any abrupt changes to the Dividend Growth portfolio at this juncture, but we think staying alert is always a … Read more

Thank you…

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By Brian Nelson, CFA Earlier this week, I received an email from a colleague and valued member of our services. I wanted to share it here for others to read. I haven’t included his name, but if he wants me to, I can add it in. It is filled with wisdom, experience and kindness. And it really made my year to read his words. The Valuentum community, I believe, is the best community of investors out there. Sir, if you do happen to read your own email on our site, we very much have appreciated your feedback, and we hope to continue to live up to your praises. We are dedicated, and our team has been rejuvenated by your words. … Read more

EXCLUSIVE ALERT: Addressing Kinder Morgan Energy Partners and the MLPs in General

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There’s one thing for sure about Valuentum: as a member, you get the truth, the whole truth, and nothing but the truth. That’s why our members love us! We’re completely independent and completely tied to your best financial interests. You know we’ve never been shy about outlining the risks related to MLPs – for one, you don’t have to look far to see this warning (source) on the front page of every one of their 16-page reports (at the bottom): Firms in the oil and gas pipeline industry own or operate thousands of miles of pipelines and terminals—assets that are nearly impossible/uneconomical to replicate. Most companies act as a toll road and receive a fee for transporting natural gas, crude … Read more

The Twilight Zone: JC Penney and Best Buy Report Better-Than-Feared Performance

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Shares of JC Penney (JCP) and Best Buy (BBY) are currently engaging in a classic “dead cat bounce” with the equity prices of both firms experiencing modest appreciation after reporting their respective fourth-quarter results recently. JC Penney is trading just over $7 per share, down from about $70 per share in 2007, while Best Buy is hovering at about $27 per share, down from more than $40 per share, a level achieved only a few months ago. We continue to believe both companies are far from healthy. What’s the news that has JC Penney’s shares spiking to $7 and change? The firm reported a loss per share of $0.68 in its fourth-quarter report, released February 26, beating estimates that had … Read more

The Valuentum Buying Index Doesn’t Disappoint: Highest-Rated Baidu Reports

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Article updated to reflect pricing open. We’re still navigating through a rough patch in growing the outperformance of the Best Ideas portfolio, but we were very pleased to see continued validation of the efficacy of the Valuentum Buying Index, our stock-selection methodology, with Best Ideas portfolio holding Baidu (BIDU) reporting excellent fourth-quarter results after the market close Wednesday. Chinese Internet search giant Baidu is one of the top-rated firms registering a pristine 10 on the Valuentum Buying Index and one of the latest inclusions to the Best Ideas portfolio, added August 1, 2013 (view email transaction alert archive here). Shares were trading at $133.60 at the time of the alert, representing more than a 30% move in just the past … Read more

Carl Icahn Keeps Pressure on eBay’s Board; Shares Continue to Rally

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On Wednesday, activist-investor Carl Icahn issued another open letter to shareholders of eBay (EBAY) following the company’s response to his original open letter here. We’ve reproduced the most recent letter below. Though the likelihood and/or timing of an eBay-PayPal split is highly uncertain at this juncture (his proposal), Icahn’s pressure on eBay’s board is bringing to light the significant underpricing of eBay on a sum-of-the-parts basis (as reflected in the 16-page report), in our view. From a shareholder standpoint, the latter may be equally as important as the former, as it will inevitably result in share-price appreciation. We continue to believe that eBay is worth $78 per share, and we expect the company’s shares to converge to those levels. Here … Read more

First Solar Disappoints

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The solar industry is extremely competitive and continually evolving as constituents strive to differentiate themselves to better compete within the broader electric power industry. Significant price reductions (per watt), reduced margins, and drastic market share shifts have become commonplace for participants. Profitability can be negatively impacted from government subsidies and sovereign capital that allow firms to operate unprofitably for extended periods of time. Production overcapacity is another major concern and will likely persist for some time. We think the structure of the solar industry is very poor, and First Solar reminded us of this when it reported fourth-quarter results Tuesday. The leading global provider of photovoltaic (PV) solar energy solutions reported revenue in the fourth quarter that declined nearly $500 … Read more

Seadrill’s 10%+ Annual Dividend Yield Is a Long-term Fantasy

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As many investors know, firms can often become cheap for good reasons. That is, they are not trading cheaply because of Mr. Market’s irrational behavior, but instead are trading at depressed levels due to deteriorating underlying fundamental characteristics that actually justify its current share price, even if traditional valuation techniques (such as P/E multiple analysis) suggest the firm’s shares are inexpensive. On a similar note, firms that boast high dividend yields may do so because the market has little confidence in the sustainability of its dividend and believes a cut may be just around the corner. Though we fall short of saying that offshore deep-water drilling company Seadrill (SDRL) will slash its dividend tomorrow, our dividend-cut predictive indicator—the Valuentum Dividend … Read more