Brian Nelson

Coca-Cola Remains Strong; Green Mountain Deal Shakes Up Beverage Industry

by

Though many investors are focused on the relatively weak global volume performance in Coca-Cola’s (KO) fourth-quarter results, released February 18, we’re not worried about the beverage giant’s fundamental strength. Excluding the impact of structural changes, comparable currency-neutral net revenues advanced 4% in the period, while comparable currency-neutral operating income jumped 6%, in line with its long-term growth target. Comparable currency-neutral earnings per share jumped 7% in the fourth quarter, roughly in-line with the full-year pace. This isn’t terrible performance by any stretch of the imagination, and the company continues to achieve global value share gains in nonalcoholic ready-to-drink beverages. Coca-Cola’s cash flow from operations declined modestly during the year, but greater scrutiny with respect to capital spending facilitated free cash flow … Read more

Realty Income Still One of Our Favorite Dividend-Focused REITs

by

On February 13, the real estate investment trust (REIT) that has a 45-year track record of providing dependable monthly income from real estate reported solid operating results for the fourth quarter of 2013. The ‘Monthly Dividend Company’ has paid an impressive 522 dividends and registered an enviable 74 total dividend increases since 1994. Though we note that the past is only as important as it informs the future, we think the future remains bright for Realty Income. Image Source: Realty Income  The Dividend Growth portfolio holding’s revenue and adjusted funds from operations (AFFO) were both impacted by acquisitive activity (its purchase of American Realty Capital Trust in January 2013), advancing significantly from the same period a year ago. We were … Read more

Under Armour’s Speed-Skating Suit Debacle Not Material

by

In case you haven’t been watching the winter Olympics in Sochi this year, the Games have found a way to impact the fundamentals of athletic-equipment firm Under Armour (UA). The company’s CEO Kevin Plank recently defended allegations that its high-tech suits were responsible for the US speed-skating team’s poor performance on ice. Many have pointed to the air vent in the back of the suit that allegedly acted more like a drag-racing parachute (slowing the athletes down) than second-saving aerodynamic technology. Still, even after suit modifications that patched the vent, the US speed skating team failed to win a single medal at the Games. We don’t think the poor publicity will impact Under Armour’s long-term international growth potential, but we … Read more

Deciphering Valuentum’s Dividend Lingo

by

On January 25, Barron’s published an article called “Get Lucky: IQT’s Lucky 13 Portfolio.” In it, the publisher talked about the reasoning behind why 13 dividend-paying stocks were highlighted in the article. Let’s walk through the reasoning behind these 13 stocks and how the assessment of some of these dividend picks applies the Valuentum Dividend Cushion framework (click here), in part or in whole. Valuentum’s Brian Nelson also gives his quick thoughts on the comments of each company as if he were training a new analyst on how to interpret the article from an analytical standpoint. Abbott Labs (ABT): “a solid anchor position for any portfolio…Free operating cash flow is three times its dividend.” Nelson’s thoughts: Abbott is clearly a … Read more

Boardwalk Pipeline Highlights Unique Risks of MLPs

by

You can’t get far researching master limited partnerships (MLPs) on Valuentum’s website without encountering the following warning (source): 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 oil and other refined products (and generally avoid commodity price risk). Though there is much to like, most constituents operate as master limited partnerships and pay out hefty distributions that can stretch their balance sheets. Additional unit issuance (dilution) has become common, and capital-market dependence is a key risk. We’re neutral on the group. We have a unique view of the business … Read more

Patience Almost Always Pays Off

by

A couple weeks ago, we outlined how patience and perspective are two very valuable qualities when it comes to investing. We used Google (GOOG) in that example, which spanned a longer time period, but we think Hasbro (HAS) is also a firm that fits the mold but over a shorter one. Many times investors use peer or industry performance to ascertain whether a closely-related firm will perform in similar fashion. Though there is undoubtedly an association between end market demand for each firm in a given industry, outside of the commodity-producing spaces, individual firm-specific dynamics can often counteract or mitigate what otherwise could have resulted in poor performance for all, indiscriminately. Mattel (MAT) sent shutters through the toy industry when … Read more

What If You Joined Valuentum on January 1, 2013 and Followed Our Transaction Alert Emails…

by

Let’s get this out of the way first: we’re not perfect. Though investors can look at our track record over a longer horizon to great satisfaction, as the Best Ideas portfolio (click here) and Dividend Growth portfolio (click here) are doing quite well for long-time members, what about new members that may have joined recently? How would they have fared by following our transaction alert emails? Would they have made money on our ideas? Before we answer these questions, let’s walk through a few ways members use our services. Many like to replicate the actively-managed portfolios that are housed in the monthly newsletters in their personal accounts in their entirety. Others like to use our transaction alert emails for incremental … Read more

Nelson Says Be Prepared: Almost Everything Points to a Return to 1670 on the S&P 500 by the End of 2014

by

Executive Summary: Investors should be cognizant that the recent pullback in the S&P 500 from all-time highs has been minimal in the context of the broader equity market performance in recent years. A fundamental, valuation-driven analysis suggests the S&P could correct to 1670, and a technical-driven analysis indicates a return to a similar level. Coincidence? Perhaps. But when most investors are expecting the same thing in the stock market, the stock market is usually quick to reflect the collective view of its participants (the Valuentum framework). The S&P 500 is trading at roughly 1750 at present, and we wouldn’t think anything of another 5% fall from current levels.  By Brian Nelson The equity markets have certainly had a very nice … Read more

Altria’s Long-term Dividend Growth Remains Intact

by

Altria (MO) followed up decent fourth-quarter earnings (click here), released January 30, with the announcement that it will acquire the e-vapor business of Green Smoke February 3 (click here). Though the move is immaterial to our valuation of the firm at this time, we like that Altria continues to focus on the long-term (the growth of e-cigarettes) as it delivers solid dividend growth to investors. Altria’s fourth-quarter results showed decent 3.6% adjusted earnings expansion, to $0.57 per share, and the company guided 2014 full-year adjusted diluted earnings per share to be in the range of $2.52-$2.59, representing a growth rate of 6%-9% from an adjusted diluted EPS base of $2.38 in 2013. We think Moody’s updated credit opinion on Altria sums … Read more