Brian Nelson

Miners Continue to Be Cautious

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Though profit margins on iron ore operations are hefty, swings in commodity prices translate into large swings in equity prices as mid-cycle valuations are tweaked. Management teams within the mining space are well-aware of the boom-and-bust cycles of their business, and recent tactical moves indicate that constituents continue to be very cautious. We commented on Rio Tinto’s (RIO) and Vale’s (VALE) decision to cut spending, and recent news suggests that BHP (BHP) will also look to keep annual spending below $15 billion, a large cut from the $21.7 billion the firm spent in the previous fiscal year. The billions of dollars in reduced mining equipment spending doesn’t bode well for firms specializing in earth-moving equipment such as Caterpillar (CAT) and … Read more

Baidu Up Big Since August Email Transaction Alert; Valuentum Members Cheer!

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Valuentum has two actively-managed portfolios, one is its Best Ideas portfolio (housed in its Best Ideas Newsletter) and the other is its Dividend Growth Newsletter (housed in its Dividend Growth Newsletter). Each edition of its Best Ideas Newsletter is released on the 15th of the month, while each edition of its Dividend Growth Newsletter is released on the 1st of each month. Though not all members use the newsletters, the monthly publications represent the avenues through which we deliver the respective actively-managed portfolios that ultimately are the gauge we use to measure performance. We send out email transaction alerts to members to keep them abreast of new additions to and removals from these portfolios, as well as any weighting changes … Read more

Lumber Liquidators Is Still Pricey Even After Fall

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Traditionally, when a firm makes the list of the ’Top 25 Most Overvalued Firms’ in the stock market, the primary reason is that market participants have built in expectations far greater than what the firm can reasonably achieve. Lumber Liquidators (LL) has been on our ‘Top 25 Most Overvalued Firms’ list for some time, and the recent update to its outlook December 9, which came in below consensus expectations, sent shares tumbling. The specialty retailer of hardwood flooring in North America provided the following for its outlook for 2013 and 2014: Company Outlook for 2013 Based on year-to-date results and current trends, the company now expects to achieve the following for the full year 2013: Net sales in the range of … Read more

Surveying Results at the Auto Parts Retailers

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Monday was a day auto-parts retailer Pep Boys (PBY) would rather soon forget. The company reported fiscal third-quarter results (ending November 2013) that came up short with consensus expectations. Comparable same-store sales at the automotive retail chain declined 2.8% (well below its targets for low-single-digit expansion), consisting of a 0.5% comparable service revenue increase and a 3.6% comparable merchandise sales decrease. The firm swung to a modest quarterly net profit during the period, but its nine-month diluted earnings per share profit of $0.19 was significantly worse than the $0.51 per share profit recorded in the prior-year period. Same-store sales are decelerating as the quarterly mark (-2.8%) is materially worse than the nine-month tally, which was -1%. Through the first nine-months of … Read more

McDonald’s US Comparable Sales Fall

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On Monday, McDonald’s (MCD) reported lackluster November comparable sales. European comparable sales (comps) were solid, up 1.9%, but comps in the APMEA (Asia/Pacific, Middle East and Africa) and US weighed on expansion, falling 2.3% and 0.8%, respectively. Performance in the APMEA was weighed down by weakness in Japan, while US comps suffered from heightened competitive activity and relatively flat industry demand trends that were only partially offset by strength in breakfast, chicken menu choices and expanded value offerings. Systemwide sales advanced 3.1% in constant currencies during the month. The news from McDonald’s is unique in that it runs counter to a report from the National Restaurant Association, released December 2, that the Restaurant Performance Index, RPI (1), hit a four-month … Read more

PC Shipments Expected To Stabilize

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According to data released by the International Data Corporation (IDC) Worldwide Quarterly PC Tracker on December 2, personal computer (PC) shipments are now expected to drop more than 10% in 2013, slightly below the previous projection of -9.7%. Though 2013 will be the most severe yearly contraction on record, this news wasn’t the key takeaway. Instead, it was expectations for stabilizing demand by 2015 that provided a shot of optimism to the PC supply chain (see image below). Image Source: IDC The commentary provided by IDC was not terribly exciting, but market expectations are closer to the PC going the way of the dodo than stabilizing at just over 300 million units (roughly 2008 levels). We continue to believe that … Read more

Share Buybacks in Vogue for Portfolio Holdings

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Showcasing strong cash flow generation, portfolio holdings Union Pacific (UNP) and Phillips 66 (PSX) have issued new buyback programs recently. On November 21, Union Pacific announced a new share repurchase authorization of up to 60 million common shares by 2017. The new four year authorization allows for the repurchase of roughly 13% of current shares outstanding. On December 6, Phillips 66 approved a new $2 billion share repurchase program. Since the third quarter of 2012, Phillips 66 has authorized a total of $5 billion in share repurchases and has increased dividends from $0.20 per share to $0.39 cents per share on a quarterly basis. Though we tend to prefer immediate dividend growth instead of buyback initiatives for most dividend growth portfolio … Read more

Surveying the Retail Landscape: Dollar General, Kroger, and Costco

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On Thursday, Dollar General (DG), Kroger (KR) and Costco (COST) reported quarterly results. Dollar General’s third-quarter report showed same-store sales advancing 4.4%, which propelled total sales 10.5% higher during its third quarter (ending November 1). Kroger’s third-quarter report showed 3.5% identical supermarket sales growth, without fuel, during the period ending November 9, while Costco’s fiscal first-quarter results (ending December 1) revealed same-store sales expansion of 3% during the quarter. Dollar General’s quarterly performance not only bested that of Kroger and Costco, but it also stood head-and-shoulders above that of Wal-Mart (WMT), which reported a comparable store sales decline in Walmart US and only a 1.1% increase at Sam’s club, and Target’s (TGT) third-quarter performance, where US comparable store sales advanced only … Read more

Valuentum Members Are Reminded of the mREITs

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“I am the advisor you referenced in the July newsletter who sold AGNC. Your timely article made me re-look at all of the mReits we owned, and we sold off nearly all of them over the following month after your article. I just calculated where we sold (because of your article) compared to where the mReits are today. Your article, which influenced the selling saved our clients over $1.1 million in equity price drops. That translates into $11,000 per year of fee income to the firm. You can bet that we will be re-subscribing when the time comes. Thank you for your hard work, and bringing additional value that was not owed or expected.” — Tim A. (source: Valuentum testimonials), … Read more

Apple Up on News of China Mobile Deal and Icahn Request

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Apple (AAPL) continues to be a holding in the portfolios of our Best Ideas Newsletter and Dividend Growth Newsletter. Since we added the firm to our actively-managed portfolios, its Valuentum Buying Index rating has hovered between a 3 and an 8 (the equivalent of a ‘consider hold’ rating), and we have been quite pleased with the informative nature of the index. In what is typical of the Valuentum process, we add firms to our actively-managed portfolios when they register a 9 or 10 (the equivalent of a ‘consider buy’ rating) on the Valuentum Buying Index and hold them until they register a 1 or 2 (the equivalent of a ‘consider sell’ rating). However, just like a value investor doesn’t add all undervalued … Read more