Brian Nelson

Housing, Hormel and Hewlett-Packard

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Tuesday brought about a nice S&P/Case-Shiller number and better-than-expected quarterly performance from Hormel Foods and Hewlett Packard. Though we liked the news, firms in our Best Ideas portfolio and Dividend Growth portfolio represent our best ideas at any time. Housing From press release: “Data through September 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that the U.S. National Home Price Index rose 3.2% in the third quarter of 2013 and 11.2% over the last four quarters. In September 2013, the 10- and 20-City Composites gained 0.7% month-over-month and 13.3% year-over-year.” To continue reading >> Homebuilders: DHI, GFA, JOE, KBH, LEN, MDC, MTH, NVR, PHM, RYL, SPF, … Read more

Tiffany’s Bottom Line Sparkles in 3Q; Pricing Power Evident

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Tiffany’s (TIF) third-quarter results, released Tuesday, showed solid revenue expansion and fantastic operating leverage. Worldwide net sales jumped 7% on a reported basis and 11% on a constant-currency basis; comparable sales advanced 7%. Reported sales in the Americas region increased 4% thanks in part to growth in Tiffany’s New York flagship store. In the Asia-Pacific region, reported revenue leapt an impressive 27%; comparable sales in the region jumped 22%. Negative currency impacts hurt reported sales in Japan, but underlying, constant-currency performance in the country was solid. Even in Europe, a region that continues to struggle for economic expansion, Tiffany revealed 7% reported growth thanks in part to strength in the United Kingdom. The company’s profit margin performance was also wonderful … Read more

Seadrill’s Cash Flow Weak, Financial Leverage Significant

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  Seadrill (SDRL), a leading offshore drilling company, posted lackluster third-quarter results Monday, and its dividend increase did little to impress investors. Consolidated revenue in the third quarter was flat on a sequential basis, while operating profit fell to $471 million from $507 million in the second quarter of this year. The company’s top-line and operating profit performance, however, was much better on a year-over-year basis, up 17.2% and 14%, respectively. Diluted earnings per share advanced to $0.60 from $0.40 in the year-ago period, slightly lower than expectations. EBITDA came in at $663 million during the quarter, flat on a sequential basis but up 15.5% on a year-over-year basis (also modestly below forecasts). Image Source: Seadrill  Seadrill’s net cash from … Read more

3 Important Pieces of News on the Monday of This Shortened Holiday Week

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The Hunger Games: Catching Fire Sets November Records Lions Gate’s (LGF) shares are under pressure this morning as the market’s expectations of The Hunger Games: Catching Fire, the second installment of the Hunger Games franchise, were just a bit too high, despite the film grossing approximately $160 million in North America over the weekend, setting a November record. Globally, the sequel catapulted to a $307.7 million opening, exceeding the original film’s $211.8 million debut in March 2012. The second Hunger Games movie grossed approximately $18 million in IMAX (IMAX) theaters worldwide and $12.6 million in 347 IMAX theaters in North America since the November 22 release. IMAX noted that this was the best three-day domestic opening for November in IMAX’s … Read more

E-commerce Exposure Still Makes Sense

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The Census Bureau of the Department of Commerce reported Friday that it estimates US retail e-commerce sales for the third quarter, adjusted for seasonal variation, came in at 17.5% (+/- 5.8%) versus the same period a year ago. On an adjusted basis, US retail e-commerce sales, as a percent of total quarterly retail sales, have advanced to nearly 6%, up from just 2% at the beginning of 2004 (shown in image below). Both the rapid pace of US retail e-commerce sales expansion and the trend toward more transactions being completed online show no signs of slowing. Image Source: US Department of Commerce The positive data follows comScore’s (SCOR) report, released earlier this month, of a 13% increase in US desktop-based … Read more

Merger Rumors Helping Best Ideas Portfolio Holdings

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On Friday, rumors of Dish Network (DISH) and DirecTV (DTV) tying the knot sent shares of both firms higher during the trading session. The potential tie-up is nothing new; we had profiled the potential deal in March this year, but the re-hashing of the idea has some market participants excited. The anti-trust hurdles will be significant for this deal to happen, but it looks like the Department of Justice is warming up to allowing consolidation if recent progress of the merger between AMR Corp (AAMRQ) and US Airways (LCC) is any indication. We love the increased leverage over content creators, the significant cost savings, and the additional financial flexibility that a Dish Network/DirecTV merger would bring. We would expect the … Read more

Surveying 3Q Performance Across the Retail Spectrum

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Sears There’s not much to say about Sears’ (SHLD) operational performance during its third quarter (results issued Thursday), except that it was atrocious. The firm lost more money in the most recently-reported quarter ($534 million) than it did through the first nine months of last fiscal year ($441 million). CEO Eddie Lampert has his hands full with the company’s multi-year transformation, but we think investors are hanging on to shares largely on hopes the firm will be able to monetize its real-estate portfolio in the future. Image Source: Sears But it seems that (lately) too many investors have been buying into this line of thinking, and the ‘real estate’ thesis continues to proliferate among investor psyches, particularly (now) with J.C. … Read more

Portion Packs Still in Strong Demand at Green Mountain; Free Cash Flow Surges in Fiscal 2013

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On Thursday, Green Mountain (GMCR) reported excellent fiscal fourth-quarter results. Fourth-quarter revenue advanced 22% from the same period a year ago (52-to-52 weeks) thanks to robust brewer sales and portion pack revenue growth (up 11% and 21%, respectively, as adjusted). The 21% increase in portion packs revenue was driven by a 26% increase in unit volume offset by pricing and mix. Portion packs revenue accounted for 74.2% of total net sales in the fiscal fourth quarter. The company’s gross margin expanded 240 basis points during the quarter, to 36%, thanks primarily to favorable green coffee costs and lower labor and overhead manufacturing costs. Non-GAAP operating income advanced to 18.2% of sales in the period from 16.4% in last year’s quarter. … Read more

GameStop Tumbles on Lower Than Expected Holiday Outlook

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One of the ‘Top 25 Overvalued Stocks on the Market’ reported third-quarter results Thursday. GameStop (GME) represents the latest firm that we highlighted as significantly overvalued to engage in a large pricing correction toward our fair value estimate. Third-quarter results at the world’s largest video game retailer weren’t the problem. Total global sales advanced 18.8%, while comparable store sales rose 20.5%. Sales of new software increased 43.1% thanks to strong performance from Grand Theft Auto V. Hardware sales also performed well, jumping 15.3% thanks to a strong sell-thru of Nintendo 2DS and 3DS. Pre-owned sales, however, declined 2%. The strong overall performance led to 675 basis points of market share gains. GameStop’s net earnings jumped 45.3%, to $68.6 million, while the … Read more

Deere Doing Much Better Than Caterpillar

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After Caterpillar’s (CAT) dismal third-quarter performance, it was quite refreshing to read about Deere’s (DE) record earnings performance in its fiscal fourth quarter results, released Wednesday. Though Deere’s worldwide net sales fell 3% in the quarter, the firm’s net income of $806.8 million, or $2.11 per share, set a record for the period (up 17% and 21%, respectively). Lower shipment volumes were more than offset by a much favorable pricing environment, which worked wonders on the company’s bottom line, particularly in its ‘Agricultural & Turf’ segment (where operating profit jumped 7%). Deere’s ‘Financial Services’ operations also experienced a nice 26% jump in operating profit during the quarter thanks to improving credit performance and crop-insurance margins. We continue to like the … Read more