Brian Nelson

Monsanto Reports Fourth Quarter Results and Moves into Data

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Agricultural biotechnology giant Monsanto (click ticker for report: ) posted slightly disappointing fourth quarter results Wednesday morning. For the full year, revenue increased 8.7% year-over-year to $14.8 billion, while quarterly revenue rose 4.9% year-over-year to $2.2 billion–a touch short of consensus estimates. Earnings per share for the full year advanced 21% year-over-year to $4.60, with the firm’s quarterly loss increasing by five cents to $0.47 per share–worse than consensus expectations. Free cash flow during fiscal year 2013 was $2 billion, equal to 13.2% of total revenue. The fourth quarter isn’t much of a revenue driver or profit driver for Monsanto, so we find it more prudent to take a closer look at full-year results. Image Source: Monsanto The firm’s ‘Corn … Read more

President Obama Tells Wall Street to Worry

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“I think this time is different. I think they (Wall Street) should be concerned.” — Barack Obama Wednesday afternoon, President Barack Obama sat down with CNBC’s John Harwood to discuss the government shutdown, the next debt ceiling debate, and other pertinent topics. Obama’s warnings are very real, and we’re taking notice. Government Shutdown The government shutdown remains top of mind since it occurred earlier this week, and it continues on with no clear end in sight. President Obama made a fiery speech Thursday morning blaming House Speaker John Boehner for not allowing a vote on the issue in the House of Representatives. Regardless, the primary issue remains that certain members of the Republican Party would like to repeal the Affordable … Read more

Plenty of Growth Ahead for Chinese Internet Companies

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The Chinese Internet space has been a fantastic growth story through the course of 2013. Shares of Best Ideas Newsletter portfolio holding Baidu (click ticker for report: ), Qihoo (QIHU), Sohu.com (click ticker for report: ), and Tencent (click ticker for report: ) are all up at least 50% year-to-date. What do all of these companies have in common? They all have exposure to China’s rapidly-growing Internet usage as well as the country’s Internet search market. Search growth in China is phenomenal. Image Source: China Internet Watch In the second quarter of 2013, the value of the Chinese search market surged approximately 35% year-over-year (shown above), lapping a very robust growth rate well above 50% during the same period of 2012. Chinese search … Read more

Phillips 66 Hikes Dividend 25%!

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Dividend Growth Newsletter portfolio holding Phillips 66 (click ticker for report: ) announced on Tuesday that it would raise its quarterly dividend 25% to $0.39 per share. This equates to an annual dividend of $1.56 per share, and an annual yield of 2.6% at current levels. We applaud the move, though we aren’t surprised, as we have long believed that the firm has excellent dividend safety and growth potential. In our view, the longer-term fundamental story for Phillips 66 and the broader industry continues to look positive as refining capacity remains constrained and more advantaged crude flows through North American pipelines. At this time, Philips 66 remains our favorite idea in the refinery space and a holding in the portfolio … Read more

Strong Prescription Comps Drive Walgreens

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On Tuesday, pharmacy giant Walgreens (click ticker for report: ) posted strong fourth-quarter results bolstered by solid prescription comps. Sales increased 5.1% year-over-year to $17.9 billion, roughly in-line with consensus estimates. Adjusted earnings per share increased 16% year-over-year to $0.73, also in-line with consensus expectations. For the full fiscal year, Walgreens generated free cash flow around $3 billion, equal to 4.3% of revenue. Comps Source: Company Filings, Valuentum Although the 2-year trend remains negative, Walgreens posted positive same-store sales during the fourth quarter, with front-end sales up 1.6% year-over-year and prescription sales up 6.4% year-over-year (resulting in total same-store sales growth of 4.6%). The comp gains came in spite of declining traffic, leading us to believe that new initiatives such … Read more

Ford Once Again Leads the Pack with September Sales

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September auto sales once again revealed a strong US auto market that continues to capitalize on pent-up demand. Though the seasonally adjusted annual rate (SAAR) fell from its 16 million-unit rate in August to 15.3 million units in September, the sequential decline seems mostly attributable to a timing shift (there were two fewer selling days in September than a year ago), and we’re not reading too much into the perceived modest industry-wide slowdown. As we can see from the chart below, there is plenty of volatility in the numbers from month to month, something that investors should continue to expect. Source: NADA Ford Best Ideas Newsletter portfolio holding Ford (click ticker for report: ) exceeded consensus estimates calling for flat … Read more

Jobs Slashed in Hopes of Operating Margin Expansion

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As the battle over the budget rages on, pharmaceuticals giant Merck (click ticker for report: ) and German conglomerate Siemens AG (click ticker for report: ) announced massive job cuts targeted at reducing annual operating expenses. Merck On Tuesday, Merck announced a bold plan to cut $2.5 billion in annual operating expenses, with the lion’s share of savings derived from marketing and R&D cuts. The firm anticipates $1 billion in cost savings by the end of 2014, with the remainder realized in 2015. 7,500 jobs have already been cut, but the firm will slash an additional 8,500 jobs in order to achieve its targeted cost savings. The restructuring is expected to result in pre-tax costs of $2.5-$3 billion, though only … Read more

Market Yawns at Government Shutdown

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It finally happened Monday night. After weeks of discussing the possibility of a government shutdown, the US government came to a standstill over the Affordable Healthcare Act and the budget, forcing governmental agencies to shutter doors and not pay employees on Tuesday. The shutdown impacts the Department of Defense most, where 400,000 workers out of the total 800,000 on leave are employed. The Department of Energy, Department of Commerce, and Department of Transportation are all also meaningfully impacted. At this time, the duration of the shutdown is unknown. It may not last long.   We think most market participants are not expecting a prolonged shutdown. Political parties should be sufficiently embarrassed, pride will be swallowed, and a deal will eventually … Read more

Valuentum’s October Edition of Its Dividend Growth Newsletter!

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Three Reasons Why Dividend Growth Investors Are Quite Savvy by Brian Nelson, CFA There are many different approaches to investing, but we think dividend growth investors are quite savvy, especially when they combine a rigorous dividend growth process in the form of the Valuentum Dividend Cushion with the valuation rigors behind the Valuentum Buying Index. Let’s examine the three reasons why we think dividend growth investors are a smart group. #1. Fool Me Once, Shame on You…Fool Me Twice, Shame on Me Today’s dividend growth crowd has seen enough. First, they witnessed the dot-com bubble (1997-2000), a period in stock market history where firms’ stock prices soared in some cases as a result of just adding an “e-“ prefix to their … Read more

J.C. Penney: Equity Offering Shows Desperation; Shares Score a 1 on the VBI; Lights Out by Mid-2014?

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With sales declining precipitously and bankruptcy looking like a real possibility, we have materially lowered our equity fair value estimate on retailer J.C. Penney (click ticker for report: ) to $3 per share. The firm now scores a 1 on the Valuentum Buying Index, and we’re avoiding shares at all costs in the portfolio of our Best Ideas Newsletter. Why Now? We haven’t liked J.C. Penney since former CEO Ron Johnson’s plan showed signs it clearly wasn’t working, and we have consistently maintained that Penney’s business model was obsolete and doomed to fail over the long term, even before Johnson made changes. Still, earlier this year, the firm improved its liquidity position when it raised over $2 billion in cash via debt with an interest … Read more