Brian Nelson

Finisar Rides the Cloud to Success

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Fiber-optics maker Finisar (click ticker for report: ) reported stronger than anticipated fiscal fourth-quarter results Wednesday afternoon. Revenue rose 2% sequentially to $243 million, modestly exceeding expectations. Earnings per share increased 18% quarter-over-quarter to $0.20 per share on a non-GAAP basis (which excludes stock-based compensation and impairment charges), which was far better than expected. Surprisingly, telecom spending was not what drove the improved results at Finisar. This runs counter to what we heard from Ciena (click ticker for report: ) just a few weeks ago. In fact, telecom revenue declined 12% sequentially to $79.5 million. Management said the problem in telecom was twofold—sluggish carrier spending combined with lower telecom prices that it had in place a year ago. Though Finisar’s … Read more

FedEx Leaps Over a Low Bar

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Shipping powerhouse FedEx (click ticker for report: ) reported better than anticipated fourth quarter results. Revenue grew 4% year-over-year to $11.4 billion, roughly in-line with consensus estimates. However, adjusted earnings per share climbed 7% year-over-year to $2.13, easily exceeding consensus expectations. This “beat” came after the company reduced its guidance in the preceding quarter, so we still do not believe results were that great. Still, the firm did an effective job of lowering capital spending, so full-year free cash flow increased 59% year-over-year to $1.3 billion. Volumes for the year were also light, with average daily shipments falling 1% year-over-year in the US and with international export volumes increasing only 3%. FedEx’s Express segment showed marginal sequential improvement during the … Read more

Mortgage REITs Are Still Hurting

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With QE Infinity potentially ending in mid-2014 and American Capital Agency (AGNC) slashing its quarterly dividend today (now $1.05 per share, was $1.25), mortgage REITs are still hurting. Consistent with our thesis on the group, dividend payments at a variety of industry constituents are not sustainable. American Capital Mortgage (MTGE) also cut its dividend today, while Two Harbors (TWO) lowered its quarterly payout a couple weeks after our industry thesis hit the wires. Annaly (NLY), American Capital Agency, Armour Residential (ARR) and Western Asset Management (WMC) were all down more than 2% today. With Fed Chairmen Ben Bernanke announcing potential tapering in 2013 and a potential end to mortgage-backed security purchases in mid-2014, the 10-year Treasury yield has moved nearly … Read more

Pool Corp Remains Overvalued Despite Fall

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Putting the majority of the blame on the weather, industry leader Pool Corporation (click ticker for report: ) reduced its full-year earnings outlook by 10 cents per share Wednesday morning. The company initially anticipated earnings per share of $2.13-$2.23, but it has reduced that figure to $2.03-$2.13 per share. We still believe shares are overvalued, despite the retracement today. Not surprisingly, the company blamed “cooler and wetter” weather in North America and Europe for delaying pool openings and purchases. Nevertheless, Pool Corp seemed confident in its revised full-year guidance despite the challenging macro situation. Surprisingly, the company has held up relatively well during the past five years. In fact, we’ve seen the firm do a tremendous job of growing sales … Read more

Growth in Asia Should Drive Ford to New Highs

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Best Ideas Newsletter portfolio holding Ford’s (click ticker for report: ) CEO Alan Mulally recently revealed that the firm believes its Asia-Pacific segment will account for 40% of sales in four or five years. We think this is terrific news for the automaker, but we think the market doesn’t truly appreciate the implications of Mulally’s statement. Source: Ford 2012 10-K, Valuentum As shown above, Asia-Pacific currently represents a small portion of the company’s revenue mix, accounting for just 8% of sales in 2012. Ford was notoriously late to enter China, but we like the firm’s cautious approach and the popularity of the Lincoln brand in the burgeoning country. Ford is now making up for this late start. Year-to-date, wholesale unit … Read more

Hormel’s Guidance Cut Isn’t Drastic

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Pork producer Hormel (click ticker for report: ) announced early Tuesday morning that the company has lowered its fiscal year 2013 earnings outlook to $1.88-$1.96 per share from $1.93-$2.03 per share. Shares are responding negatively to the news, but remain up 26% year-to-date. A 5-cent per share reduction in the annual earnings outlook will not have a material impact on our fair value estimate. While shares sold off aggressively Tuesday morning, we think it had less to do with a change in underlying fundamentals, and more to do with some profit taking. In fact, shares of the pork producer have traded at or above the high end of our fair value range for the past few months. The acquisition of … Read more

Best Ideas Newsletter Holding DirecTV is on the Verge of Acquiring Hulu

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Key Takeaways: ·         Best Ideas Newsletter holding DirecTV could acquire Hulu in the ballpark of $1 billion. Though its earnings are undisclosed, we know Hulu posted $695 million in revenue in 2012, and people watched 24 billion minutes of entertainment on Hulu during the first quarter of 2012. ·         The acquisition keeps Hulu out of the hands of competitors. It also keeps Hulu out of the hands of companies that may want to enter the content distribution business. ·         The cord cutting trend is overblown, but we think Hulu is a nice hedge against cord cutting. We also think Hulu rounds out DirecTV’s TV Everywhere package. ·         Content costs could come down, and DirecTV is well positioned to benefit. We … Read more

Valuentum’s June Edition of Its Best Ideas Newsletter

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Why Valuentum’s Email Transaction Alerts Are Worth Paying Attention To, by Brian Nelson, CFA Valuentum subscribers have noticed that we’ve been quite busy as of late, adding protection to our portfolio in the form of a broader-market put option and taking some large profits in Astronics (ATRO) and eBay (EBAY). In last month’s edition, we highlighted our best-in-class hit rate–meaning that a large percentage of the firms we added to the portfolio are outperforming the broad market benchmark. But there are a couple ways of looking at our performance–the first is relative outperformance versus the market since inception, which is at 28 percentage points. Investors duplicating our portfolio are enjoying this outperformance. Another way of looking at our track record, … Read more

Why Valuentum’s Email Transaction Alerts Are Worth Paying Attention To

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Valuentum subscribers have noticed that we’ve been quite busy as of late, adding protection to our portfolio in the form of a broader-market put option and taking some large profits in Astronics (ATRO) and eBay (EBAY). We’ve highlighted our best-in-class hit rate–meaning that a large percentage of the firms we added to the portfolio are outperforming the broad market benchmark. But there are a couple ways of looking at our performance–the first is relative outperformance versus the market since inception, which is at 28 percentage points. Investors duplicating our portfolio are enjoying this outperformance. Another way of looking at our track record, however, is to evaluate the performance of additions to the portfolio on the long side (purchases) since inception–i.e. … Read more

Asset Divestitures Progress at Best Ideas Portfolio Holding Rio Tinto

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Image Source: Rio Tinto Due to concerns about economic growth in China and the corresponding impact on demand for iron ore, the broader mining sector has been under pressure during the past few months. Mining giants are looking to shed small or unproductive assets in order to strengthen balance sheets. Best Ideas Newsletter holding Rio Tinto (click ticker for report: ) made progress Thursday, shedding its Eagle project in the upper peninsula of Michigan for $325 million. The buyer is Canadian-based Lundin Mining Corp, which will take over the project that began 3 years ago and is approximately 55% complete. Eagle wasn’t a bad asset, as it is located in the US, is in an advanced stage of development, and … Read more