Brian Nelson

Salesforce.com: Completing the Package

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Earlier this week, leading SaaS firm Salesforce.com (click ticker for report: ) made headlines acquiring cloud marketing platform ExactTarget (ET) for $2.5 billion in cash ($33.75/share). The move comes as Salesforce.com hopes to round out its product offering, and adding a company largely known for its email marketing platform helps the firm move toward this goal. Salesforce.com CEO Marc Benioff, excited about the transaction, explained that the landscape is changing, saying on the firm’s conference call about the deal: “There is no doubt our whole industry is changing, and the opportunity to create solutions in sales and service and marketing that are unified, that are mobile, that are social, that are in the cloud, that this combination of these two … Read more

Amazon’s Expansion Knows No Bounds

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On Tuesday, we received a variety of information about Amazon’s (click ticker for report: ) expansion into different product lines. The company is looking to expand its AmazonFresh same-day grocery delivery service and could enter as many as 40 markets this year. Additionally, the firm entered into the highest streaming content contract ever, purchasing the rights to stream over 4,000 episodes of Viacom (click ticker for report: ) TV shows. Let’s dig into the details. AmazonFresh For years, people have speculated that the end-game for Amazon was to build so many warehouses that it could effectively offer same-day shipping on any product and compete with brick-and-mortar shops on the basis of time. Thus, the expansion of AmazonFresh comes as little … Read more

Checking In With Intel

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While shares languished throughout 2012, Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Intel (click ticker for report: ) has experienced a solid rebound in 2013, with shares up 21% year-to-date. We have a nice gain on the position in our actively-managed portfolios, and the firm continues to pay out a nice and safe dividend yield (about 3.7%). Our conviction in the significant valuation upside of the firm remains unchanged (the high end of our fair value range is north of $30 per share), and we continue to think fears that Intel would never become a player in the mobile space are completely unfounded. Intel recently received the “Barron’s treatment,” as the financial publication called for shares to double. Though the publication … Read more

Three Very Good Questions From Members

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Q: Why do you use a risk free rate assumption of 4.25% when the current spot rate of the 10-year Treasury is about 2%? In our discounted cash-flow models that we use to value every non-financial operating company in our coverage universe, we match the duration of future free cash flows (from year 1 to perpetuity) with expectations of the average discount rate over this forecast horizon (from year 1 to perpetuity). We think the best way to achieve expectations of the long-term future average rate of the 10-year Treasury (risk free rate) is to use the weighted average of the historical 10-year Treasury and the current spot rate. The goal of using a weighted average risk free rate in … Read more

Apple Can “Amazon” Pandora

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Over the past year, the idea of Apple (click ticker for report: ) launching an internet streaming radio has been in the back of our minds. In fact, we think it’s the one of the few interesting features that could make the Apple ecosystem even stickier. According to reports, iRadio could be introduced next week. Pandora (click ticker for report: ) shareholders are clearly worried, sending shares tumbling over the past few days, and we believe they should be. While Apple has (wisely) been unwilling to sell its phones or hardware at lower prices in order to win market share, we do not think this logic necessarily applies to iAds/iRadio. For one, Apple’s hardware presents advertisers with an enormous installed … Read more

House Defense Appropriators Ignore Sequestration

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To download the 155+ page fiscal 2014 Defense Appropriations bill, please click here. On Tuesday, the House Appropriations Committee released the subcommittee draft of the fiscal year 2014 Defense Appropriations bill. The bill provides for $512.5 billion in non-war funding, an amount that completely ignores the level that would be caused by automatic sequestration spending cuts (to the tune of over $28 billion). The House’s proposal is also $5.1 billion below fiscal 2013 levels and $3.4 billion below President Obama’s request. In any case (whether the bill in current form is implemented or if sequestration takes hold and further spending cuts are put in place), the trajectory of defense spending for fiscal 2014 relative to fiscal 2013 is down. The … Read more

The US Auto Recovery Is Unshakeable

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As the housing market recovery in the US appears more sustainable, US auto sales continue to gain steam. Low-end luxury is performing exceptionally well, as is the pickup segment—a likely result of the housing recovery. Let’s take a look at results from the industry. Ford Best Ideas Newsletter holding Ford (click ticker for report: ) posted a spectacular May, exceeding consensus estimates with unit sales surging 14% year-over-year to 246,585. As we hit home in our recent piece about the US housing recovery, pickup sales are driving a large portion of Ford’s gains. In fact, F-Series unit sales grew 31% year-over-year to 71,604 units! Other cars posting large sales included the Escape, up 26% year-over-year, the Fusion, up 10% year-over-year, and … Read more

Evaluating the Industry Structure of Managed Care Organizations

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Structure of the Managed Care Industry The managed care organization (MCO) and health insurance/benefits industry is concentrated, competitive, and still consolidating. The largest publicly-traded MCO by members is WellPoint (WLP), which serves more than 66.5 million individuals through its health plans, but UnitedHealth (UNH), Aetna (AET), Humana (HUM), Cigna (CI), Centene (CNC), Health Net (HNT), and WellCare (WCG) are other key players in the industry. Revenues are generated primarily from insurance premiums and, to a lesser extent, from administrative fees and net investment income. Expenses are dominated by benefit expense (the cost of health care services), though overhead (selling, general and administrative expense) is also a material portion of the cost structure of the group. Operating margins for some constituents have hit … Read more

ASCO Reveals That Big Pharma Is Alive

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This weekend, the annual American Society of Clinical Oncology (ASCO) kicked off in Chicago. The theme this year? Immunotherapy. The conference is traditionally littered with news from biotech companies revealing results from clinical studies, but this year’s event also included some news from big phama companies that haven’t been bursting with pipeline breakthroughs in years. Let’s take a look at some of the news out of the event. Firms Highlighted: Bristol-Myers Squibb, Merck, GlaxoSmithKline, Amgen, Galena Biopharma, BioMarin, Celgene. Bristol-Myers Squibb Source: BMY ASOC 2013 Presentation Bristol-Myers Squibb (click ticker for report: ) isn’t exactly what we’d call an under-appreciated company. Over the past year, shares are up 43%. However, this year’s ASCO only further ignited the fire. The company … Read more