Brian Nelson

Revisiting the Real Risks of Linn Energy

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In recent months, energy producer Linn Energy (click ticker for report: ) has come under fire from the likes of Barron’s and hedge fund managers. The biggest issue for Linn bears, prior to the merger agreement with Berry Petroleum (BRY) was that the company issued unrealistic measures for distributable cash flow per share and for adjusted EBITDA. Both metrics are non-GAAP figures, which can sometimes raise a red flag—especially when a firm’s management team comes under pressure. Let’s take a look at Linn’s metrics and the issues swirling around the stock. Linn’s Metrics After the attacks on its metrics, Linn went on the offensive, providing a supplemental presentation elaborating on the company’s non-GAAP metrics. Source: Linn “Short Seller Response” The … Read more

What Did We Learn About Apple from the All Things D Conference?

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During the past few weeks, Apple (click ticker for report: ) has re-entered the market’s collective psyche in a big way. First, CEO Tim Cook was grilled by congress over how the company skirts US income taxes. While Apple broke no laws, the company still got targeted for its complex tax avoidance structure. We think this news couldn’t be any less material, especially since literally thousands of other companies use similar tactics. In our view, Apple was singled out because it’s one of the largest companies in the world. The hearing is nothing more than a silly sideshow, and we doubt it will amount to anything more than a few weeks of headlines. On the other hand, Cook spoke on … Read more

Market Swoons in Late Trading Friday

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All data in this article is as of the published date, May 31, 2013. Reiterating Our View As we had outlined in our May 23 piece, “The Market Doesn’t Go Straight Up,” we identified a number of reasons why the risk-reward ratio had tilted against the investor: increased market volatility, the significant imbalance in the Valuentum Buying Index rankings (click here), and unfavorable relative/comparable market value comparisons versus historical trends. As such, we opened a put option on the broader market ETF, the SPDR S&P 500 Trust (SPY), in our Best Ideas portfolio for added downward protection ($160 strike, Dec 2013 expiration) well in advance of the sell-off Friday (we already have roughly a 30%+ cash position in our Best … Read more

Dividend Increases for the Week Ending May 31

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Below we provide a list of firms that upped their dividends for the week ending May 31. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here. Firms Raising Their Dividends This Week American Eagle Outfitters (AEO): now $0.125 per share quarterly dividend, was $0.11. Canadian Imperial Bank of Commerce (CM): now C$0.96 per share quarterly dividend, was $0.94. CryoLife (CRY): now $0.0275 per share quarterly dividend, was $0.025. Daktronics (DAKT): now $0.12 per share semi-annual dividend, was $0.115. Eastern Insurance Holdings (EIHI): now $0.11 per share quarterly dividend, was $0.09. Hill-Rom Holdings (HRC): now $0.1375 per share quarterly dividend, was $0.125. Lowe’s Companies (LOW): now … Read more

Tiffany Leaps A Low Hurdle

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Aspirational retailer Tiffany (click ticker for report: ) announced better-than-expected results for the first quarter of fiscal year 2014 fiscal year Tuesday morning. Global sales increased 9% year-over-year (13% ex-currency) to $895 million, exceeding consensus estimates. Earnings per share were also better than anticipated after Tiffany tempered first quarter expectations, as earnings were 10% higher year-over-year at $0.70 per share on a non-GAAP basis. While the firm didn’t give out free cash flow during the quarter, it did give full-year free cash flow guidance of $300 million. The company’s previous fears of margin deterioration did come true, as gross margins declined 110 basis points year-over-year to 56.2%. Management cited product mix as the major driver behind the weakness as consumers … Read more

Mortgage REITs Feeling the Pain

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We published our extensive bear thesis on the mortgage REIT industry Monday–‘The Mortgage REIT Business Doesn’t Work…‘–, and when the markets opened for trading Tuesday, the entire mREIT group came under intense selling pressure, with American Capital Agency (AGNC) leading the charge lower. Key moves: American Capital Agency (-4.73%), Annaly (NLY -3.47%), Two Harbors (TWO -2.87%), Anworth (ANH -2.08%), Western Asset (WMC -3.75%), Apollo Residential (AMTG -5.43%), Invesco (IVR -4.22%), MFA Financial (MFA -2.2%). The 10-year Treasury added another 14 basis points today (2.15%), while the 30-year Treasury added 13 basis points (3.31%)–source. The primary driver behind our negative thesis on the mortgage REITs rests on the continuation of higher interest rates, and the eroding of the group’s net asset value via net unrealized losses (negative OCI) … Read more