Brian Nelson

Rio Tinto Up Over 6%

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Shares of Rio Tinto (click ticker for report: ) are spiking on the back of a strong first quarter from Alcoa (click ticker for report: ). We continue to hold the name in the portfolio of our Best Ideas Newsletter.

Good Bye Ron Johnson: JC Penney In Flux

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After the market closed Monday afternoon, JC Penney (click ticker for report: ) announced much maligned CEO Ron Johnson is out, and the reins will be turned over to former CEO Mike Ullman. While we saw little chance of Johnson’s turnaround consummating in a retailing powerhouse at this point, we are shocked by the timing. If there was any chance that the JC Penney turnaround was going to work, Johnson had to be given some additional time to complete the changes. The abrupt decision indicates that the board clearly believes the Johnson’s strategy would continue to fail, and the return of Ullman suggests that JC Penney may return to its previous market position. Not everything Johnson did was necessarily bad—the … Read more

Shares of Baidu Are Just Too Cheap

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Valuations for internet technology companies are literally all over the place. On one end of the spectrum sits LinkedIn (click ticker for report: ) and Amazon (click ticker for report: )—fast growing firms with sky-high PE multiples and tremendous credit given to the long-run. On the other end, we have Apple (click ticker for report: ) generating fantastic amounts of free cash flow, and trading with a single-digits forward PE. Chinese search giant Baidu (click ticker for report: ) falls closer to Apple, and we think shares look incredibly cheap at current levels. Let’s take a closer look at the search giant. Valuation Baidu’s valuation on a discounted cash flow basis looks extremely reasonable. We estimate shares to be worth … Read more

GE Pays Up For Fracking Exposure

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Earlier this morning, The Wall Street Journal reported that GE (click ticker for report: ) will acquire oil pump manufacturer Lufkin Industries (click ticker for report: ) for a whopping $3.3 billion, or $88.50 per share in cash. Paramount to any acquisition is the price paid, and we think GE paid a hefty sum to gain exposure to the US hydraulic fracturing market, paying a 20% premium to the high-end of our fair value range and a price 38% higher than Lufkin’s closing price on Friday. We understand the attractiveness of the energy business, as well as the potential synergies from incorporating the business into GE’s existing portfolio, but paying over 25x 2013 earnings for a firm that hasn’t generated … Read more

March Auto Roundup

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March was another strong month of auto sales in the United States. The SAAR for the month of March came in at 15.27 million units, up from 14.14 million units in March of 2012. Let’s take a look at the results by OEM. Ford Best Ideas Newsletter holding Ford (click ticker for report: ) posted unit sales growth of 6%, driven by utilities (up 14%) and trucks (up 6%). Car sales were flat during the month, though we saw a solid increase of 6% for the redesigned Fusion, and we saw Police Interceptor sales ramp significantly with sales coming in at just under 1,000 units. Consumers flocked away from crossovers, dumping the Edge (down 13%) and the Flex (down 35%), … Read more

Tesla’s Aggressive Financing: Revolutionary or Shortsighted?

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Electric vehicle maker Tesla (click ticker for report: ) stole headlines over the past several days. The firm announced that it will be profitable on both a GAAP and non-GAAP basis as its first quarter sales exceeded expectations (4,750 units versus 4,500 units estimate). Tesla also cancelled its 40 kWh battery version, which is positive, in our view, because it will raise the firm’s average selling price, likely boosting margins. We were a bit surprised to see the company have software limit the driving range to 40kWh rather than force consumers to upgrade to 60kWh batteries, but we think the decision could positively impact brand perception. More importantly, Tesla revealed what it’s calling a “revolutionary” financing plan. Tesla has partnered with … Read more

McCormick Kicks Off 2013 With Strong Cash Flow

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Spices and flavor giant McCormick (click ticker for report: ) started fiscal year 2013 with a solid first quarter. Revenue increased 3% year-over-year to $934 million, easily exceeding consensus estimates. Earnings per share rose 4% year-over-year to $0.57 per share, in-line with consensus expectations. We were pleased to see a strong surge in operating cash flow, which jumped 39% year-over-year to $32 million. McCormick’s first quarter showed a remarkable divergence between its consumer and industrial businesses. The consumer business segment saw sales jump 7% driven by a 14% sales increase in emerging markets, as well as continued strength in the US and Europe. We think McCormick’s spices provide consumers with a relatively inexpensive way to improve tastes, which is important to … Read more

The April Edition of Our Dividend Growth Newsletter!

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S&P and Our Portfolio Hit All-Time Highs, Brian Nelson, CFA Our Dividend Growth Portfolio (see page 5) continues to post strong results, with several names hitting fresh all-time highs over the past few weeks. With our cash balance relatively high, we anticipate to capitalize on any material pullback by adding to existing positions or opening new ones. We’ve had our sights on a few names on our watchlist (page 12) that we believe could add some outperformance and diversification to our portfolio. Economic data throughout March was mostly positive, although the debacle in Cyprus, continued stagnation in Europe, and questionable growth in China may lead some to believe otherwise. Oddly, the headlines aren’t much different than they were a year … Read more

Firms Raising Their Dividends in the Week Ending March 29

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Very few firms raised their dividend during the week ending March 29. To access our dividend reports, please click here. Firms Raising Their Dividends This Week: Camden National (CAC): now $0.27 per share quarterly dividend, was $0.25. City Holding Company (CHCO): now $0.37 per share quarterly dividend, was $0.35. The Female Health Company (FHCO): now $0.07 per share quarterly dividend, was $0.06. Shoe Carnival (SCVL): now $0.06 per share quarterly dividend, was $0.05. Signet Jewelers (SIG): now $0.15 per share quarterly dividend, was $0.12. Washington Federal (WAFD): now $0.09 per share quarterly dividend, was $0.08.