Brian Nelson

Ford Posts a Fantastic Fourth Quarter

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Earlier this morning, Best Ideas Newsletter portfolio holding Ford (click ticker for report: ) reported fantastic fourth-quarter results that capped off one of the company’s strongest years in its long history. Revenue increased 5% year-over-year to $36.5 billion, easily exceeding consensus estimates. Pre-tax operating profit more than doubled to $1.2 billion, which was also better than anticipated. We see no reason to change our above-market fair value estimate, and we remain very bullish on the company (Image Source: F Earnings Presentation). Not surprisingly, North America (shown above) continued to be the standout segment, with revenue increasing nearly 13% year-over-year and the firm’s operating margin advancing 390 basis points higher. There is some concern about the company losing US market share … Read more

JC Penney Brings Back Discounting; Was the Fourth Quarter Horrible?

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Last week, rumors swirled that JC Penney (click ticker for report: ) was pressuring its suppliers to place MSRPs (manufacturer’s suggested retail price) on its products so JCP could appear to be giving consumers a discount on a product (a sale without it actually being on-sale). Earlier today, that move was confirmed, and sales and MSRPs will be reintroduced at Penney’s stores around the country. Much-maligned CEO Ron Johnson noted that the strategy shift was an “evolution” rather than an admittance of failure.  Yet, the idea of including MSRPs or comparable prices isn’t at all a unique idea—just look at any TJX (click ticker for report: ) store, Nordstrom Rack (click ticker for report: ), or Ross (click ticker for … Read more

Marissa Mayer’s Yahoo! Revitalization Continues

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Monday afternoon, former tech darling Yahoo! (click ticker for report: ) reported solid fourth-quarter results. Revenue jumped 2% year-over-year to $1.35 billion, and revenue ex-TAC (traffic acquisition costs) came in at $1.2 billion, a 4% year-over-year increase that was in line with consensus expectations. Operating earnings per share jumped 28% year-over-year to $0.32, easily exceeding consensus estimates. As wonderful as it is to see revenue grow, the real story at Yahoo! remains the turnaround that CEO Marissa Mayer has embarked upon. Given the incredibly competitive market for talent in the tech industry, Mayer has worked to transform the company into one of Silicon Valley’s best places to work. She noted in the conference call: To date, we introduced rigorous hiring … Read more

Coach’s Momentum Is Slowing

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Aspirational luxury brand Coach (click ticker for report: ) announced lackluster results for its fiscal year 2013 second quarter and the holiday season. Revenue increased just 4% year-over-year to $1.5 billion, short of consensus expectations. Earnings missed the mark by several cents, growing just 4% year-over-year to $1.23 per share. Our fair value estimate remains unchanged. Gross margins remained basically unchanged year-over-year at 72.1%, suggesting the company did not take markdowns during the quarter. Unfortunately, the firm’s 4% sales expansion trailed the 15% increase in inventories, which could indicate that markdowns may come eventually. We could see a gross margin figure meaningfully lower than the current low-70’s run-rate in the coming periods. Inventory growth was among the primary reasons why … Read more

The Significance of Changes in Our Valuentum Buying Index (VBI) Ratings

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Astronics (ATRO) has been a darling of a stock for our Best Ideas portfolio, despite hitting a very rough patch recently. Our Valuentum Buying Index (VBI) ratings have helped us maximize profits in the company, informing us to add the firm in June 2011 to our Best Ideas portfolio in the low-mid $20s (VBI rating of 10) and then to potentially take some profits when the firm registered a VBI rating of 6 in late 2011/early 2012 in the mid-$30s, which we did (selling 30% and then another 50% of our position).  We view VBI ratings of 9 and 10 as actionable for us on the long side and VBI ratings of 1 or 2 as actionable for us on the short (put-option) side. However, we … Read more

Jos. A. Bank’s Friday Night Update Reveals Huge Profit Shortfall

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Late Friday night, suit retailer Jos. A. Bank (click ticker for report: ) used a common tactic to report bad news, revealing in an 8-K that net income for 2012 will be approximately 20% lower than it was in 2011. Some simple mathematical calculations reveal that the figure will lead to lower EPS in not only 2011, but also below what the firm reported in 2010. Although we’re sure SG&A has increased as a percentage of sales, we think the terrible results are the product of compressing gross margins. The firm is famous for its “Buy 1, Get 2 Free” marketing, though it sometimes extends to buying one suit for a free shirt, tie, socks, and other accessories. While Jos. … Read more

The Most Important Tactic in Money Management: Don’t Overreact – The Path of Republic Services

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Let’s dig into the path of Republic Services (RSG), a holding in both the portfolio of our Best Ideas Newsletter and Dividend Growth Newsletter. The trash taker’s past several months have been quite volatile due to some negative newsflow, but the company has now fully recovered and is breaking out to a new 52-week high today! Though we had plans to trim our position in both of our actively-managed portfolios following its weak performance in early November of last year, we didn’t move an inch as we awaited for a tactical exit. In fact, in our Dividend Growth portfolio (cost basis: $27.55 per share), we still hold a full position, and we’re now sitting on profits in our Best Ideas portfolio — even before considering … Read more

Halliburton Sets New Revenue Record

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Late last week, oil services firm Halliburton (click ticker for report: ) reported fantastic fourth-quarter results. Revenue jumped 3% year-over-year to $7.3 billion, easily exceeding consensus estimates and the best quarterly result in the company’s history. Adjusted income from continuing operations was $0.63 per share, a few pennies higher than expected, but down significantly from a year ago. Margins in the Completion & Production (C&P) segment improved sequentially, but declined well over 1,000 basis points year-over-year to 13.9%. International results were excellent, with operating income growing 43% sequentially in Latin America, 22% in Europe/Africa, and 55% in Middle East/Asia. However, operating income in North America, Halliburton’s largest segment, fell 26% sequentially due to seasonal factors, as well as pricing and … Read more

Weak Holiday Sales from Hasbro Are a Surprise

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After NPD reported solid toy sales during December, we thought the holiday season might be relatively strong for the major toymakers—including Lego, Hasbro (click ticker for report: ), and Mattel (click ticker for report: ). However, Hasbro announced last week that its fourth quarter revenue will be approximately $1.3 billion, below the consensus expectation of $1.4 billion. Earnings, net of restructuring charges, will be $2.73-$2.75 per share, well below the consensus estimate of $2.85 per share. We won’t know until the firm announces its results in February what caused the weakness, but we like the firm’s decision to reduce annual operating expenses by $100 million over the next three years. Since December seemed like a relatively strong month for the … Read more