Brian Nelson

Channel Checks at Apple Store Speak to Continued Strength

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This weekend (on the evening of January 19, 2013), we took a trip to a local Apple (click ticker for report: AAPL) store to assess traffic trends and gauge the level of ongoing interest in the iPad maker’s products (post-holiday season). We didn’t see any slowdown in traffic, and the location we visited was very well attended. Though the Schaumburg, IL (Woodfield) locale is one of a large number of Apple stores in the US, we have no reason to believe that it is not indicative of traffic trends and general interest in Apple products at other retail Apple stores across the country. We’ve also included a snapshot of an adjacent, neighboring (and vacant) Radio Shack (click ticker for report: RSH) located just a few feet from the pictured Apple store … Read more

Intel Punished for Investing in the Future

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Thursday afternoon, semiconductor giant Intel (click ticker for report: ) reported better than expected fourth quarter results. Revenue declined 3% year-over-year to $13.5 billion, roughly in-line with consensus expectations. Earnings easily exceeded modest estimates, falling 25% year-over-year to $0.48 per share. Due to the weak PC market and the firm’s desire to clear inventories, gross margins were down significantly in the fourth quarter, falling 650 basis points year-over-year to 58%. Gross margin declines were the primary driver behind the lapse in profitability, but research & development costs increased $300 million compared to the same period of 2011 to 19.5% of sales (up 290 bps Y/Y). On a segment basis, the PC Client Group, not surprisingly, drove the majority of revenue … Read more

Is Genworth a Gem Worth Looking At?

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While we at Valuentum tend to prioritize independent thinking over following the herd, we believe investors large and small can benefit from ideas generated outside of their own portfolios—we don’t think anyone would be disappointed piggy-backing Warren Buffett into shares of Berkshire Hathaway 25 years ago, for example. We wanted to profile a stock owned by prominent investors Seth Klarman and David Einhorn. Genworth Financial (click ticker for report: ) is a financial services company engaged in international and domestic mortgage insurance, as well as wealth management. When the US housing market collapsed, Genworth flirted with bankruptcy and since has experienced volatile price performance. Based on a price-to-book ratio of less than 0.25, a price-to-tangible-book ratio of approximately 0.30, and our fair … Read more

Strong Holiday Sales Boost Toy Makers

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Between the rise of video games and the popularity of cell phones and tablets among children, one might expect the US toy industry to be experiencing a robust decline. However, according to NPD, holiday sales were strong enough to propel the toy market to $16.5 billion in sales during 2012, down just $100 million compared to 2011. The report claims dollar sales and unit sales surged 18% and 10%, respectively, during the final two weeks of December, driving sales 1.3% higher year-over-year for the busiest month of the year. Leapfrog (LF), which focuses primarily on educational toys, topped the ‘best-selling toy list’ with 4 out of the 10 best sellers as well as 3 out of the top 4 (including the … Read more

Kinder Morgan Grows Capacity; Raises Distribution

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Pipeline master limited partnership Kinder Morgan (click ticker for report: ) reported strong fourth-quarter results Wednesday afternoon. Revenue surged 31% year-over-year to $2.5 billion, exceeding consensus estimates. Operating earnings per share grew 74% year-over-year to $0.61, also ahead of expectations. Distributable cash flow per share increased 6% year-over-year, to $1.35, more than covering the firm’s payout during the fourth quarter. This led the company to raise its fourth quarter distribution to $1.29 per share (payable February 14, 2013), three cents higher than the previous payout. The firm’s full-year distributable cash flow of $5.07 per share was significantly higher than in 2011, but more importantly, it easily covered distribution payments of $4.98 per share. Aside from solid earnings, we think the company’s … Read more

Bottom in Sentiment Has Been Reached in Boeing’s 787; Orders for Planes Surge at the Airframe Makers

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What a wild ride it has been for Boeing (click ticker for report: ) in the past few years. In a move widely applauded for choosing to build the incredibly efficient, mostly-composite, revolutionary 787 Dreamliner (instead of a gargantuan super-jumbo like the double-decker Airbus A380), the engineering, development, and production of the plane has been filled with more than its share of costly problems. Not only was the plane delayed at least a half dozen times during the engineering and development of the aircraft to first flight, but the company is dealing with highly-publicized “teething” pains now that the plane is in service. This morning, Europe, Japan and India have joined the US Federal Aviation Administration (FAA) in grounding the … Read more

Superb Growth Continues at Best Ideas Portfolio Holding eBay

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Not surprisingly, fantastic growth continued during the fourth quarter at Best Ideas Newsletter holding eBay (click ticker for report: ). Revenue surged 18% year-over-year to $4 billion, a touch better than consensus expectations. Earnings per share, on a non-GAAP basis, grew 17% compared to a year ago to $0.70. We continue to like this holding of our Best Ideas Newsletter portfolio. The continued resurgence of the core eBay business continued uninterrupted, as revenue surged 16% year-over-year to $2 billion, which coincided with 16% gross merchandise volume growth ($19.1 billion). While PayPal grabs all the headlines, the performance of eBay’s marketplace has been fantastic over the last several quarters. The eBay marketplace, in our view, has reached a similar positioning as … Read more

Growth Slowing at Chipotle

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Fast-growing restaurant chain Chipotle (click ticker for report: ) announced its preliminary fourth-quarter results ahead of its presentation at the ICR Conference. Productivity growth at the restaurant appears to be slowing, as same-store sales climbed just 3.8% year-over-year. Overall revenue growth remains strong, up 17% year-over-year to $699 million, slightly above consensus estimates. However, earnings look incredibly disappointing, as the firm estimates earnings per share of $1.92-$1.97—well below the consensus estimate of $2.09 and only a small increase from the same period a year ago. According to the firm’s press release, food costs jumped 130 basis points to 33.5% of sales—the main culprit behind restaurant operating margins dropping 150 basis points compared to the same period a year ago. Though … Read more

Improving Credit Quality at JP Morgan and Wells Fargo

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Over the past week, both JP Morgan (click ticker for report: ) and Wells Fargo (click ticker for report: ), two of the nation’s most important banks, reported fourth quarter results. JP Morgan reported better than anticipated earnings of $1.39 per share, but the firm’s net interest margin (NIM)—return on deposits less the cost of deposits—continues to decline. As the graph below shows, the bank’s NIM has fallen to 2.4% in the most recently-reported quarter from 3.42% in fiscal year 2009 (Image Source: JPM Q4 2012 Earnings Presentation). Such a trend remains an ongoing problem with the banking sector as a whole, but the weakness is not tragic and does not alter our long-term thesis on the group, which is tied to improving real … Read more