Brian Nelson

Roundy’s: A Cheap Stock in a Terrible Industry

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After going public in early 2012, we profiled Midwestern grocery chain Roundy’s (click ticker for report: ). Earnings momentum has moved materially against the company, and as we predicted, the firm had to slash its enormous dividend payout. In a typical post-IPO period, management was optimistic about future prospects, and competition in the firm’s core Wisconsin market looked weak at best. What CEO Bob Mariano didn’t see coming was that Wal-Mart (click ticker for report: ) would enter Wisconsin in a big way, Woodman’s would keep growing, and Roundy’s-owned Copps would be thrown into a major price war, crushing same-store sales and margins. Our initial thesis included a stable, or even slightly declining core business, but not the 3.6% decline … Read more

Quick Note: Inside the Solar Industry

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Even though shares of First Solar (click ticker for report: ) have more than doubled from the July low, we’ve remained relatively bearish on the poor structure of the industry and keep a below market fair value estimate on the firm’s shares. This weekend’s interview with Gordon Johnson in Barron’s digs into several trends we’ve identified as downward business drivers, including oversupply and subsidies from China, as well as declining investment incentive in the developed world. Please select the following link for the interview: http://online.barrons.com/article/SB50001424052748704723404578207732007178380.html#articleTabs_article%3D1 Please select the following link for our reports on the solar industry: /20121004_2

McDonald’s Going After the Wing Market

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In a somewhat surprising move, McDonald’s (click ticker for report: ) is following up the chicken McBites with its own iteration of chicken wings. The “Mighty Wings” are currently being rolled out across 500 Chicago area restaurants (one location we visited advertised them, but had yet to receive the raw goods). Although wing prices are high and have been hurting profit expansion at Buffalo Wild Wings (click ticker for report: ), we like the move. Not only does it fulfill the need for the company to diversify its menu offerings, but we also think the new menu item could generate incremental revenue (assuming the wings are differentiated from other McDonald’s chicken offerings). Buffalo Wild Wings, for example, is still experiencing … Read more

Finish Line: A Turnaround?

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Athletic footwear and apparel retailer Finish Line (click ticker for report: ) reported highly disappointing third-quarter results Friday morning. Revenue grew 5.2% year-over-year to $296 million, in-line with consensus estimates. Earnings were incredibly weak, as the company was roughly break-even for the quarter, well below the consensus estimate of $0.10 per share and down from earnings of $0.11 per share in the same period a year ago. We were not expecting such weak quarter, particularly given the company’s increased focus on basketball shoes, as well as the blockbuster lineup of basketball shoe releases from the likes of Nike (click ticker for report: ) and adidas in the third quarter. Basketball wasn’t the problem, as management noted that basketball shoe sales … Read more

Sales Surge at Family Dollar But Margins Miss the Mark

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Dollar store giant Family Dollar (click ticker for report: ) reported a mixed first quarter earlier this week. Revenue jumped 12.7% year-over-year to $2.4 billion, slightly above consensus expectations. However, earnings disappointed, increasing just a penny compared to a year ago, to $0.69 (which was well below consensus expectations). Driving sales traffic wasn’t an issue, as same-store sales jumped 6.6% year-over-year. However, the strength was driven by lower-margin consumables, which grew 18.5% from the same period a year ago. Cigarettes were specifically identified as pressuring margins, but management remains confident that selling cigarettes is an overall positive for the business. President and COO Michael Bloom specifically said on the conference call: “We don’t believe that cigarettes — the fact that … Read more

December Auto Sales Roundup

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December auto sales were reported by the major US auto manufacturers Thursday, and it appears the monthly SAAR was somewhere between 15.4 and 15.6 million units. Let’s dig into the results. Ford Best Idea Newsletter holding Ford (click ticker for report: ) has been on a tear since reporting a record operating margin in North America during its most recent quarter. Shares are up 35% during the past three months, and December’s results were another positive for the automaker. Company-wide unit sales grew 1.9% compared to the same period last year, driven by a 2.5% unit gain at the Ford brand, but hurt by a unit decline of 12% at Lincoln. For the year, unit sales in the US grew … Read more

Dear Valuentum Member

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In such a short time that you’ve known us, you have seen us do so much: from generating more than 25 percentage points of outperformance in our Best Ideas portfolio since inception (May 2011) to delivering on our high-single-digit return goal of our Dividend Growth portfolio during 2012 to the Valuentum Dividend Cushion score predicting the dividend cuts of JC Penney (JCP), SuperValu (SVU), Roundy’s (RNDY), and others. You’ve seen us identify a triple in EDAC Tech (EDAC) and predict the bankruptcy of the parent of American Airlines (AMR). These are tremendous accomplishments. There’s an old saying in the market that if your winners are outperforming your losers, you’re doing a great job. Through November of last year, 87% of … Read more

Hard Not to Like Hormel’s Acquisition of Skippy Peanut Butter

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On Thursday, food producer Hormel (click ticker for report: ) announced it will acquire Unilever’s (click ticker for report: ) Skippy Peanut Butter for $700 million. Skippy is a legendary brand, trailing only Smucker’s (click ticker for report: ) Jif in the US peanut butter market. The deal should add approximately $370 million in annual sales, while being mildly accretive to earnings in fiscal year 2013 and adding $0.13-$0.17 per share in fiscal year 2014. More importantly, Skippy is the market-share leader in China, and the company hopes to expand its international presence via Skippy and its popular Spam brand. Image Source: The Peanut Institute We like the deal for Hormel, especially since the peanut butter market has experienced fantastic … Read more