Brian Nelson

Berkshire Hathaway Caps Off Strong Year of Operating Earnings Growth

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Image: Berkshire’s operating earnings experienced a strong advance during 2023 from last year’s levels. By Brian Nelson, CFA On February 24, Berkshire Hathaway (BRK) reported strong fourth-quarter results that capped off a year where operating earnings advanced 21% on a year-over-year basis. Warren Buffett tipped his hat to his long-time partner Charlie Munger, who passed away in November of last year, crediting him as the architect of Berkshire and himself merely in charge of the “construction crew.” There weren’t many surprises in the annual report, and Buffett made several references to areas that he has long talked about in the past, including pointing investors to operating earnings, as opposed to net income, which includes unrealized capital gains that can make … Read more

Domino’s Puts Up Strong Comp in Fourth Quarter, Approves Another $1 Billion in Buybacks, Raises Dividend

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By Brian Nelson, CFA On February 26, Domino’s Pizza (DPZ) reported mixed fourth-quarter results, but comparable store sales came in better than expectations and the firm announced an additional $1 billion in buybacks, while it raised its dividend ~25%. We’re huge fans of Domino’s due in part to its heavily franchised business model, impressive digital initiatives, as well as its long-term unit growth prospects. The high end of our fair value estimate range of Domino’s stands at $569 per share, and we see meaningful upside from today’s price levels (~$465 per share) given the fundamental momentum at the firm. During the quarter, Domino’s global retail sales growth, excluding currency fluctuations, came in at 4.9%, while U.S. same store sales growth … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Booking Holdings’ Fourth Quarter Results Impacted By War in Middle East But Free Cash Flow Margins Remain Robust

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By Brian Nelson, CFA  On February 22, Booking Holdings (BKNG) reported better-than-expected fourth quarter results that beat expectations on both the top and bottom lines, but the company noted that its business had been impacted by the conflict in the Middle East. Regardless, Booking Holdings remains one of our favorite ideas on the market today due to its fantastic free cash flow generation and secular growth prospects. Following in the footsteps of Meta Platforms this quarter, Booking Holdings also initiated its first-ever dividend, a quarterly cash dividend of $8.75 per share, and we like what this implies with respect to capital discipline. Our fair value estimate stands north of $4,100 per share, well above where shares are currently trading at … Read more

Market Darling Nvidia Delivers in Fiscal Fourth Quarter

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Image: Nvidia has been a market darling, and the company did not disappoint in its fourth-quarter fiscal 2024 report. By Brian Nelson, CFA Nvidia (NVDA) reported fantastic fourth-quarter fiscal 2024 results on February 21 that handily beat the consensus forecast for both the top and bottom lines. Shares of Nvidia have surged since the beginning of 2023, and the quarterly report and outlook for the first quarter fiscal 2025 pleased even the most cautious investors. We believe that the market is still in the very early innings of investment into artificial intelligence [AI], and Nvidia has the lead when it comes to advanced chipmaking. The high end of our fair value estimate range of Nvidia stands north of $800 per … Read more

Lithium Prices Remain Volatile; Albemarle Adjusts Long-term Demand Forecast

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Image: Albemarle’s shares have faced significant pressure as a result of depressed lithium prices. By Brian Nelson, CFA The Financial Times reported February 16 that Albemarle (ALB) had reduced its 2030 demand forecast for lithium due to a reduced pace of electric-vehicle adoption in the U.S. and Europe. According to reports from Seeking Alpha, Albemarle now believes that 3.3 million tons of lithium carbon equivalent [LCE] will be in demand across the globe by the end of this decade, a pace that is meaningfully lower than the 3.7 million tons it had projected previously. Albemarle is also dealing with plunging lithium prices, which have punished its cash flow more recently. We think most of the bad news is priced into … Read more

Public Storage Puts Up Record Revenue and Net Operating Income in Fourth Quarter

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By Brian Nelson, CFA Self-storage giant Public Storage (PSA) reported solid fourth quarter results February 20, with revenue and funds from operations [FFO] coming in better than expectations. The company is one of our favorite income-oriented ideas. It has now been in business for more than 50 years, and it boasts an enviable A2/A credit rating, allowing it easy access to the capital markets to fund future deals and projects. Public Storage’s same-store operating margin also runs higher than many of its peers, showcasing its more efficient operating model. We like Public Storage quite a bit, and the company yields ~4.2% at the time of this writing. For the three months ended December 31, Public Storage’s revenue increased 6.6%, while … Read more

Walmart’s Free Cash Flow Remains Robust, Buys Vizio to Boost Advertising Business

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Image: Walmart’s free cash flow generation during fiscal 2024 was superb and comfortably covers its cash dividends paid. By Brian Nelson, CFA On February 20, Walmart (WMT) reported excellent fourth quarter fiscal 2024 results, raised its dividend, and announced that it would acquire Vizio (VZIO) in a $2.3 billion all-cash deal. Walmart continues to be well-positioned in the current retailing environment after the step-change in prices over the past 12-18 months due to heightened levels of inflation, as consumers trade down to lower-priced value items. Shares of Walmart advanced followed the release of its report, and while they are trading above our fair value estimate at the time of this writing, we see upside to the high end of our … Read more

Dividend Growth Idea Home Depot Hikes Payout Nearly 8%!

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Image: Home Depot is working through some soft sales trends following robust home improvement spending during the pandemic, but the company’s free cash flow generation remains top notch. By Brian Nelson, CFA On February 20, Dividend Growth Newsletter portfolio holding Home Depot (HD) reported mixed fourth quarter results that showed revenue pressure in the period, but the company still beat expectations on both the top and bottom lines. We’re huge fans of Home Depot’s resilience through the ups and downs of the real estate market, and the company’s pace of dividend growth remains solid. Our fair value estimate of Home Depot stands at $369 per share, modestly higher than where it is trading, and the company has a strong 1.4x … Read more

Energy Transfer’s Lofty Distributions Are Much More Sustainable These Days

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Image: Energy Transfer covered its distributions with traditional free cash flow in 2023, and the company offers investors an elevated distribution yield. By Brian Nelson, CFA Energy Transfer (ET) reported mixed fourth-quarter results on February 14, but the company’s traditional free cash flow metrics continue to hold up well, providing support to its lofty distribution. Years ago, pipeline entities were spending much more than they reasonably could to be able to sustain their distributions at prior levels, and many have readjusted both their capital spending trajectories as well as their distributions over the years. These days, pipeline entities such as Energy Transfer, with their geographically diversified portfolio of assets, are in much better shape to sustain their payouts. Units of … Read more