Brian Nelson

Will Microsoft’s Mobile Strategy Lead to its Revival?

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A ten-year chart of Microsoft (MSFT) is not a pretty site. Excluding dividends, shares are down a little over 10%, and the PE has contracted from above 40 to, at times, below 10. In the same time period, Microsoft has gone from a Wall Street tech darling that dominated computing to a dinosaur, legacy tech-company. Regardless of how accurate such a description may be, investors have in droves fled to Apple (AAPL), which makes innovative consumer devices that have impressed the masses. During this same time period, Microsoft has had a few wins, including Windows 7, continued excellence with its Office products, Xbox, and Kinect. Throughout the same period we’ve also seen the Zune, unsuccessful tablets, a weak mobile strategy, … Read more

Hasbro Could Be In For a Big Year; Its Hefty Yield Makes it Even More Attractive

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With the invention of intuitive iPads and the interactive Xbox Kinect, you would think children would be ready for technology to take over their childhoods. And that may be correct. iBook 2 might result in learning taking place exclusively in the digital world. In the meantime, kids are still kids, and they still enjoy playing with toys. Though it’s unreasonable to expect toys to absolutely explode in popularity, they’ve been around for hundreds of years, and they won’t go completely out of fashion tomorrow. We think the digital age has beaten down shares of Hasbro (HAS) to an attractive valuation. The stock currently trades at around 11x our 2012 earnings forecast, with a dividend yield of almost 3.7%. With a … Read more

GE’s Industrial Backlog Hits New Highs in Fourth Quarter; GE Capital Continues to Improve

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General Electric (GE) reported fourth-quarter results Friday that showed strong organic revenue growth, a surge in infrastructure orders, and continued improvement at GE Capital. We continue to watch GE’s industrial backlog closely, and its continued growth to record levels suggests to us that the global economy is healthier than most pundits believe.   GE’s total revenue expanded 4% (excluding NBCU) in the quarter, and the firm’s industrial revenue growth came in at 10% on the heels of organic expansion of 5%. Infrastructure orders jumped 15% (organic orders increased 9%) during the quarter, with equipment orders up 23% and services up 7%. Notably, industrial segment emerging market orders increased a whopping 26% from the same period a year ago. GE had … Read more

Best Idea Intel Reports Fourth-Quarter Results; Expects Solid Sales Expansion in 2012

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Intel (INTC) reported better-than-expected fourth-quarter results Thursday that relieved some concerns about the PC market following the chipmaker’s negative pre-announcement several weeks ago. We are maintaining our above-market fair value estimate for Intel and continue to hold the firm in our Best Ideas Newsletter and Dividend Growth Newsletter. “$54 billion in annual (GAAP) revenue, up 24%, $2.39 in annual (GAAP) EPS up 19%, and $18 billion in dividends…” Reading the above headlines, 2011 was truly an excellent and record-breaking year for Intel, and we believe 2012 will continue to be a good one for investors. For example, the firm’s product and technology pipeline includes opportunities presented by Ultrabook systems, data center and security needs, as well as Intel-powered smartphones and … Read more

Microsoft Posts Fiscal Second-Quarter Results; Shares Remain Cheap

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Microsoft (MSFT), one of the larger holdings in the portfolio of our Dividend Growth Newsletter, reported solid fiscal second-quarter results Thursday on the heels of strong corporate demand and holiday sales. We continue to be pleased with Microsoft’s performance and maintain our view that the shares continue to have valuation upside potential. The firm’s revenue advanced 5% from the prior-year period thanks primarily to expansion in its Server/Tools and Entertainment/Devices segments, which advanced 11% and 14.5%, respectively. The Business Division, its largest segment, increased 3% from the prior-year period, and the firm noted that it has sold nearly 200 million licenses of Office 2010 (in the 18 months since launch). Revenue in the firm’s Windows division fell 6%, and management … Read more

IBM Posts Solid Fourth-Quarter Results; Software Continues to Drive Performance

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IBM (IBM) reported fourth-quarter results Wednesday that capped off a year of record earnings per share, revenue, profit and free cash flow. We continue to like IBM, but we are waiting for an entry point that captures an appropriate margin of safety before adding it to either our Best Ideas Newsletter or Dividend Growth Newsletter.  The firm’s revenue jumped a modest 2% (1% adjusting for currency) as an 8% decline in sales from Systems and Technology–due to the timing of product launches, namely the System z mainframe server–weighed down strong performance in Software, which advanced 9% due to strength in its middleware product suite (WebSpere, Tivoli, etc.). Geographically, sales in the Americas’ region increased 3%, while revenues from Europe/Middle East/Africa advanced 1%. … Read more

Google’s Fourth-Quarter Misses on European Weakness, Ad Pricing Declines

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On Wednesday, Google announced weak fourth-quarter results that showed relatively disappointing earnings growth, declining cost per clicks (money paid to the firm for its ads) and slowing international revenue expansion. Though we’ll be re-evaluating our intermediate-term projections on the internet giant, we don’t expect to make a change to our fair value estimate at this time. Google’s revenue advanced 25% in the fourth-quarter from the same period a year ago thanks to a 29% increase in ‘Google Sites Revenues’ and a 15% increase in ‘Google Network Revenues.’ Paid clicks jumped 34% in the fourth quarter from the same period a year ago, but average cost-per-click declined 8%. Though there was some currency impact and management blamed “format changes”, we had been … Read more

Best-Idea eBay Reports Fantastic Fourth-Quarter Results; Outlook Tempered, as Expected

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Best-idea eBay (EBAY) reported strong fourth-quarter results and provided conservative forward guidance. We are maintaining our above-market fair value estimate of the online auction and payment processor. eBay’s revenue for its fourth quarter jumped 35% from the same period a year ago. The firm’s PayPal business continued to perform well, ending the quarter with 106.3 million active registered accounts (up 13% from the same period a year ago). Revenue from PayPal jumped an impressive 28% thanks to continued merchant and consumer adoption and increased penetration on eBay. PayPal’s net total payment volume (TPV) grew 24%, and the firm noted that its international markets exceeded revenue from the US for the first time, reflecting its global footprint. Its Marketplaces business also … Read more

Lack of Winter Weather Hits Dick’s Sporting Goods and Big 5; We’re Not Fans of Either

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Dick’s Sporting Goods (DKS) and Big 5 (BGFV) recently pre-announced dismal guidance for the fourth quarter of 2011. Though both companies cited a lack of winter weather as the main driver of poor same store sales growth, we think the stories at each company are quite different. Dick’s remains a steadily growing, well-run business focused on driving high returns on invested capital, whereas Big 5 is an inferior player focused on smaller markets that’s struggled to find its way. However, as with any investment, getting the right price remains key to our decision-making process, even for firms that may not be best-in-breed.  Risk/reward at Dick’s Sporting Goods isn’t very compelling right now. With our fair value of Dick’s at $31 per share, and … Read more