Brian Nelson

Nike Just Does It Again, Raising Our Fair Value

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Nike (NKE) reported an absolutely spectacular first quarter that beat what we thought were aggressive estimates. Due to increased expectations, we’ve upped our fair value estimate to $97 per share (was $95 previously). North American results: a huge upside surprise Considering many pundits seem to think the United States is in/heading into/might head into a recession, Nike posted wonderful North American results. Apparel was up 23%, reinforcing our thesis that sports apparel is a tailwind industry. This “mature” industry was up 15% currency neutral, which was even greater than 9% currency neutral growth in China. As CEO Mark Parker said at Nike’s Analyst Day, “Nike is a growth company.” Though commentary was limited, Nike also seems very excited about its upcoming NFL license. With … Read more

Is First Solar Really That Bad?

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After the failure of the federally-supported company, Solyndra, shares of First Solar (FSLR) have been beaten down harshly. By now, you’ve probably heard that Solyndra received over half a billion dollars in federal loans, and thereafter went bankrupt. It looks possible that First Solar, which is scheduled to possibly receive government loan assistance for its next major projects, could have their funding stripped away by a reactionary Congress. Management has noted this would “materially affect earnings.” So why is the market so negative on the solar industry? It hasn’t been a sudden change, but only recently has the trend come to like. There are a few things to like about the solar industry. For one, it’s growing rapidly. According to … Read more

Oracle’s Fiscal First-Quarter Results Reveal Strength in Software Sales, Europe

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Oracle (ORCL) posted strong fiscal first-quarter results Tuesday that showed significant growth in new software licenses and product support (about two thirds of revenue) and some weakness in hardware systems products revenues (about 20% of its top line). Services revenue, accounting for the balance, increased nicely and remained steady at about 14% of sales. We are maintaining our $38 fair value estimate and make available our 16-page report here. Oracle’s top-line advanced at a low double-digit pace, while the firm’s GAAP operating income increased an impressive 40%, translating to a 36% increase in net income and a 46% jump in operating cash flow. The significant profitability expansion was driven by a refocus on its high-end server business – Exadata, Exalogic, … Read more

Adobe’s Fourth-Quarter Outlook Reassures Investors; Firm Continues to Generate Significant Cash Flow

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Adobe (ADBE) reported weak third-quarter results Tuesday, but provided a range for its fiscal fourth-quarter results that topped consensus estimates, representing revenue growth of 10% and earnings growth of 20% at the high end of its guided range. We’re maintaining our fair value estimate of $35 per share and make available our 16-page equity research report here. The firm’s total revenue advanced a modest 2% in the period, as expansion from subscription and services and support sales offset declines in product revenue. The company noted record educational revenue, strong growth in its digital video products, and solid performance with Acrobat. Services and support revenue grew a whopping 39% during the period, and we expect continued rapid expansion from this revenue … Read more

Why We’re Still Bullish on Collective Brands

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As followers of Valuentum know, Collective Brands (PSS) was one of the first positions in our best ideas portfolio. Unfortunately, the timing could not have been worse, as the market collapsed upon itself, sending down Collective shares by over 30%. Since bottoming out at around $9, Collective has rallied nearly 50%, with the shares trading between $13 and $14. Given the announcement of “strategic initiatives” and its tremendous short-term out performance, we revisited our position and think that with or without a buyout, Collective remains one of our top picks. DCF Valuation: $24 At Valuentum, we ultimately think a crucial part of the investment process is applying a discounted cash flow model to arrive at a fair value estimate. This gives … Read more

United Tech’s Potential Bid For Goodrich To Start Wave Of Aerospace Acquisitions

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As we outlined previously in our long-term outlook on aerospace demand, the sector is the place to be and represents the largest weighting in the market-beating portfolio contained within our Best Ideas Newsletter, with Precision Castparts (PCP), Astronics (ATRO), and Edac Tech (EDAC) as core holdings. We outline our forecast for large commercial aircraft demand below:                       As shown above, the expected growth rate of aircraft deliveries during the next five years is truly remarkable. Both Airbus and Boeing are ramping up production of their workhorse A320 and 737 programs to thwart potential cancellations as competition heats up from global rivals — Bombardier, etc. — in the narrowbody market. Boeing has resumed a target of producing seven 777s a month (from … Read more

Ancestry.com Has Staying Power, Has the Makings of a Double

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/293902-why-ancestry-com-has-staying-power-a-double-in-the-making Ancestry.com (ACOM) has taken its shares of lumps following its second-quarter earnings release, which revealed a digestion of the massive growth in subscribers experienced in the first quarter. According to the most recent tally, roughly 25% of the free float of Ancestry.com’s shares are short — an absolutely amazing level given the profitability and growth of the firm. As we outlined in our second-quarter earnings note, we were pleased with the results and maintain that the firm is significantly undervalued: Subscriber growth of 28% from the same period a year ago fueled a 36% increase in the company’s top line during the quarter. We were particularly impressed with the level of average … Read more

Spirit Airlines Retains Cost Advantage, AMR and United Continental Trail Peers

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In the commodified airline industry, the lowest-cost provider often dictates the price for any given route, and real pricing growth continues to elude this troubled industry. As a result, efficient and low-cost operations are paramount to success, and in many cases, essential for long-term survival. The primary metric used to gauge the cost structure of an airline is cost per available seat mile (CASM) — or the cost to fly one seat one mile, whether it’s occupied or not. Unfortunately, comparing one airline’s consolidated CASM with that of another offers little insight into which airline is truly more cost efficient, as some carriers sport regional operations and others vastly different route structures and fleets. To really compare the cost structures … Read more

Drinking from the Fire Hose: Making Smarter Decisions without Drowning in Information.

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Valuentum’s subscriber base enjoys reading the latest and greatest investing books. As a result, Valuentum requests and receives business and investing books before they are officially released. Our editorial staff took a look at the following book, and here’s what we thought after reading it: Drinking from the Fire Hose: Making Smarter Decisions without Drowning in Information. By Christopher J. Frank and Paul Magnone. Portfolio, 2011. 256 p. ISBN 978-1-5918-4426-6. Book Release Date: September 1, 2011   Frank (vice-president of business-to-business and communications research at American Express) and Magnone (director of global business development and alliances at Openet) offer their take on the information overload facing organizations, and suggest that with a few simple questions it is possible to sort … Read more