Brian Nelson

Best Idea Collective Brands Beats Estimates, Shares Up Over 20%

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Earlier Collective Brands (PSS), one of our best ideas, reported second-quarter earnings that beat most analysts’ estimates and announced a plan to unlock shareholder value. Sales were up nearly 5% and net of a large goodwill impairment, earnings came in at $0.16 a share. The numbers weren’t the big news. Collective announced that it will pursue “strategic initiatives to unlock shareholder value” which we speculate involves a sale of the company, possibly to a private equity firm, or a spin-off of the successful PLG group. We’ve thought that a sum of the parts evaluation shows the true value of Collective, but we underestimated management’s willingness to deliver, and are very pleasantly surprised. We are maintaining our fair value of $24, … Read more

We Outline Our Bullish Case for Ford

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One of the best trades of the 1980’s could be relevant again today: we love Ford   Famous investor and manager of the Fidelity Magellan Fund Peter Lynch is best known for his “buy what you know” strategy. Though Lynch did a lot more than just go to malls and buy stock in the most popular stores, occasionally the best investment opportunities are right in front of you. We think investors will have a chance to replicate Lynch’s famous auto trade of the 1980’s today with shares of Ford inexplicably tumbling towards the single digits. On a discounted cash-flow basis, we think Ford is worth $20 if we double dip into a second recession, $34 under the continued low-growth scenario, … Read more

Target Issues Strong Second Quarter, Posts Best Comps in Four Years

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Target Corp (TGT) reported strong second-quarter results Wednesday that showed accelerating same-store sales growth (its best showing in four years), but modest operating-income and net-earnings expansion that still beat expectations. Total sales increased about 5% thanks to a 3.9% jump in comps, while segment EBIT expanded 4.6% from the same period a year ago. The firm’s earnings per share leapt 11.5% during the quarter (mostly driven by share buybacks), and the company issued full-year 2011 diluted EPS in the range of 4.15 to $4.30, a range we think is achievable. The firm’s average transaction amount increased 3.5% from the same period a year ago, thanks to a 1.8% jump in units per transaction and a 1.7% increase in the average … Read more

Home Depot Outshines Lowe’s in its Second Quarter

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Home Depot (HD) reported solid second-quarter results Tuesday that revealed a strong rebound in its seasonal business and strength in its core categories (hardware, building materials, and electrical), despite the sluggish housing recovery. We like the name better than peer Lowe’s (LOW), but don’t feel diving head first into a housing market play is best at this point in the economic recovery. Home Depot’s sales jumped over 4% from the same quarter a year ago on a similar percentage jump in global comps, while earnings per diluted share expanded nearly 20%, a very impressive growth number. Operating income increased 12% and net earnings increased over 14%, so we were quite pleased with Home Depot’s ability to leverage sales expansion in … Read more

Luxury Continues Positive Momentum as Nordstrom and Saks Post Strong Results

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In the midst of luxury earnings season, we were not at all surprised to see Nordstrom (JWN) and Saks (SKS) post excellent results. Nordstrom ended the quarter with revenues up 12.4% and consolidated same store sales up 7.3%. Breaking its downward trend, Nordstrom Rack posted a 4.8% comp, which we think is impressive given the current success of the full-price Nordstrom store. During 2009 and early 2010, Nordstrom Rack posted terrific growth as it served as the means to deleveraging the massive inventory build that took place in 2007 and 2008. However, the discounter struggled in the first half, likely due to less fashionable items hitting their shelves. In spite of an excellent quarter, we think shares of Nordstrom are … Read more

Wal-Mart Raises Full-Year Guidance, Sam’s Club Drives Results

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Wal-Mart (WMT) issued fiscal 2012 second-quarter results Tuesday that showed resiliency in the face of a difficult consumer spending environment. Net sales advanced 5.5% from the same period a year ago, while diluted earnings per share rose over 12% from last year’s quarter. Total US comps were flat during the period, as continued strong performance at Sam’s Club largely offset declines at Wal-Mart US, which, despite lower comps, posted its best quarterly performance since the third quarter of fiscal 2010. Impressively, Wal-Mart International increased net sales by over 16% in the quarter, a nice showing. The retailer narrowed and raised its full-year guidance to the range of $4.41 to $4.51 per share, which implies about 8% earnings growth at the … Read more

Up, Down, or Sideways: What You Must Always Do to Succeed When Times Are Good, Bad, or in Between

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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: Up, Down, or Sideways: What You Must Always Do to Succeed When Times Are Good, Bad, or in BetweenBy Mark Sanborn. Tyndale House Publishers, 2011. 170 p. ISBN 978-1-4143-6221-2.Book Release Date: October 1, 2011 Sanborn (president of Sanborn & Associates, leadership speaker, and best-selling author of The Fred Factor) shares his take on how to succeed no matter what circumstances you find yourself in. Sanborn starts the book by sharing his own story of how … Read more

Best Idea EDAC Tech Rises 15%+ on Valuentum Report

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It’s not everyday we come across such a massive mispricing in the market as that of EDAC Tech (EDAC) at these levels, but nonetheless we are amazed at the upside opportunity presented by this stock. As part of our process, we employ a discounted cash-flow model to arrive at a fair value estimate for every company within our equity coverage universe. In the case of EDAC Tech, a nano-cap aerospace supplier of precision components to jet engine makers, we think the shares are significantly undervalued at today’s prices of roughly $5 per share. Based on our DCF process, our fair value estimate for EDAC Tech is $10 per share (assuming a 9.4% weighted average cost of capital), and we reveal … Read more

Luxury Remains in Vogue: Macy’s and Ralph Lauren Report Blow-out Numbers

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Although the broader market sold off yet again August 10, Ralph Lauren (RL) was a stand-out performer, with shares rising nearly 5% on a very impressive quarter. As with literally every company in the clothing business, gross margins fell due to rising fuel and cotton costs. However, even with a 120 basis point drop in gross margins, RL achieved outstanding profitability growth, with diluted EPS up 57% on a 32% increase in revenue. We think the quarter’s same store sales growth (19%) was even more indicative of the company’s performance. Clearly consumers are going to this high-priced boutique stores and seeking out full-priced Ralph Lauren merchandise that is far more prone to sales at Nordstrom (JWN) or Macy’s (M). We think … Read more