Brian Nelson

Lorillard’s Valuation Leaves Something to Be Desired

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/276520-lorillards-valuation-leaves-something-to-be-desired  The FDA recently ruled that beginning in the fall of next year, all cigarette packaging and advertisements in the U.S. must reveal prominent and perhaps gory health warning labels. These new and larger cigarette warnings, which include an image of a man smoking through a hole in his throat and an image of a parent holding a baby as smoke drifts toward them, represent a huge step by the current administration to curb new smokers from picking up the habit, while encouraging others to quit. But should investors of Lorillard (LO), Altria Group (MO) and Reynolds American (RAI) be concerned? Regulation has long been a part of the tobacco industry and while … Read more

Our Case for Precision Castparts — Upside to $200 Per Share

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Precision Castparts has long been a favorite of ours. The firm’s investment cast products segment (about 34% of sales) makes the structural castings (metal blocks) and the rotating airfoils (blades) that form aircraft jet engines. Though a structural casting has a longer useful life, a jet engine’s airfoil components frequently need to be replaced upon maintenance (think razor, razor-blade model). The firm’s forged products (about 41% of sales) are used in landing gear, bulkheads, and other airframe components, while its fasteners (about 25% of sales) are used in such critical applications as wing-to-fuselage and engine-to-wing connections. Precision’s components are crucial to flight safety, particularly its metal castings, which preserve engine integrity during intense thermal conditions. Plus, and perhaps most important, Precision … Read more

Airbus Has Boeing’s Back Against the Wall, Seek Opportunities in Supply Chain

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/276439-airbus-has-boeings-back-against-the-wall-seek-opportunities-in-supply-chain Last week in anticipation of the Paris Air Show–a huge event for the aviation industry–we outlined our forecasts for market share in the narrowbody aircraft segment, which showed Airbus’ A320 gaining a clear lead during the next few decades.  So far during the show, Airbus has received a plethora of orders for its A320neo (new engine option), a re-engining of its popular A320, which competes with Boeing’s 737NG [and within a few years, entrants from around the globe: Comac’s C919 from China, Bombardier’s (BDRBF.PK) CSeries, and the Irkut/UAC MS-21 from Russia]. Orders for the A320neo are coming from around the globe, with Airbus garnering wins from India’s Indigo, Chile’s LAN Airlines (LFL), and domestic carrier Republic (RJET). We’re currently watching for any major shifts within the discount airline … Read more

Waste Management Looks Undervalued, Boasts Attractive Yield

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/275873-waste-management-looks-undervalued-boasts-attractive-yield At Valuentum, we employ a discounted cash-flow model to arrive at a fair value estimate for every company within our equity coverage universe. In the waste industry, using a discounted cash-flow model is the best tool for valuation, given the robust cash-flow characteristics of participants. We outline below our forecasts and fair value estimate for Waste Management and offer up our model template to investors if they are interested in using it to value any operating (non-financial) company they wish. This model template can be found at the following location: DCF Valuation Model. But before we dive into the numbers on Waste Management, we’d like to invite investors to take a read of a waste-industry primer, which goes into … Read more

Debt: the First 5,000 Years

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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: Debt: the First 5,000 Years By David Graeber. Melville House Publishing, 2011. 544 p. ISBN 978-1-933633-86-2.Book Release Date: July 12, 2011 Graeber (Reader in the Department of Anthropology at Goldsmiths, University of London) takes a multi-pronged approach to exploring debt, looking at both the moral and economic underpinnings of debt as well as providing anthropological evidence of the long history of debt and credit.  He refutes the generally accepted history of money, which posits that barter systems led … Read more

Word of Caution: Boeing’s Narrowbody Build Rate Is Unsustainable

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/275567-word-of-caution-boeings-narrowbody-build-rate-is-unsustainable  Competition in the narrowbody market continues to heat up, and recent events only support our view that the large commercial jet-making duopoly of Boeing (BA) and Airbus will be shattered in coming years. First, last Wednesday, Boeing released plans to increase production of its 737 workhorse to 42 jets per month by the first half of 2014. We view this strictly as a competitive response to clear its massive narrowbody backlog in the face of firming global competition, not as an indication of incremental demand for Boeing’s soon-to-be-legacy 737NG (it will be replaced with either a re-engined model or a brand new build in coming years). Frequent readers were aware … Read more

A Serious Blow to Boeing is Looming

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This article was referenced on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/275567-word-of-caution-boeings-narrowbody-build-rate-is-unsustainable As competition in the narrowbody market heats up before the Paris Air Show next week, Boeing appears to be losing favor with two of its best customers, Southwest and Ryanair. For those unfamiliar with Southwest’s and Ryanair’s fleets, they are all-Boeing 737 airplanes, and recent actions by these two carriers give us pause, especially as Boeing drags its feet on deciding what to do next with its workhorse 737. As Bloomberg reported some time ago, Southwest’s CEO Gary Kelly is not all that thrilled by Boeing’s delay in responding to Airbus’ A320neo and the CSeries offered by Bombardier–both planes offering cost advantages better than the 737NG in their corresponding seat … Read more

Apple Priced for Significantly Slower Growth

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/275395-apple-priced-for-significantly-slower-growth At Valuentum, we often use a discounted cash-flow model as a means to back into the current share price of firms in order to ascertain whether the market is unfairly pricing their stock relative to reasonable long-term growth and profitability assumptions. In Apple’s case, it appears that the market is certainly concerned about future growth rates, almost to the tune of merely expecting inflation-like expansion beginning toward the middle of this decade. Although in the land of technology, competition adapts quickly and a few years from now can be viewed as the distant future, Apple represents a compelling risk-reward opportunity at these levels based on our analysis. Often, evaluating a … Read more

Ageing Fleets: Which Airline Has the Highest Costs?

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273990-aging-fleets-which-airline-has-the-highest-costs  With jet fuel once again on the rise and the economic environment becoming even more uncertain, it’s informative for airline stock speculators to know which carriers have the oldest fleets. The age (and model) of an aircraft could have large implications on fuel efficiency and ultimately the airline’s cost structure, which becomes absolutely paramount under poor economic conditions. Let’s evaluate the fleets of the Big Four legacy carriers in the U.S. US Airways (LCC) As of the end of last year, US Airways was flying nearly 60 Boeing 737 Classics and 10 legacy 767s that were on average about 21 years old. These Classics and legacy 767s are roughly 15%-20% … Read more

9 Aerospace Suppliers With Attractive PEG Ratios

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273893-9-aerospace-suppliers-with-attractive-peg-ratios Although there is no substitute for assessing a firm’s valuation on a discounted cash-flow basis, evaluating a firm’s value through its PEG ratio may be the next-best option. Provided in this article is an aerospace supplier cheat sheet that gives a brief description, the market cap, consensus forecasts, long-term growth estimates, and the corresponding PEG ratios for suppliers within the commercial aerospace chain. This list should come in handy as commercial aircraft deliveries soar in coming years. (Click charts to expand) Based on the cheat sheet below, there are nine aerospace suppliers that currently garner a PEG ratio below 1, derived by taking the price-to-earnings ratio based on next year’s … Read more