Brian Nelson

The Role of Luck in Investing and How To Think About It

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Dear members: — For every Amazon (AMZN) that made it, there are hundreds, maybe thousands, from the dot-com era that didn’t. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla (TSLA), there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. — For every streaming enterprise like Netflix (NFLX), there is a Napster that failed. Most of us probably don’t even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet (GOOG, GOOGL), there’s an AltaVista or Netscape. For every Apple (AAPL), there … Read more

Apple’s Big “Wonderlust” Event Is Business as Usual

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Image Source: Apple By Brian Nelson, CFA On September 12, Apple Inc. (AAPL) hosted its widely-anticipated “Wonderlust” event. The market was anticipating several new products, and Apple delivered. The firm’s iPhone 15 Pro, iPhone 15, Apple Watch Series 9, and Apple Watch Ultra 2 will go a long way to retaining share in smartphones and wearable devices, but the company opted to leave prices unchanged. Many had been expecting a price increase, but we’re not reading too much into Apple’s decision to leave them unchanged, given economic uncertainty in the U.S., Huawei’s release of its latest phone (the Mate 60 Pro) and rising geopolitical tensions between the U.S. and China. The iPhone 15 Pro frankly looks awesome, and it is … Read more

ESG Issues Plague Discover

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Image: Discover’s shares have faced pressure due to a card misclassification issue and the resignation of CEO Roger Hochschild. Discover Financial’s (DFS) shares have faced a difficult 52-week stretch as corporate news hasn’t been great. The company’s equity is down nearly 14%, while the S&P 500 (SPY) is up more than 8% over the same time stretch. Though Discover has the potential to bounce back from the troubles it has encountered, the firm has certainly been in hot water since it disclosed a card product misclassification. From its press release on July 19: Beginning around mid-2007, Discover incorrectly classified certain credit card accounts into our highest merchant and merchant acquirer pricing tier. Incremental revenue resulting from this card product misclassification … Read more

Oracle’s Shares Have Performed Fantastically

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Image: Oracle’s shares may have sold off aggressively during the trading session September 11, but they have done quite well as a member of the Dividend Growth Newsletter portfolio. By Brian Nelson, CFA On September 11, Dividend Growth Newsletter portfolio holding Oracle Corp. (ORCL) reported first-quarter fiscal 2024 results that missed expectations modestly on the top line. Shares tumbled aggressively during the trading session September 12, but we think most of the sell-off is just profit taking. Prior to the report, Oracle’s shares were up more than 50%, while they are up over 64% during the past year. The high end of our fair value estimate stands at $136, while the firm yields ~1.3% on a forward estimated basis. During … Read more

Our Latest Report Updates

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The data for these companies will be updated on their respective web pages this weekend. Download their updated 16-page reports (pdf) by selecting the link below. Chevron (CVX) ConocoPhillips (COP) Enbridge (ENB) General Mills (GIS) Keurig Dr Pepper (KDP) Kimberly-Clark (KMB) Kroger (KR) Mondelez Intl (MDLZ) Occidental Petroleum (OXY) Paramount Global (PARA)  Pioneer Natural Resources (PXD) T-Mobile (TMUS) ———- In our 16-page equity research reports, we offer a fair value estimate for each company based on a rigorous and transparent discounted cash flow process, assess the attractiveness of a stock based on a firm-specific margin of safety, and provide a relative valuation comparison in the context of the company’s industry and peers. Each report includes detailed pro forma financial statements, … Read more

In the News: Lockheed Martin, Apple, Enbridge

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Image Source: Björn Lammers By Brian Nelson, CFA On September 6, Dividend Growth Newsletter portfolio holding Lockheed Martin (LMT) announced in a regulatory filing that it expects to deliver 97 F-35 fighter jets during 2023, down from its previous expectation of 100-120 planes. Reports indicate that the production hiccup occurred at supplier L3Harris Technologies (LHX) with respect to the development of the aircraft’s integrated core processor, pushing back Lockheed’s delivery timeline for the combat jet. Though the news is not good, we’re not reading much into it. Lockheed noted that it continues to produce F-35s at a pace of 156 per year. We’re viewing this as a mere timing issue and not making any changes to our $440 per share fair … Read more

Latest Report Updates Reveal Tremendous Dividend Strength at Walmart

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By Brian Nelson, CFA Our latest report updates showcased one very big observation, and that was the tremendous dividend strength of Walmart (WMT). The big box retailer’s Dividend Cushion ratio is rock-solid, and improved inventory management has worked wonders on operating cash flow this year, driving it to $18.2 billion during the six months ended July 31 from $9.24 billion in the same period a year ago, all the while organized retail theft remains a huge industry-wide problem. Though shares of Walmart are widely followed and are fairly valued on the basis of our discounted cash-flow process, we stand in awe of the company’s resurgence in free cash flow generation and believe that the firm offers a nice foundation to … Read more

Report Updates — Did You Throw the Baby Out with the Bathwater?

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Hi everyone: Brian here. I hope you are having a nice Labor Day holiday weekend.  We wanted to bring your attention to a number of stock report updates. Both Alibaba (BABA) and Korn/Ferry (KFY) have registered one of the highest ratings (9) on the Valuentum Buying Index. To garner such a high rating, a company would have to be considered undervalued on a discounted cash-flow basis, undervalued on a relative value basis, as well as exhibiting strong technical/momentum indicators. Alibaba looks like it could pop quite a bit from current levels after technically basing for months, and while risks related to the name are tremendously high given rising U.S.-China tensions, shares sure look undervalued to us. Korn/Ferry’s shares also look … Read more

Our Reports on Stocks in the Industrial Leaders Industry

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Dividend Yield: Estimated on a forward-looking annualized basis. VBI: The Valuentum Buying Index, a timeliness indicator that overlays a price-to-fair-value estimate consideration. Fair Value Estimate: Derived by Valuentum’s enterprise valuation process. Dividend Cushion ratio: A ratio assessing the health of the dividend (the higher, the better). Data as of the date of this article. Individual company reports may have been updated subsequent to the publishing of this article, so please download a company’s stock and dividend report for its latest information and data. Note: The data in the tables of each of the below companies’ respective stock pages is updated the weekend after the publishing of this update. Please click on a company name below to view the corresponding equity … Read more

A New Computing Era Has Begun — Nvidia Delivers Yet Again

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By Brian Nelson, CFA When we first wrote that Nvidia (NVDA) would power this market higher back in May, the firm had just put up one of the most prolific earnings beats I had ever seen. I’d have to go back almost 20 years to the invention of Apple’s iPod click-wheel technology to remember something that came close. Well, on August 23, Nvidia just put up another monster quarter, this one the second of its fiscal year 2024, beating top-line and bottom-line consensus estimates by a huge margin for the period ending July 30. We’ve raised our fair value estimate of Nvidia considerably following the blockbuster second-quarter performance and third-quarter outlook, released today, and the race is on to adopt … Read more