Member Articles

French Conglomerate Bolloré Is Intriguing

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Image Source: Bolloré SE – 2019 Business Report We are intrigued by the extensive reach of Bolloré and the very diversified nature of its asset base. The French conglomerate’s ability to generate meaningful free cash flows during the initial stages of the COVID-19 pandemic highlights the resilience of its business model and cash flow profile. However, we caution that the Bolloré family will continue to exert an outsized level of influence on the trajectory of the conglomerate going forward. Nonetheless, this is one for the radar. By Callum Turcan The French conglomerate Bolloré SE (BOIVF) is a behemoth. It operates in ~130 countries across the world, has ~84,000 employees, and is controlled by the Bolloré family. Cyrille Bolloré is chairman … Read more

Aon and Willis Towers Watson to Join Forces

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Image Source: Aon Plc – Willis Towers Watson Plc Merger IR Presentation March 2020 Executive Summary: Two global professional services firms, Aon and Willis Towers Watson, are in the process of merging through an all-stock deal. Should the transaction proceed as envisioned, the pro forma company should be able to unlock material synergies within a few years after the deal closes. We would want to see how the combined company performs first before updating our opinion on the pro forma entity, though we view the merger quite favorably given the expected free cash flow uplift. By Callum Turcan Aon Plc (AON) is in the process of merging with Willis Towers Watson Plc (WLTW) through an all-stock transaction announced back in … Read more

Earnings Roundup: BYND, DASH, DPZ, NVDA

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Image Shown: Shares of DoorDash Inc tumbled after the food delivery service reported its latest earnings report near the end of February 2021. In alphabetical order by ticker: BYND, DASH, DPZ, NVDA By Callum Turcan In this article, we’ve highlighted four companies that just reported their latest results. Domestic and international economic activities continued to face major headwinds from the coronavirus (‘COVID-19’) pandemic near the end of last year and into the beginning of this year, though corporates are now starting to plan for a world when “pre-pandemic” activities (such as going to eat indoors at a restaurant) can resume in earnest. Global health authorities are working to put an end to the public health crisis via ongoing COVID-19 vaccine … Read more

The Invisible Hand Will Sink These Markets

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Image: Nan Fry By Brian Nelson, CFA Adam Smith’s “Invisible Hand” is often thought to be a blessing by the capitalists of the world. The free-market economy will find the right answer, they may say. Self-interest and greed will inevitably push humankind to new horizons and achieve levels of greatness no person before thought possible. What fools we are to believe. Irrational behavior around shares of GameStop (GME) continued Friday, February 26, with the company trading in a huge range of $86.00-$142.90 on the session. We re-released our 16-page report on the stock and peg a fair value estimate of just $4 per share, with the high end of the fair value estimate range of $7. A Bank of America … Read more

Public Storage’s Traditional Free Cash Flow Coverage of the Dividend Is Unique for a REIT

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Image Source: Mike Mozart By Brian Nelson, CFA Public Storage (PSA) reported better-than-expected fourth-quarter 2020 results February 24. For the period ending December 31, 2020, net income came in at $1.67 per common share, down from last year’s level but mainly because of a non-operating negative impact related to forex on Euro denominated debt ($35.1 million). On an operating basis, Public Storage’s self-storage net operating income advanced $16.5 million year-over-year in the quarter, which was only modestly offset by higher general and administrative expenses ($12.3 million). Underlying business performance at Public Storage remains very healthy, in our view. Core funds from operations (FFO) per share came in at $2.93 in the quarter, up 3.2% in the year-ago period (above the … Read more

Realty Income’s Dividend Track Record Unfazed by Its Weakened Theater Exposure

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Image Source: Realty Income By Brian Nelson, CFA On Monday, February 22, Realty Income (O) reported solid fourth quarter results that beat expectations. For the quarter ending December 31, 2020, net income per share came in at $0.33, adjusted funds from operations per share was $0.84, and the REIT collected 93.6% of contractual rent, a decent percentage given that the troubled theater industry comprises ~5.6% of its annualized contractual rent. Regal Cinemas and AMC Entertainment (AMC) are top-10 customers. Though Realty Income continues to face headwinds from its non-investment grade client tenant portfolio, the REIT continues to invest for the future, with over $1 billion allocated to properties and properties under development or expansion in the period. As with many … Read more

Garbage Hauler Republic Services Expects Record Year in 2021

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Image Source: Republic Services By Brian Nelson, CFA There are few things as certain as death and taxes, but garbage may be one of them. One of our favorite ideas within the municipal solid waste coverage is Republic Services (RSG), a holding in the Dividend Growth Newsletter portfolio. We love its free cash flow generating ability, visibility into future revenue, enviable position with respect to disposal capacity, CPI-based book of business, and exposure to fast-growing economic areas in the US. Republic Services reported strong fourth-quarter results Monday, February 22, and issued favorable 2021 full-year guidance. Revenue during the fourth quarter was largely flat, but adjusted net income rose to $1.00 per diluted share from $0.88 per diluted share in the … Read more

Home Depot Shows the Home Has Never Been More Important

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Image Source: Home Depot. By Brian Nelson, CFA On Tuesday, February 23, Home Depot (HD) reported fiscal fourth-quarter 2021 results (period ending January 31, 2021) that came in better than consensus estimates across the board. Not only did the top- and bottom- lines beat, but comparable store sales growth of 24.5% exceeded even some of the most optimistic forecasts for the home improvement retailer during the period. The average ticket price and the number of transactions advanced, while both professional (“Pro”) and Do-It-Yourself (“DIY”) customer revenue increased at a double-digit pace in the quarter. Home Depot also raised its dividend 10% and now yields ~2.5% on a forward-looking basis ($6.60 per-share dividend on an annualized basis). We continue to like … Read more

Korn Ferry Leaps Higher Toward Our Fair Value Estimate

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Image Shown: Korn Ferry’s stock has surged since it registered a 9 on the Valuentum Buying Index. The company is also included as a holding in the Best Ideas Newsletter portfolio. Brian Nelson, CFA During the trading session Monday, February 22, Best Ideas Newsletter portfolio holding and 9-rated on the Valuentum Buying Index, Korn Ferry (KFY) jumped nearly 9% thanks to better-than-expected fiscal third-quarter 2021 results. Korn Ferry’s fee revenue advanced 9% on a sequential basis as the global consulting firm hauled in record operating income of $65.2 million, record adjusted EBITDA of $96.7 million, and record net income of $51.3 billion during the three months ended January 31, 2021. Here’s what CEO Gary D. Burnison had to say in … Read more