Member Articles

Buffett Makes Another “Unforced Error” in Airlines

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Image Source: Value Trap: Theory of Universal Valuation By Callum Turcan The commercial passenger airline industry is nearly impossible, to downright impossible, to generate meaningful shareholder value in. Specifically as it relates to the US, since the Airline Deregulation Act of 1978 (which among other things allowed airlines to set their own routes without always needing to seek regulatory approval which in turn greatly increased competition, lowered fares, and saw a boom in travelers and miles traveled) various airlines have gone under (such as Pan Am in 1991 and Delta Air Lines (DAL) in 2005 along with others) as competitive advantages once created by government barriers no longer existed. This is true globally as well, as rising competition from private … Read more

AT&T Provides Another Key Update

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Image Shown: The blue line represents the share price performance of AT&T Inc and the orange line represents the performance of the S&P 500 Index. Shares of T have outperformed the index on a year-to-date basis as of this writing. By Callum Turcan One of our favorite high yield ideas out there is AT&T Inc (T) — ~5.6% yield — given its stellar free cash flow profile and ongoing corporate initiatives: serious debt reduction, share buybacks, upcoming launch of HBO Max, the rollout of 5G services across the US, cost structure improvements, and upside from AT&T’s public-private partnership FirstNet (billed as the first nationwide network in the US dedicated to entities/groups operating within the realm of public safety i.e. first … Read more

A ~0.1% Probability Since 1896

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Image Source: Wikipedia Commons   By Brian Nelson, CFA It was mid-June 2015, and our team released our case on why the midstream MLP space would collapse. To us, it just made sense. We’ve been practicing enterprise valuation for a long time, and to this day, we’ve updated over 20,000+ discounted cash flow models. I used to head up the methodology and valuation infrastructure of a department of over 100 analysts across several continents and all sectors when I used to work at Morningstar. Baptism by fire as they say. This was about 10 years ago now. Since our call in mid-June 2015 through March 2, 2020, on a price basis, the S&P 500 (SPY) has advanced 46%, while the Alerian MLP … Read more

Analyzing Three Names Within the Retail Industry

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By Callum Turcan In this note, we cover one quality retailer and two retailers that were facing a myriad of problems long before the novel coronavirus (‘COVID-19’) epidemic reared its head. Best Buy One of the few retailers out there that has actually been able to mitigate the threats posed by e-commerce giant Amazon Inc (AMZN) is Best Buy Co. Inc. (BBY), and as of this writing, shares of BBY yield a decent ~2.8% on a forward-looking basis. On February 27, Best Buy reported fourth quarter and full-year earnings for fiscal 2020 (period ended February 1, 2020) that beat consensus estimates on both the top- and bottom-lines. ‘Enterprise comparable sales’ growth in the fourth quarter (includes both domestic and international … Read more

Covering Oil Markets Ahead of the Upcoming OPEC/OPEC+ Meetings

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Image Source: Exxon Mobil Corporation – 2019 IR Presentation  By Callum Turcan On March 5, the Organization of Petroleum Exporting Countries (‘OPEC’) is holding an “extraordinary” meeting in Vienna, Austria (EWO), which will be followed up by a ministerial meeting between OPEC and non-OPEC members the next day. The group had already agreed to cut oil (USO, BNO) supplies by an additional 0.5 million barrels of per day (‘bpd’) back in December 2019 through an agreement that would last through March 2020 (that was on top of an existing deal to keep 1.2 million bpd off of the market which runs through the end of March 2020 as well). As part of that deal, Saudi Arabia (KSA) offered to “voluntarily” … Read more

Fed Cuts 50 Basis Points, Expect More Market Volatility Ahead

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Image Source: FOMC  The emergency 50-basis point Fed rate cut announced March 3 was largely expected by the marketplace in light of growing economic concerns due to COVID-19, but it does nothing to immunize against COVID-19 and little to stabilize the situation. We continue to monitor the situation closely, and we expect ongoing volatility in the coming days and months as the situation with COVID-19 remains fluid. Having moved to defensive positions in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio in January and having capitalized on the “crash protection” put, we are preparing for our next move. For now, we’re watching and waiting, and we encourage readers that have not yet picked up their copy of … Read more

Analyzing Parsons: A Defense, Intelligence, and Critical Infrastructure Solutions Company

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Image Source: Parsons Corporation – February 2020 IR Presentation By Callum Turcan Parsons Corporation (PSN) is a provider of technical design, engineering, and software solutions to markets within the realm of defense, intelligence, threat detection and mitigation, cybersecurity, critical and transportation infrastructure, mobility solutions, connected communities, and more. The company went public in May 2019 and has since used those IPO proceeds to fund its growth story, including the acquisition of OGSystems during the first half of 2019 (which focuses on “geospatial intelligence, big data analytics, and threat mitigation”) and QSR in the second half of 2019 (which “specializes in radio frequency spectrum survey, record and playback; signals intelligence; and electronic warfare missions”). The company continues to generate value with … Read more

Self-Storage Industry Faces a Rocky 2020, But Long-Term Outlook Remains Bright

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Image Source: CubeSmart – November 2019 IR Presentation By Callum Turcan With housing costs rising aggressively in “Tier 1” and “Tier 2” cities across the East and West coasts in the US, that has created an immense need from households for additional storage space but at a much lower cost than simply buying a larger home, apartment, or condo. This has created a major secular growth trend that we’ve highlighted repeatedly in our High Yield Dividend Newsletter (‘HYDN’) by including shares of CubeSmart (CUBE) and Public Storage (PSA) in our HYDN portfolio, both of which are self-storage focused real estate investment trusts (‘REITs’). Click here for more information on our HYDN. Both self-storage REITs have steadily grown their already sizable … Read more

COVID-19 Crisis Intensifies

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Image Source: CDC. Coronavirus Disease 2019 (COVID-19).  Our dearest members: — The world is being challenged today by what some including Bill Gates believe might be a “once-in-a-century pathogen.” We do not know the eventual outcome, whether the impact of this illness ends up being as profound as the Spanish Influenza of 1918-1919 (which inflicted a death toll in the tens of millions), but we maintain our view the markets have yet to come to grips with the impact of COVID-19 on economic activity and potential ramifications on the global economy and the banking system.  — What is currently a “biological” crisis may turn into an all-out global financial crisis, one that could end up worse than the 2008/2009 mortgage meltdown. Instead … Read more

Our Reports on Stocks in the Software (Graphics) Industry

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Structure of the Software (Graphics) Industry The software (graphics) industry is composed of a variety of firms from online gaming entities to technology-based-language learning companies. Industry constituents compete for the leisure time, attention and discretionary spending of consumers. The social gaming space, in particular, is evolving rapidly, and new entrants will inevitably drive down outsize returns over time. Performance of many participants is “hit” driven. If companies don’t deliver “hit” products to the market, operating results will suffer. Rapid technological change makes obsolescence a possibility. We don’t like the group’s structure. For our coverage of firms in the Software (Graphics) Industry, please click here.