Member Articles

Dow Down 3000+ Points This Week — Interested in Options? This Might Be for You

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Image: We “added” out of the money put options on the S&P 500 ETF (SPY) Monday morning, February 24. The markets have crashed since. Hi everyone, We trust you are well and staying safe during this crisis. One of the biggest takeaways of our book, Value Trap: Theory of Universal Valuation, is just how volatile the markets might become in the event of the next crisis as a result of price-agnostic trading, or what we define as passive indexing and quantitative algorithmic trading–buying and selling anything at any price irrespective of intrinsic value. Well, that next crisis has now arrived. After our call to “add” deep out-of-the-money put options to both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter … Read more

Home Depot Reports Fourth Quarter Amid Rising Exogenous Headwinds

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Image Shown: Home Depot Inc has had plenty of success building off of and expanding its ‘Pro’ ecosystem as it relates to generating nice comparable sales growth. Image Source: Home Depot – 2019 Investor and Analyst Day IR Presentation By Callum Turcan On February 25, Home Depot Inc (HD) reported fourth quarter and full-year earnings for fiscal 2019 (period ended February 2, 2020) which matched top-line consensus estimates and beat bottom-line consensus estimates. What really caught the market’s attention was Home Depot’s strong comparable sales performance, which was up 5.2% overall and 5.3% in the US during the fourth quarter on a year-over-year basis (for the whole fiscal year, Home Depot’s overall and US comparable sales rose by 3.5% and … Read more

Has the Stock Market Crash Begun?

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Image: CDC. Transmission electron microscopic image of an isolate from the first U.S. case of COVID-19, formerly known as 2019-nCoV. The spherical viral particles, colorized blue, contain cross-section through the viral genome, seen as black dots. Dear members: This article is our fourth update on COVID-19. The previous three installments can be found here (Feb 22), here (Feb 7) and here (Jan 31). We trust you and yours are well during this global crisis. It’s hard to turn on the television these days without hearing about COVID-19, a novel coronavirus and respiratory illness that continues to spread from person to person around the world. COVID-19 is deadly, and particularly deadly among those 60 years of age and older and those … Read more

Republic Services Further Showcases Why It’s a Top Quality Defensive Firm

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Image Shown: We added Republic Services Inc to our Dividend Growth Newsletter portfolio on January 13, 2020, with shares of RSG included at a modest weighting. By Callum Turcan On February 13, waste management company Republic Services Inc (RSG) reported fourth quarter and full-year results for 2019. We added shares of RSG with a modest weighting to our Dividend Growth Newsletter portfolio back on January 13 (link here covering those changes) as part of our shift towards more defensive names in light of rising exogenous headwinds facing the global economy. Waste management services are always in demand, and while trash and recycling needs can fluctuate, this is a very recession-resistant space. Shares of RSG yield ~1.6% as of this writing … Read more

Berkshire Reports 2019 Earnings

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By Callum Turcan Berkshire Hathaway Inc (BRK.A) (BRK.B) reported fourth quarter and full-year results on Saturday February 22, and we appreciate the firm’s performance across most of its business lines, keeping in mind that losses at its insurance-underwriting business during the fourth quarter weakened its company-wide performance. That being said, the insurance business can be volatile at times, which is why we appreciate Berkshire’s large railroad, utility, consumer goods, and other business segments. On the topic of Berkshire’s insurance-related exposure to the ongoing COVID-19 epidemic (which has since spread from China (FXI, MCHI, KWEB) to the rest of the world, shutting down economies in South Korea (EWY), Italy (EWI), and elsewhere), insurance firms fundamentally altered the structure of their policies after the … Read more

Our Reports on Stocks in the Electrical Equipment Industry

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Image Source: Emerson Structure of the Electrical Equipment Industry The fragmented electrical equipment industry includes firms that primarily provide flow control and electrical components. Order trends and backlog are largely driven by the overall health of the economy, while all constituents must deal with volatile raw material prices. Most operate high fixed-cost business models, where operating leverage should be monitored closely, and face intense global competition. Still, we like the group’s exposure to recurring maintenance, repair, and overhaul (MRO) revenue and its large and growing emerging-market opportunities. We’re generally neutral on the industry’s structure. We’ve optimized our industrials coverage. For industrial reports, please click here.

Our Reports on Stocks in the Communication Equipment Industry

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Image Source: Kārlis Dambrāns Structure of the Communications Equipment Industry The communications equipment industry continues to undergo rapid change, as network traffic expands, new service offerings are introduced, and end user demand shifts. Competition among communication network solution vendors remains intense, as securing new opportunities often requires agreeing to less favorable commercial terms and pricing. Rivalry among constituents will only increase in coming years, as Chinese equipment vendors gain entry into the US market and incumbent competitors strive to retain share. We don’t think such conditions are favorable to generating long-term economic profit. We’ve optimized our tehnology coverage. To access the reports, please select here.

ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Realty Income Closes Out 2019 With a Solid Earnings Report and Promising Guidance

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Image Shown: Shares of Realty Income Corporation, a holding in our Dividend Growth Newsletter portfolio, have taken off year-to-date. By Callum Turcan On February 19, the commercial property focused real estate investment trust (‘REIT’) Realty Income Corporation (O) reported fourth quarter and full-year earnings for 2019. Its results beat market expectations for both its GAAP revenues and non-GAAP funds from operations (‘FFO’), which saw shares continue to march higher after performing quite well year-to-date. We include shares of O in our Dividend Growth Newsletter portfolio and continue to like the name. Please note that when we update our Retail REIT Industry models, it’s likely Realty Income will receive a nice boost to its fair value estimate and fair value estimate range. … Read more