Member Articles

Uncertainty of Italy’s Political Future Weighing on Global Investors’ Minds

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Italy holds ~$2.7 trillion in public debt, and global investors are worried that a new government could implement policies that would weaken the country’s credit status. Though a sovereign debt crisis does not seem probable at this point, bond markets are suggesting that risks are rising. By Brian Nelson, CFA We do not want investors to be worried by events unfolding in Italy (EWI) of late, as they may not be any more significant than the impact of Brexit (EWU) on equity market returns during the past few years. We can’t cast a blind eye to developments either, however, as Italy’s sovereign debt is not-at-all small by any country’s standards (it’s the third-largest in the world), and the political uncertainty … Read more

CVS Health Story Unchanged; Still Okay with Its Removal

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Image Source: Mike Mozart CVS Health continues to face long-term threats to its business, and relatively weak near-term performance expectations have done little to inspire confidence. The company’s long-term debt load has exploded as it prepares to acquire Aetna, and we don’t expect the company to bounce back onto our radar given the materially increased financial leverage amidst other challenges. By Kris Rosemann Shares of former simulated newsletter portfolios idea CVS Health (CVS) continue to face pressure, and its first quarter 2018 report, released May 2, offered little support. Our opinion of the risks facing the company are unchanged, as threats such as Amazon (AMZN) teaming up with Berkshire Hathaway (BRK.A, BRK.B) and JP Morgan (JPM) to form a new healthcare company … Read more

PPL’s UK Business Provides Drag to Otherwise Strong Earnings

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Former simulated Dividend Growth Newsletter portfolio idea PPL Corp turned in strong earnings from ongoing operations growth in the first quarter of 2018 despite its UK segment, its largest business, taking a meaningful step back in the period. By Kris Rosemann It has been tough sledding for shares of former simulated Dividend Growth Newsletter portfolio idea PPL Corp (PPL) as the high-yielding utility stock has not fared well amid a rising interest-rate environment. We parted ways with the idea in December 2017 in anticipation of rising rates, and a potentially material regulatory overhang exists in pending UK legislation to enact energy price caps on electricity and gas utilities. Some observers believe the cap could be in place by Christmas 2018, … Read more

The Most Important Topic in Stock Investing

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President of Equity Research, Brian Nelson, discusses why price vs. value is the paramount consideration in stock investing. Brian Nelson, CFA: This is Brian Nelson from Valuentum Securities. Today, I wanted to talk about a number of investment concepts that I think are absolutely paramount for every investor to know.  The very first concept is price versus value, and this one is paramount to any investment process. Now I’m not just giving this lip service–this is just one of the core concepts of investing, equity investing. The reality of stock investing is that each company has a present value of future free cash flows that it generates, and those future free cash flows roll up to a fair value, the … Read more

Dividend Increases/Decreases for the Week Ending May 25

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Below we provide a list of firms that raised their dividends during the week ending May 25. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week American Tower (AMT): now $0.77 per share quarterly dividend, was $0.75. Apollo Tactical Income Fund (AIF): now $0.104 per share monthly dividend, was $0.10. B&G Foods (BGS): now $0.475 per share quarterly dividend, was $0.465. Bunge (BG): now $0.50 per share quarterly dividend, was $0.46. CoreSite Realty (COR): now $1.03 per share quarterly dividend, was $0.98. Cracker Barrel (CBRL): now $1.25 per share quarterly dividend, was … Read more

Understanding the Phenomenon of “Price Risk” in High Yield

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  Image Source: Julien Carnot We want you to learn about a unique risk innate to the high yield space like the back of your hand. We’ll explain the “information contained in prices” and talk about what you should be on the lookout for, the “avalanche effect.” Order the High Yield Dividend Newsletter here. — By Brian Nelson, CFA — I received a question from a dear member of ours, and I think it may be helpful that I share the response. The question had to do with why we may be ultra-cautious on high-yielding stocks that are facing considerable price declines. The risk described below makes the high yield space uniquely different than other equity strategies, in our view, … Read more

Tiffany Rallies 20%+ on 1Q’18 Report; Positive Read-Through for China, High-End Retail Margins

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Tiffany’s first-quarter 2018 results were from another planet! Strong increases in comparable store sales almost across the board, blowing by consensus estimates, and the company’s free cash flow outlook has only improved. The read-through is significantly positive for aspirational and luxury players, in our view, and Ralph Lauren’s gross-margin improvement during its quarterly release bodes well for many brands across most of the high-end apparel space. Foreign tourism and high-end consumer spending remain very strong on the basis of Tiffany’s quarterly results, and geopolitical concerns did not impact the breakneck pace of jewelry sales in China or the Korean Peninsula. It’s hard to imagine Tiffany having a better first quarter than it did. By Brian Nelson, CFA On May 23, … Read more

Cracker Barrel Raises Dividend; All-in Yield Impressive

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Simulated Dividend Growth Newsletter portfolio idea Cracker Barrel reported decent fiscal-third quarter 2018 results and hiked its quarterly payout. The company declared a special dividend in its fiscal third-quarter report, too. By Kris Rosemann We’ve been quite pleased with the income generation of Cracker Barrel (CBRL) since highlighting it as an idea in the simulated Dividend Growth Newsletter portfolio, and the unique restaurant operator appears to have made a habit of announcing dividend increases and special payouts, as it did with its fiscal third-quarter 2018 report, released May 22. Fiscal 2018 marked the fourth consecutive such year. The stock reacted favorably to the report, and shares yield ~3.1% after the recent increase in the regular dividend. Cracker Barrel’s yield is … Read more

Campbell Soup Representative of Weakening Consumer Staples Equities

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Image Source: Neil Conway When our team presented at the CFA Society of Houston in March 2017, we warned about the possible coming pressures on consumer staples stocks, and so far, our concerns have come to fruition. Not only have a number of high-profile players in the tobacco and beverage arena soured, but household consumer products and packaged foods players have felt the pain, too. Campbell Soup’s recent fallout has been among the worst. Shares have been halved since mid-2017. Download slide deck — March 8, 2017: Trust the Numbers, Not Just Management, CFA Society Houston, Kris Rosemann and Brian Nelson, CFA By Brian Nelson, CFA The consumer staples sector, as measured by the Consumer Staples Select SPDR ETF (XLP), has … Read more

Hanesbrands Continues to Battle Tough Operating Environment

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Image source: HBI investor presentation Apparel maker Hanesbrands is working to change its fortunes with its “Sell More, Spend Less and Generate Cash” strategies, but its business is facing challenges that include a difficult US brick-and-mortar environment. By Kris Rosemann Former simulated Dividend Growth Newsletter portfolio idea Hanesbrands (HBI) is battling a challenging US brick-and-mortar retail environment and higher commodity costs as it works to transform its performance, and increased marketing spending is expected to weigh on bottom-line results in the near term. Recent acquisitions have helped boost top-line growth as the company turned in reported net sales growth of 7% from the year-ago period in its first quarter of 2018, results released May 1. Organic sales growth in constant … Read more