Member Articles

Netflix: The Painful Slowdown Begins

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By Brian Nelson, CFA We’re not going to say much about Netflix’s (NFLX) quarterly “miss” other than adding 1.7 million members, as it did during its second quarter 2016, wasn’t horrible. The media outlets and sell-side analysts will tell you that this came in below Netflix’s 2.5 million net new member forecast and below the 3.3 million net-add mark in the prior-year. This is no surprise to the Valuentum readership. We had been expecting significant weakness at Netflix. The stock is ~15% lower in after-hours trading. What to do now? Well, the air is slowing coming out of the Netflix bubble. The market is slowly realizing that growth in the US is grinding to a halt. On a trailing 12-month … Read more

Yum! Separation on Track; China Picking Up in 3Q?

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Image Source: Yum! Brands, 2015 Annual Report By Jessica Bishop Squashing a recent report from Bloomberg that suggested the Yum! (YUM) separation had been delayed, the executive team heading the KFC, Pizza Hut and Taco Bell franchises said in its second quarter 2016 report, released after the close July 14, that all is well with plans to separate its fast-growing operations in China from the rest of the company. We outlined our latest thoughts on the China separation in our late June piece, “Yum! Does One Plus One Equal More Than Two?” and while not much has changed in the past few weeks, we continue to monitor Yum! — not only in the event the separation causes a mispricing with … Read more

Frozen Capital: What Nobody Is Talking About…Anymore

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Image Source: Janet Ramsden UK property funds have frozen redemptions. What happens when they finally allow investors to flee the country? The US equity markets continue to set new highs, but many risks remain, not the least of which is the fallout to come from Brexit. In some respects, we’re surprised nobody is really talking about it much anymore, but UK property funds have suspended redemptions, even beyond the previous three we reported on, “The Next Banking Crisis? No… Well, Not Yet (July 2016).” This is a big deal because it is just the beginning of the capital-flight process. We think it is wise that such funds are limiting redemptions to avoid an all-out collapse in property prices across the … Read more

Best Idea Kinder Morgan Working To Solve Debt Problem

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Image Source: Benson Kua By The Valuentum Team Kinder Morgan is on its way to righting its debt problems, and we love it! When the US government seemingly raises the so-called debt ceiling every few months, how can the public view towards massive leverage and effectively being unable to repay future obligations without making significant changes hold a stigma? In many ways, it has now become “okay” to be buried under mountains of debt. Is it now the norm? Each citizen in the US, for example, owns a piece of its country’s $19.3 trillion national debt, amounting to a whopping $60,000 per person, and this number is growing. That means that each new baby born in America is saddled with … Read more

Understanding the Market Melt Up

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Image Source: Martin Thomas A previous version of this article appeared on our website April 15, 2016, “The Bubble Is Still Inflating.” No – things are not getting better. The discount rate is shrinking – and that means rising equity values. The laws of finance continue to be bent. NIRP (negative interest rate policy) has changed everything. The world is upside down, and it seems as though every week, we hear of another country or yet another long-er duration bond that has breached below the 0% threshold, “Japan’s 20-Year Government Bond Yield Goes Negative for First Time (July 2016).” The 10-year Treasury yield hit all-time lows just last week. We wrote extensively on the NIRP topic in the February 1, … Read more

New Coverage Additions

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Image Source: Eric Golub Alliant Energy Alliant Energy (LNT) is a utility holding company, providing regulated electricity and natural gas services to residential, commercial, industrial, and wholesale customers in the Midwest of the US, particularly Wisconsin and Iowa. Moving forward, the firm will continue to grow its exposure to natural gas and wind and other renewables, while reducing its dependence on coal and oil. Despite its regulated operations and competitive dividend yield, we think there are better income ideas for investors looking for exposure to utilities due in part to growth in its debt load in recent quarters. However, management continues to target a dividend payout ratio of 60%-70% of consolidated earnings. Shares appear fairly valued at the moment..  First … Read more

Sharp Curves Ahead for US Auto Market?

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“Auto is clearly a little stretched, in my opinion…Someone is going to get hurt…We don’t do much of that.” — JP Morgan CEO Jamie Dimon, Yahoo Finance, June 2016  The month of May saw many major automakers report significant declines in sales in the US. Could the effect of pent-up demand for autos finally be slowing? An overheated loan market is adding concern to the situation. By Kris Rosemann Major automakers will be forced to make some important decisions in coming months. The US auto market is clearly slowing from the breakneck pace it set last year, particularly late last year, as total US auto sales fell 6% in May 2016 from May 2015. The strength of the rally in recent … Read more

MLP Debate: Not Over?

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I’d like to apologize in advance, but we have to cover some well-traveled ground…again. We know many of you joined “midstream” our call on Kinder Morgan and the MLP space, perhaps in January or February 2016, and some may not have the entire story arc. This article really may be the difference between a life-long customer and someone that cancels today. By Brian Nelson, CFA In June 2015, Valuentum issued a report “5 Reasons Why We Expect Kinder Morgan’s (KMI) Shares to Collapse,” a piece that included our warning about the impending collapse in shares of Kinder Morgan and our major concerns across the MLP spectrum due to their insufficient free cash flow relative to distributions paid in light of … Read more

The Next Banking Crisis? No… Well, Not Yet.

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Image Source: Berit Watkin “Washington Mutual customers withdrew $16.7 billion in cash from the thrift in the past nine days, a huge outflow that led to the largest bank failure in U.S. history, the institution’s regulator said Friday.” — MarketWatch, September 26, 2008 By Brian Nelson, CFA Let’s get this out of the way. We’re not sensationalistic or bombastic. We’re realistic, and we love focusing on the risks of investing because an investor that knows his downside risks is a much better investor than the one that is only looking at sunshine in the rear-view mirror. I’m going to put it bluntly. We’re starting to hear of some rather serious developments in the UK following Brexit. If the UK pound hitting … Read more

Dividend Increases/Decreases for the Week Ending July 1

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Below we provide a list of firms that raised/lowered their dividends during the week ending July 1. 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 Bank of the Ozarks (OZRK): now $0.16 per share quarterly dividend, was $0.155. Darden Restaurants (DRI): now $0.56 per share quarterly dividend, was $0.50. Empire Resources (ERS): now $0.04 per share quarterly dividend, was $0.025. General Mills (GIS): now $0.48 per share quarterly dividend, was $0.46. Global Water Resources (GWRS): now $0.022 per share monthly dividend, was $0.02. Worthington (WOR): now $0.20 per share quarterly dividend, … Read more