Member Articles

Flash: Cisco Pops… Shares +6% After-Hours Trading

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Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Cisco (CSCO) is popping nicely in after-hours trading May 18 after a solid fiscal third-quarter report that showed revenue growth of 3% on a year-over-year basis thanks to strength in Security (+17%), Collaboration (+10%) and SP Video (18%), and GAAP earnings per share of $0.46 (non-GAAP came in at $0.57, up 6% during the period). Service revenue jumped 11% in the quarter on a year-over-year basis, while deferred revenue advanced 8% in total. We’re reiterating our $37 per share fair value estimate of Cisco at this time, and we don’t expect its solid 2.6 Dividend Cushion ratio to change materially as a result of the incremental quarterly information. Shares yield ~4%. … Read more

Target and Non-GAAP Earnings

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Image Source: Mike Mozart Another day of earnings — another bad day for retail. May 18 brought a disappointing first-quarter report from retail bellwether Target (TGT) that sent the prices of it and most of its big box brethren including WalMart (WMT), Best Buy (BBY), and hhgregg (HGG) lower on the session, the latter two lower due to weakness in Target’s electronics vertical during the period. We’re reiterating our $71 per share fair value estimate of Target at the time of this writing. Except perhaps home improvement retailers Lowe’s (LOW) and Home Depot (HD), which continue to post desirable comparable store sales increases (+7.3% and +6.5% in the first quarter, respectively), and arguably the auto retailers, including AutoZone (AZO) and … Read more

Soros, Icahn, Nelson Hedge for Market Fall

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Pictured: George Soros; source: Heinrich-Böll-Stiftung By The Valuentum Team Following news that Warren Buffett’s Berkshire Hathaway’s (BRK.A, BRK.B) took a rather sizable stake in Apple (AAPL), news flow from other large investors continues to be decidedly bearish. As our members are aware, we recently added put options on the S&P 500 (SPY) to protect capital in the Best Ideas Newsletter portfolio, a move that may expire worthless but accurately captures our sentiment toward today’s overheated equity market. As of May 13, the forward 12-month price-to-earnings ratio on S&P 500 companies is 16.6, above both its 5-year average (14.5) and 10-year average (14.3). Reversion to the 10-year average alone means the S&P 500 Sector SPDR ETF (SPY) has downside risk to ~$170 … Read more

Big Pharma 1Q Earnings Roundup, Part II

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Image Source: Paw Paw Companies mentioned: ABBV, AGN, BMY, AMGN, MRK, PFE. AbbVie (ABBV) Riding Humira to the End AbbVie’s performance in the first quarter of 2016 was nothing short of impressive, as the firm grew revenue by more than 18% on an as reported basis from the year-ago period. Humira (arthritis), the company’s headlining drug, sales increased nearly 15% as reported. New drug Imbruvica (leukemia) showed solid momentum in the quarter, and AbbVie received two approvals for the expansion of the Imbruvica as a first line therapy for chronic lymphocytic leukemia. The treatment is expected to play a key role in the future of the company, especially after its patent on Humira expires in December of this year. The … Read more

Mr. Buffett: Apple and the Potential Yahoo-eBay Tie-Up

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Image Source: Fortune Live Media Stocks will be volatile. Remember – they are driven by people, and people act emotionally, irrationally at times. This dynamic has hammered Apple (AAPL) as of late. Though we’ve engaged in risk mitigation in recent months in trimming our position in Apple in both newsletter portfolios, “Valuentum’s Exclusive Weekly Recap (August 2015),” we’ve done all that we can to explain to our membership the tremendous valuation opportunity presented by shares, “Quantifying Apple’s Tremendous Investment Case (September 2015), while acknowledging that market “spirits” could pressure the company in the near term, “Apple Will Go Lower… (January 2016).” The transparency of our writing is enough to make our reader’s heads spin sometimes, perhaps to make them think … Read more

Cord Cutting and the New Age Consumer

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Image Source: Mike Mozart Disney’s Quarterly Performance Reignites Fear On May 10, Disney’s (DIS) shares fell after the company reported lower-than-expected fiscal second-quarter earnings. Investors are concerned with the media and entertainment giant’s weakness in advertising revenue and subscribers in its Media Networks segment, which accounts for more than 60% of the company’s operating income. Was the fiscal second quarter the beginning of a long-term trend for the segment at Disney? As more and more consumers continue to opt away from traditional cable TV, will not only its subscriptions decline, but will demand for advertising space on the networks also fall as fewer consumers are reached through the medium? Investors are fearing the worst. The development is certainly worth following … Read more

Teva Bounces After Strong First Quarter

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Teva remains confident in its combination with Allergan Generics. Image source: Teva quarterly presentation. In July 2015, Best Ideas Newsletter portfolio holding Teva Pharmaceuticals (TEVA) announced it had agreed to acquire the generic drug portfolio of Allergan (AGN). It was expected that the firm would have to divest certain assets in order to clear the increasingly unpredictable US regulatory requirements, as is common with most acquisitions of its size. The deal was originally anticipated to be completed by the end of the first quarter of 2016, but it was announced March 15 that the transaction would be delayed. However, the process continues to take longer than foreseen, and Teva will have to sell more than the $1 billion in assets … Read more

Fundamental Strength To Outweigh Short-Term Volatility

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Image Source: texasfeel Union Pacific Battling Declining Volumes We continue to be fans of Union Pacific (UNP) on a fundamental level, and we fully expect the company to be gearing up for material improvement further down the line as the end-markets it serves stabilize. Union Pacific reported weak quarterly results April 21, as operating revenue fell 14% from the year-ago period. The sharp drop was driven by an 8% decline in volume, as measured by total revenue carloads. Coal volume dropped 34%, industrial products volume decreased 10%, and agricultural and intermodal volumes fell in the low to mid-single digit range. Flat chemicals volume and automotive volume growth of 7% were no match for offsetting the other declines, and average revenue … Read more

Valuentum Applauds SEC’s Move To Evaluate Non-GAAP Reporting

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  Image Source: SEC By Brian Nelson, CFA Too many investors have been hurt. Management teams want to present their results the best way they can within the boundaries of the law, to bolster their holdings. Some analysts want to “pitch” their stocks in the most optimistic light possible, to preserve their jobs. The consumers of such research want the future to always be bright, so they want to believe the “good news.” The result: there are now very few places to find objective, unbiased research and analysis. It therefore has become more important for companies to provide the most accurate and helpful information possible, and non-GAAP earnings presentation isn’t it — in fact, it has gotten way out of whack. … Read more

Big Pharma 1Q Earnings Roundup, Part I

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Image Source: Rodrigo Companies mentioned: AZN, ABT, BIIB, LLY, GSK, VRTX, ZTS AstraZeneca (AZN) Treading Water in 2016 AstraZeneca reported total revenue growth of 1% in the first quarter of 2016 on a year-over-year basis, but this growth rate climbs to 5% when not including the impact of foreign exchange headwinds. Core operating results, which excludes the impact of amortization, impairments, restructuring and other non-operating costs, did not hold up well compared to the first quarter of 2015. Core operating profit and core earnings per share fell 8% and 7%, respectively, on a constant currency basis from the year-ago period. Core R&D spending grew 15% in the quarter as a result of acquisitions and continued focus on the firm’s pipeline, which … Read more