Member Articles

Discuss: The Biggest Ruse Ever Perpetuated?

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There is a crisis on Wall Street. We’re not talking about the “Big Banks” or outrageous CEO pay or loose monetary policy — we’re talking about the biggest ruse ever perpetuated on individuals, and it is even worse for financial advisors that employ these vehicles. We’re talking about index funds. Vanguard’s expense ratio on the Vanguard S&P 500 ETF may seem cheap at 0.05% per annum, for example, but let’s be fair. The value that Vanguard brings to the table isn’t much of anything to charge even a sliver of assets. Vanguard doesn’t maintain that index, it doesn’t conduct research on the companies in that index – in many cases, all it does is copy the grouping of stocks. Who … Read more

Alerts: High-grading! GILD–>JNJ; EBAY–>FB

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Pictured: The long-term view of Gilead’s Harvoni franchise has blurred. Prices updated, as of 1:36pmCT. By Brian Nelson, CFA We were very pleased by the market action of Friday, January 29, with the top weightings in each of the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio performing extremely well. Visa (V), the largest weighting in the Best Ideas Newsletter portfolio (7%+), is simply “on fire,” with the company trading ~5% higher on the session at the time of this writing. The high end of our fair value range of $90 per share for shares is starting to look within reach for the credit-card network, “.” Visa generates an operating margin in the mid-60% range (not a typo), and there … Read more

Microsoft!

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  By Brian Nelson, CFA If there is any stock that you might think of when you think of Valuentum, it probably is Microsoft (MSFT). The software giant put up fantastic fiscal second-quarter (calendar fourth-quarter) results after the close January 28. Kudos to my University of Chicago Booth School of Business “colleague,” Microsoft CEO Satya Nadella. Things have really taken off since he took the helm in February 2014, “.” Microsoft is one of the largest holdings in the Dividend Growth Newsletter portfolio, and it has been one of the best-performing equities since registering a high rating on the Valuentum Buying Index. The company also has been the “focus” income idea in nearly every one of Valuentum’s dividend growth presentations, … Read more

The Bounce in Energy and Potash’s “Surprising” Dividend Cut

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Nothing like Valuentum’s optimistic article last week, January 21, in Barron’s to get the energy markets popping, “Is Kinder Morgan on Road to Recovery,” would you say? Of course, we say that in jest. The equity markets January 28 were defined by optimism that two of the globe’s major energy resource producers, the cartel OPEC and Russia (RSX), would finally come together to alleviate the pain that has been exerted on the price of the black liquid the past 12-24 months with a “meeting.” What we found to be peculiar, however, is that instead of OPEC letting what turned into a “rumor” run, helping to further drive crude oil prices higher, OPEC delegates quickly denied the talk of a potential … Read more

Giddy Up – It’s Earnings Season!

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By Brian Nelson, CFA During the trading session January 27, Apple (AAPL) failed to turn the tide of a disappointing fiscal 2016 first-quarter report (calendar fourth-quarter), “Apple Will Go Lower…And It Will Be ‘Forced’ Into Acquisitions,” and coupled with a Fed statement, where the Committee left interest rates unchanged, as expected, many market observers read between the lines and hit the sell button. On the basis of some of the concerns we’ve outlined, “Not Doom and Gloom – But Just Cautious,” we can completely understand the hesitancy by participants to stay fully exposed to this tumultuous equity market. In many ways, that the Fed has hit the brakes just a few weeks after the long-anticipated rate hike means the global … Read more

Procter & Gamble Puts on Impressive Display of Pricing Strength

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By Kris Rosemann Multinational corporations have seen reported revenue punished in recent quarters as a result of the strong US dollar relative to other currencies around the world. In keeping with this theme, Procter & Gamble (PG) reported net sales falling 9% in its fiscal second quarter of 2016 on a year-over-year basis to $16.9 billion. However, after backing out all the noise, the company’s constant-currency core earnings per share leapt more than 20% on a year-over-year basis in the period. Reported free cash flow trends were fantastic through the first half of the fiscal year, too, and while we think the company’s valuation remains stretched, we’re not rushing to remove it from the Dividend Growth Newsletter portfolio anytime soon. … Read more

Trouble Ahead for Sempra Energy?

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By Kris Rosemann On October 23, 2015, Southern California Gas Company, an indirect subsidiary of Sempra Energy (SRE), discovered a leak at one of its injection and withdrawal wells at its Aliso Canyon natural gas storage facility, which is located in the northern part of the San Fernando Valley in Los Angeles County about 20 miles from downtown Los Angeles. The facility is the largest underground storage facility on the West Coast. The well is more than one mile away and 1,200 feet above the nearest residences, and is one of more than 100 injection and withdrawal wells at the storage facility. Despite spewing copious amounts of dangerous gases–including methane–into the atmosphere, the company has stated that the leak has … Read more

Apple Will Go Lower… And It Will Be “Forced” Into Acquisitions

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By Brian Nelson, CFA We have a few regrets for not “lightening up” more on the position in Apple (AAPL) in the newsletter portfolios during the past few weeks, “Looking to Trim Apple…” and while our lack of action may cost the newsletter portfolios a few basis points in the near term, we’re not too concerned. For one, in this “type” of market, we want to stick with quality, and Apple fits that bill quite well, particularly with the cushion that its balance sheet provides. The iPhone giant’s equity price may go lower as some sell the “headlines” around its fiscal 2016 performance, but the company’s financial health puts it in a class by itself, in our view. The Journal … Read more

Johnson & Johnson Reports Strong Underlying Performance

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By Kris Rosemann As US-based multinational corporations continue to battle currency headwinds related to the strong US dollar, Johnson & Johnson (JNJ) reported solid underlying results in its most recent quarter and full-year report, released January 26.  Johnson & Johnson reported full-year sales in 2015 of $70.1 billion, which represents a 5.7% decrease on a reported basis from 2014 due to a negative currency headwind of 7.5 percentage points. On an operational basis, sales grew 1.8%, domestic sales advanced 2.6%, international sales grew 1.1% on an operational basis, and sales excluding acquisitions, divestitures, and hepatitis C sales on an operational basis increased 6.5% on a year-over year basis. The underlying growth witnessed in 2015 at Johnson & Johnson was driven … Read more

Not Doom and Gloom – But Just Cautious…

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You wouldn’t know it on the basis of the strong US market action January 26, but it wasn’t all quiet in overnight trading. Local markets in China (FXI) took another hit, with Shanghai and Shenzhen exchanges experiencing declines to the magnitude of 6%-7%+ on the session. Though some optimistically dismiss the local China markets as irrelevant, the implications on weakened Chinese banks, other Asian nations via trade, and interconnected financial institutions from Standard Charted to HSBC (HSBC) and even Citigroup (C) are material, in our view, and we’re paying close attention. Some may even say that China stocks represent less than 15% of household financial assets in the country — certainly not enough to cause a global calamity… Or is … Read more