Member Articles

If It Happened to AbbVie, Could It Also Happen to Gilead?

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The Valeant (VRX) and Citron saga is not all the drama happening in biotech these days. On October 22, federal health officials warned doctors and patients that two of AbbVie’s (ABBV) hepatitis C treatments can cause life-threatening liver injury in advanced stage patients. The Food and Drug Administration announced October 22 that it will require AbbVie to add new warnings to its Viekira Pak (1) and Technivie (2) drugs after deaths and liver transplants have been reported in patients who already had liver damage caused by the disease. During the second quarter, global sales of Viekira were $385 million, on pace for blockbuster status. Viekira is one of AbbVie’s top drugs, trailing only Humira in sales during the six months … Read more

Consumer Staples Giants Demonstrate Pricing Strength

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The strengthening US dollar continues to muddy quarterly results for multinational corporations. Coca-Cola (KO), Kimberly-Clark (KMB), and Procter & Gamble (PG) were no exception in the calendar third quarter. The consumer staples giants demonstrated the strength of their scale and pricing power in the quarter, though reported results could not overcome the significant pressure of foreign-exchange headwinds in economies around the globe with varying growth levels. Coca-Cola, Kimberly-Clark, and Procter & Gamble hold some of the most well-known consumer staples brands in the world. Coca-Cola, for one, has perhaps the most-recognizable soft-drink portfolio of any company, Kimberly-Clark boasts a wide range of trusted consumer staples brands from Huggies to Kleenex, and Procter & Gamble has one of the most diverse … Read more

Flash: Dividend Growth Newsletter Portfolio Holding Microsoft Surges!

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We’ve been huge fans of Microsoft’s (MSFT) investment merits for some time now. We’ve traveled around the US, from Chicago to San Jose to Milwaukee/Madison and Cleveland highlighting the Dividend Growth Newsletter portfolio holding to investors that were open to learning more about the Dividend Cushion ratio. Please view one of the slide decks from our presentation in San Jose , for example. Not only has Microsoft been a tremendous valuation opportunity for much of the past few years, but its dividend growth prospects, as measured by its solid Dividend Cushion ratio, have simply been pristine since the company initiated the payout. Following Microsoft’s release of solid first-quarter fiscal 2016 results October 23, the company’s shares have converged to our … Read more

Alphabet (Google) and eBay Power Best Ideas Newsletter Portfolio!

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It’s no secret that the Internet and the companies that operate within the Internet space are always changing. There must be continuous innovation and re-discovery to keep up with the competition to amaze society with the next great development. Consumers have become accustomed to many of the Internet giants doing just that, pushing the envelope and enriching their lives with a better, faster, or more convenient way of content consumption. One of the many struggles that Internet-based entities have is not only how to create these new products, devices, or programs, but also how to monetize such breakthrough endeavors successfully. In a fast-changing environment, it is never easy to deliver sustainable, profitable and innovative growth. Let’s take a look at … Read more

Nelson: Time to Consider Buying Kinder Morgan?

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“Buy and hold investing has done more to turn perfectly decent people into the worst sort.” As others are poo-pooing Kinder Morgan’s (KMI) third-quarter report, we wanted to share a few observations. Our $29 per share fair value estimate for the corporate is unchanged, as we note the low end of our fair value range is $23 per share. We’re reiterating our “neutral” view on the company. First, we were beyond pleased to see Executive Chairman Richard Kinder come to terms with emphasizing the fact that Kinder Morgan is not totally immune to commodity price impacts. He said as much in the press release. Though top analysts on Wall Street are well-aware of this (or they should be), there are … Read more

Flash: Kinder Morgan Cuts Dividend Growth Outlook

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Per the company’s third-quarter report, released October 21, 2015: “while we are at the beginning of our budget process for 2016, we currently expect to increase our declared dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share.” The previous target had called for a 10% increase versus the lowered midpoint of 8%.

Valeant Crushed by “Short-Seller” Research Report

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Additional uncertainty has surfaced around the biotech firm. We can’t say we are surprised, but the company’s share-price decline has been a monumental one. Despite Valeant’s strong reported performance in recent quarters, the Valuentum Buying Index kept us away from such a risky stock. Please understand why paying attention to the information contained in prices is an important component to any value-, growth- or income-based strategy. Valeant Pharmaceuticals’ (VRX) shares have taken a major shellacking as a result of a research report accusing the firm of Enron-like activities. These are some serious accusations, and Valeant has since defended itself, which has given its shares a sizable bounce. We can’t say we’re surprised there was a material drop in Valeant’s share … Read more

Surveying the Aerospace Arena

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The reasons for liking commercial aerospace, or constituents involved in the production of commercial aircraft, are many and varied. The liberalization of air travel between global point-to-point markets has facilitated expansion in not only leisure travel but also business travel between countries. The advent of the low-cost-carrier model in the likes of Southwest (LUV) and others just like it around the globe has made air travel affordable to those that it once had “priced out.” The growing middle class in developing countries has paved the foundation for continued passenger growth, something that should be expected for decades to come. The collapse in jet fuel costs has made the global airline industry, or those involved in the transporting of people from … Read more

Restaurants: Pulling Out All the Stops?

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Yum! Brands’ (YUM) second annual earnings-per-share guidance revision for 2015 in a matter of a couple weeks–as late in the year as the month of October–must be a new record for an executive suite. Credibility now shot, management is pulling out all the stops and going full-steam ahead with separating its China operations from the rest of its business. Yum! Brands is simply shell-shocked, in our view, and is acquiescing to activist investor demands that may not be beneficial to the interest of long-term shareholders. We think the move by the executive suite is being pursued solely to preserve their jobs.   Though some estimates suggest that a separation of Yum! Brands’ China Division from the rest of its operations … Read more

IBM Continues to Punish Optimists

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The fundamentals of International Business Machines (IBM) have deteriorated so much in the past few years that we use the technology giant as our in-house example to explain poor earnings quality. Can you believe it? The bluest of blue chips is now the poster child for what it once was the opposite of. We wrote the following in January of 2014, which addresses the myriad red flags when IBM was still trading close to $190 per share. Let’s explore what we said then to help establish a foundation for evaluating its third-quarter results, released October 19, 2015: Never did we ever think we’d be using Big Blue as an example of poor earnings quality, but its fourth-quarter 2013 results, released January 21, 2014, fit … Read more