Member Articles

Turnaround Plan at McDonald’s Does Not Fly With Franchisees

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Image Source: Mike Mozart Things haven’t been going well at McDonald’s (MCD), and they might not get better anytime soon. McDonald’s initial turnaround plan, released May 4, left a great deal to be desired. Though the major points of the plan seem to be improvements, there was a lack of detail about how to fix the restaurant’s menu issues while improving service speeds, two major areas of concern we have with the fast-food giant. Nevertheless, management is confident that its efforts will return the company to an industry leader, as it works toward its goals as a modern, progressive burger company. We’re not so sure. Starting on July 1, the firm’s organizational structure will be revamped. It will group the … Read more

The Continued Rise of Pizza and How to Play It

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Image Source: Blaze The pizza industry is flat-out sizzling! Or is it stuffed? Call it how you want, but pizza is hot! Literally, and well, figuratively. There are some pretty interesting statistics about pizza. Here are a few from the latest Pizza Industry Analysis at Franchise Help: Americans eat on average 100 acres of pizza daily or 350 slices per second. In addition, 93 percent of Americans eat at least one pizza per month, easily making pizza the number one dinner choice in the United States. With such mass appeal, it is no surprise that this $40 billion industry (measured by sales per year) makes up approximately 17 percent of all restaurants in the nation…there are approximately 65,000 pizzerias in … Read more

Alibaba Shines in Calendar First Quarter

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Why are we talking about Alibaba (BABA)? First, for investors looking for opportunities outside of the US, Alibaba should certainly be on the list, one that should also include former Best Ideas Newsletter portfolio holding Baidu (BIDU)—two companies that are tied to the secular growth of e-commerce in China. Valuentum covers a broad swath of non-US companies from China, Europe, Australia, Brazil, Canada, and beyond. Our international coverage continues to expand every day. Second, Alibaba is currently a holding in the Best Ideas Newsletter portfolio. Our team passionately follows ideas we add to the newsletter portfolios and provides updates when warranted. You can read about the tremendous track record of ideas added to the Best Ideas Newsletter portfolio in the … Read more

Priceline Sets Up for Second-Quarter Beat

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Priceline.com (PCLN) is a 1.8% weighting in the Best Ideas Newsletter portfolio. The global online hotel reservation leader turned heads when it reported first-quarter results May 7, but it was Priceline.com’s conservative outlook that traders decided to focus on instead. Frankly, we’re not too concerned with the company’s “soft” second-quarter guidance, and we point to significant fundamental outperformance in the first quarter as to why. We’re not going to punish the company for being conservative in the midst of significantly volatile foreign-exchange conditions. First-quarter gross travel bookings at Priceline.com advanced 26% on a constant-currency basis and 12% on a reported basis year-over year. That’s not bad, especially since management had guided to growth in the range of 2%-9% for the … Read more

Chevron: Cash Flow and Dividends Are Inextricably Linked

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We think it’s worth reviewing case studies at times to help members build a greater understanding of and an increased conviction in the products, tools, and proprietary analysis we make available to them. In the case of Chevron (CVX), the efficacy of the Dividend Cushion ratio in helping to predict a company’s future dividend policy was undeniable. The Dividend Cushion ratio is calculated for every non-financial operating company in our coverage universe and can be found in the data strip at the top of each firm’s Dividend Report. A ratio above 1.25 is generally viewed as GOOD. For new members, Chevron had been a holding in the Dividend Growth portfolio since its inception. However, the company was removed from the … Read more

May Dividend Growth Newsletter to Be Released Monday, May 4

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Twitter (TWTR) and LinkedIn (LNKD) – perhaps two of the most “un-ownable” stocks on the market today offered terrible outlooks in their calendar first-quarter reports. Frankly, we’re not surprised. Wall Street is off its rocker with their valuations. We put the largest fair value bands in our coverage on these two stocks, and we wouldn’t touch either one with a ten-foot pole. Investors are reeling. LinkedIn is down ~20% on Friday, and Twitter has dropped more than 20% from earlier this week, to under $40 per share. We’re not harping on these stocks because they are speculative and unproven. That’s a given. We’re bringing this to your attention because we just don’t see the investment case in either one. Their normalized … Read more

Apple: Quality from Its Core

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Image Source: Eric Wüstenhagen On April 27, Apple (AAPL) reported record numbers for its second quarter of fiscal year 2015. Record second-quarter sales of the iPhone and Mac, and best-ever performance from the App Store drove revenue growth of 27% on a year-over-year basis, resulting in $58 billion in revenue. In addition to the significant top-line growth, EPS increased to $2.33 per diluted share, an increase of 40% over the year-ago quarter. Gross margin was higher than expected, at 40.8%, and cash flow from operations also reached a second-quarter high at $19.1 billion. Apple noted that 69% of the quarterly revenue was provided by international sales.  Management announced a plan to increase its capital-return program by more than 50% by the … Read more

Torn on Procter & Gamble

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Image Source: Phil Manker When Procter & Gamble (PG) first reported its calendar fourth-quarter 2014 results in January, we came out on the stock suggesting investors need not panic. When we rolled the model forward (what this means), however, our team was left scratching our heads. We ended up cutting our fair value estimate on P&G’s shares to $74 from $84, and we felt we were even being generous to get to the mid-$70s with that estimate. We’re torn. We love the strength of Procter & Gamble’s core brands (especially Pampers, Tide, and Gillette), its dividend track record, and its robust free cash flow, but its valuation has become out of line – mostly due to a reset of its … Read more

Knowing When to Consider Selling Altria

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Image Source: Jonny Williams There are three things you have to know about Altria (MO). First, the company has tremendous pricing strength, which works wonders on driving increased profitability and free cash flow across its core business lines. Second, the company has a lucrative ~27% economic stake in SABMiller (SBMRY), which offers the firm financial flexibility like no other tobacco stock. And third, the entity pays a dividend that makes some REITs and MLPs envious. Altria is one of our favorite corporate dividend growth stocks, and this won’t change anytime soon. The tobacco giant said April 23 that first-quarter adjusted diluted earnings per share leapt more than 10%, to $0.63. Affirming its 2015 full-year adjusted diluted earnings per share guidance … Read more

Coach…Ouch!

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Image Source: m01229  On April 28, Coach (COH) reported a doozy of a calendar first quarter. Sales fell 15% while adjusted net income dropped to $0.36 per share from $0.68 per share in the year-ago period. For many, as with us, it’s difficult to accept such declining performance. However, we think the market is simply overlooking a recovery that we think will eventually take hold. Brand transformation is a difficult maneuver but something that Coach looks to be executing upon, albeit slowly. The company’s international business posted decent growth on a constant-currency basis thanks to fantastic expansion in Europe and China, the latter increasing 10% on a constant-currency basis. The executive suite drove sequential improvement in its North American bricks … Read more