Member Articles

Google’s Cash Is Real

by

Which company ended 2014 with total cash of $64.4 billion and short and long-term debt of $5.2 billion? If you read the title, you can probably guess it without much difficulty: Google (GOOG, GOOGL). Focusing purely on beats and misses of accounting earnings-per-share ignores one of the most important financial statements: the balance sheet. Not considering the financial health of a company, and specifically a firm’s net cash position (its total cash less total debt) is similar to ignoring an individual’s savings account and obligations when calculating his/her net worth. It just doesn’t make any sense. Yet, the industry loves throwing multiples on accounting earnings with little regard to a company’s net cash or net debt position. Mr. Market’s love … Read more

We’ve Raised Our Fair Value Estimate of Alibaba

by

We have raised our fair value estimate of Chinese e-commerce giant Alibaba (BABA) on account of the firm’s stronger than expected earnings and faster pace of top-line expansion relative to our previous future forecasts. Through the first nine months of its fiscal 2015 (ending March), the company’s revenue has expanded at a 45% year-over-year clip thanks in part to strength in mobile, where sales expanded roughly 5-fold in the calendar fourth quarter. Non-GAAP EBITDA margins were an impressive 58% during the three months ending December 2014, and we expect profit margins to remain robust as expenses are scaled with robust revenue expansion. Through the first nine months of its fiscal 2015, Alibaba has generated RMB35.45 billion ($5.7 billion) and RMB31.4 … Read more

Pain in Oil Not Likely To Subside Soon; Alibaba Disappoints

by

Just how bad are we drowning in crude oil? Yesterday’s inventory report showed the largest weekly supply increase in over 30 years, since 1982. That’s how bad. Yet, knowing that crude oil prices are driven by supply and demand, pundits continue to be optimistic, perhaps overly so, about the timing of the recovery in the price of the black liquid (USO). Let’s first start with OPEC, and the Secretary-General Abdullah al-Badri, who said Tuesday that oil prices have bottomed as he “warned of a risk of a future price spike to $200 a barrel.” With inventories as they are and OPEC not ceding market share to US shale-based plays, we think the Secretary-General is drinking a bit too much Kool-aid. … Read more

Commercial Aerospace Flying High

by

Valuentum’s President Brian Nelson talks about the resiliency of the commercial aircraft making business and the massive backlogs that offer a nice tailwind to the supply chain. Source of Images: Boeing (BA), Randy Tinseth (20-year Current Market Outlook, July 2014). If you cannot see the video, please click here. Aerospace Suppliers: AIR, AIRI, AL, ATRO, COL, HEI, HXL, ISSC, PCP, SPR, TATT, TDY, TXT Airlines – Major: AAL, ALK, DAL, JBLU, LUV, SAVE, UAL

Apple’s Powerful “Valuentum-style” Attributes Remain

by

We were expecting “an absolute blow-out holiday quarter for Apple,” and the company did not disappoint. Revenue growth of ~30% and earnings per share of $3.06 (up ~50%) blew by analyst expectations and set new records in its fiscal first quarter, as the tech giant sold an all-time quarterly best 74.5 million iPhones, simply a monumental number.   Was there really any doubt that Apple (AAPL) was going to beat expectations?    The iPhone maker’s “Valuentum-style” attributes also remain intact. We talk quite a bit about the importance of combining both valuation and technical/momentum qualities in individual equity analysis, and perhaps the best example of any idea we’ve added to the newsletter portfolios showcasing the efficacy of such a process is Apple.   … Read more

There’s More Rough Sledding Ahead; Removing Half of Microsoft from DG Portfolio

by

Reverberations of the collapse in commodity prices have influenced much more than the commodity producers themselves. The slide has impacted business in a variety of sectors, almost across the board, as suppliers and customers seemed to pause to assess the damage and opportunities. The strengthening dollar is also having an unprecedented impact on the growth of global entities. If the disappointments yesterday (see here) didn’t signal an inflection point in the markets, then today surely has. It was just yesterday that we reiterated our view that Peabody Energy’s (BTU) dividend was at risk, and almost on cue, the firm announced today that it would slash its payout more than 97%, to $0.085 per share on a quarterly basis. The Dividend … Read more