Member Articles

Magellan Midstream Soars on Takeout Deal

by

Image: Magellan Midstream Partners soars on a takeout offer from ONEOK, Inc. By Brian Nelson, CFA We’re as happy as we can be to see a midstream energy master limited partnership (MLP) takeout. On Sunday, May 14, it was publicly announced that Magellan Midstream (MMP) would be bought by ONEOK, Inc. (OKE) in a cash and stock deal worth ~$18.8 billion including assumed debt. According to the deal terms, the transaction would give $25 per share in cash and 0.667 common share of ONEOK for each MMP common unit. Though many are questioning the rationale behind the deal, energy infrastructure rollups continue to reduce the number of energy MLPs trading on public markets, as we predicted years ago. Units of … Read more

Our Reports on the Health Care Bellwethers Industry

by

Dividend Yield: Estimated on a forward-looking annualized basis. VBI: The Valuentum Buying Index, a timeliness indicator that overlays a price-to-fair-value estimate consideration. Fair Value Estimate: Derived by Valuentum’s enterprise valuation process. Dividend Cushion ratio: A ratio assessing the health of the dividend (the higher, the better). Data as of the date of this article. Individual company reports may have been updated subsequent to the publishing of this article, so please download a company’s stock and dividend report for its latest information and data. Note: The data in the tables of each of the below companies’ respective stock pages is updated the weekend after the publishing of this update. Please click on a company name below to view the corresponding equity … Read more

Disney’s 5-Year Returns Have Been Pitiful

by

Image: Since the beginning of 2018, Disney’s shares have fallen, while the S&P 500 has surged. Though we liked the company more recently, we no longer include shares in the Best Ideas Newsletter portfolio. By Brian Nelson, CFA On May 10, Walt Disney Company (DIS) reported improved second-quarter results for fiscal 2023 that showed solid double-digit consolidated revenue growth and substantial cash flow improvement on a year-over-year basis. Though the market had previously shown some love for shares upon CEO Bob Iger’s return, investors are now having to face reality. The advertising market remains difficult for linear television these days, and subscription growth in the streaming market has become even more challenging. Our fair value estimate for Disney stands at … Read more

There Are No Free ‘Income’ Lunches

by

Image Source: Jeffrey Beall By Brian Nelson, CFA We often talk about certain areas of the market such as large cap growth and small cap value. One of the big takeaways of the book Value Trap is that it explains that there are not really growth or value stocks, but rather there are only undervalued, fairly valued, and overvalued stocks determined on the basis of a price-versus-fair value consideration. This will always be true. Each company is different, and no company can be distilled into a simple price-to-earnings (P/E) or price-to-book (P/B) metric to determine the attractiveness of its valuation. For example, a company with a low P/E can be overvalued because the market is missing its huge net debt … Read more

We Prefer Visa

by

By Brian Nelson, CFA Visa Inc. (V) has probably the best business model in our coverage universe. The company benefits from a network effect, acts as a toll-road operator collecting fees every time one of its cards is swiped, and the credit card giant puts up huge operating and free cash flow margins. Visa is a top “weighting” in the portfolio of the Best Ideas Newsletter, and we don’t see that changing anytime soon. The high end of our fair value estimate range for Visa stands at ~$259 per share. Image: Our estimate of Visa’s range of fair value estimate outcomes. Image Source: Valuentum Our discounted cash flow process values each company in our coverage on the basis of the … Read more

The Fall of an Icahn?

by

Image Source: danor shtruzman Hindenburg Research put together a compelling short report on Icahn Enterprises (IEP). We think it is worth a read here >> NOW READ — Thought Piece: The Hidden Advantage ———- It’s Here!  The Second Edition of Value Trap! Order today!   —– Tickerized for IEP, JEF, CVI, UAN, GLRE. Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.  Valuentum members have access to our 16-page … Read more

Earnings Roundup

by

By Brian Nelson, CFA PayPal Holdings (PYPL) best days may be behind it. We’re not sure why there is so much consumer backlash against the company, but we think the fallout not only has impacted the company’s business fundamentals but also its stock. PayPal’s fall from grace started when rumors began to swirl about its potential interest in Pinterest (PINS), and we no longer can get behind the firm’s shares. As with Meta Platforms (META), we were burned pretty bad last year with PayPal, and while the newsletter portfolios did quite well on a relative basis during 2022, it’s hard to swallow that two of our favorite ideas just didn’t live up to expectations. In any case, PayPal’s shares are … Read more

Long Live Apple and Large Cap Growth!

by

Image: Since the release of the book Value Trap in December 2018, an ETF that tracks large cap growth (SCHG) has outperformed not only the S&P 500 (SPY), but also the areas of dividend growth (SDY) and small cap value (IWN) by sizable margins. By Brian Nelson, CFA We explained in part why we don’t like the dividends of banking firms in this note here, and we’re starting to see dividend cuts in the regional banking space, with PacWest Bancorp (PACW) as the latest banking entity to slash its quarterly payout. Right now, executives in the regional bank arena seem to be like deer caught in headlights, and we’re even seeing banking deals fall apart. The proposed deal between Toronto-Dominion … Read more

Apple’s Second-Quarter Fiscal 2023 Results Were Good Enough

by

  Image Source: Valuentum By Brian Nelson, CFA  On May 4, Apple (AAPL) reported second-quarter results for its fiscal 2023 for the period ending April 1, 2023, that were slightly better than consensus forecast, but we’re viewing the report as mixed. Revenue dropped 2.5% in the quarter on a year-over-year basis as better-than-expected resilience in iPhone sales could not offset weakness in Mac and iPad performance, and its quarterly EPS of $1.52 was unchanged from last year’s mark. Revenue in the company’s Services business jumped 5.4%, and the iPhone maker announced a $90 billion buyback program as it upped its quarterly dividend by more than 4%, to $0.24 per quarter. We plan to make a few tweaks to our valuation model … Read more

Paramount Global Cuts Payout, Dividend Cushion Ratio Caught Another!

by

Image Source: Paramount Global By Brian Nelson, CFA The Dividend Cushion ratio is not a perfect predictor of dividend health and the risks of a dividend cut, but it’s a pretty darn good one. On May 4, Paramount Global (PARA) missed expectations for its first-quarter 2023 results on both the top and bottom line and cut its quarterly dividend to $0.05 per quarter (was $0.24). The company’s Dividend Cushion ratio, which considers its balance sheet as well as future expectations of free cash flow relative to future expected cash dividends paid, was -2.5 (negative 2.5). Any ratio below 1 indicates growing risk to the health of the dividend, while any materially negative (below 0) ratio indicates severe risk of a … Read more