BEAM

Beer and Cigarettes

by

Update: Shortly after the publishing of the following article, Reynolds American announced that it would acquire Lorillard in a deal valued at $27.4 billion, or a deal price of $68.88 per share (in-line with the high end of our fair value estimate range for Lorillard, as predicted). For more details >> ————— Let’s pick up right where we left off. On May 22, we commented that Reynolds American (RAI) and Lorillard (LO) have been looking to combine operations. Here’s what we wrote at that time: According to recent reports, tobacco giants Reynolds American and Lorillard continue to work to tie the knot. The speculated deal is rumored to be a three-way transaction that involves Reynolds’ shareholder British American Tobacco (BTI), … Read more

Valuentum Economic Castleâ„¢ Rating Update

by

Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Big Tobacco, Brewers Want to Continue Consolidation; Altria to Benefit

by

Altria (MO) is a holding in both the portfolio of the Best Ideas Newsletter and the portfolio of the Dividend Growth Newsletter. The company operates in one of the strongest industries in our coverage universe as it relates to structural composition (think Porter’s 5 forces). The oligopolistic tobacco industry is attractive in a number of ways. Firms in the industry sell an “addictive” product (cigarettes and/or smokeless tobacco), have significant pricing power, generate high margins, and have strong returns on invested capital. Though declining trends in smoking in the US, threats of tobacco-related litigation, new tobacco regulation (labeling) that discourages tobacco use, and excise tax price shocks that may impact demand will always be concerns, we tend to like the structural … Read more

M&A Heating Up

by

When money is cheap (i.e. when interest rates are low) and equity price euphoria is running wild, deals will happen. Last Wednesday, activist hedge fund Elliot Management launched an opportunistic bid to acquire all of the outstanding shares of Riverbed (RVBD) for $19 per share in cash. We think the offer is too low on the basis of our fair value estimate, and we don’t think Riverbed will accept terms as they currently stand (the board is still evaluating); it remains uncertain whether a higher offer from Elliot is an eventuality. We think a fair price for Riverbed is $22 per share (our fair value), and we’re reiterating this opinion. Before the bid, we believed Riverbed was undervalued on both a … Read more

Beam and Boston Beer Post Solid Results

by

Leading spirits company Beam (click ticker for report: ) posted fantastic second quarter results led by strong performance from its established brands. Revenue increased 7% year-over-year (5% on a comparable basis) to $638 million, roughly in-line with expectations. Earnings per share increased 8% compared to the year prior to $0.64, also in-line with consensus estimates. Free cash flow was only $1 million for the quarter, but management continues to predict the free cash flow for the full-year of $300-$350 million. Beam has experienced comparable sales growth of 4% year-to-date, with premium brands such as Maker’s Mark (+18%) and Jim Beam (+4%) leading the way. Basil Hayden’s has performed exceptionally well so far this year as consumers show a willingness to … Read more

Stock Market Outlook for 2021

by

By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more

Best Idea Vertex Pharma Boosts Guidance (Again), Buying Back Stock While Awaiting Key Clinical Trials

by

Image Shown: Vertex Pharmaceuticals Inc is one of our favorite biotech ideas. Image Source: Vertex Pharmaceuticals Inc – Third Quarter of 2021 IR Earnings Presentation By Callum Turcan One of our favorite biotech plays out there is Vertex Pharmaceuticals Inc (VRTX), which is included as an idea in the Best Ideas Newsletter portfolio. The company’s commercial portfolio, meaning therapeutics that have already been approved by key health regulators, is centered on drugs that treat cystic fibrosis (‘CF’), including patients as young as four months old as well as older patients. Its branded commercialized CF treatments include TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO. Vertex Pharma is currently generating substantial revenue and cash flows from these offerings. Guidance Update Sales of its CF … Read more