DB

New Highs! The December Call Has Been Well-Rewarded

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Image shown: Valuentum’s Dividend Growth Newsletter portfolio. Since inception, the newsletter portfolio has *never* had a constituent that experienced a dividend cut. We moved to weighting ranges beginning in 2018.   “The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.” – Warren Buffett (2018) By Brian Nelson, CFA While others are celebrating, we know better. This market could come down upon itself like nothing else. But for now. We breathe a sigh of relief. A company, Valuentum, that emphasizes the importance of timing and then delivers on that cold December 26 day to move to all-in in the newsletter portfolios is something remarkable (see image below). We cannot go back to … Read more

Big Bank Roundup, Bank of America Catches Our Eye

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In this article, let’s catch up with how far the big 6 banks in the US have come since the height of the financial crisis exactly a decade hence. We will highlight the improvements in the banking system, some of the key risks, and a few high level thoughts about the individual franchises leading the US banking system. We like Bank of America the most, and we include diversified banking exposure in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. “Both a European bank crisis and/or a Chinese banking and economic crisis would be mutually reinforcing to the downside and a major cause of global deflation.” – Matthew Warren By Matthew Warren When you take a look at the … Read more

Microsoft Now $100+ Per Share

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Image shown: Microsoft’s performance relative to an ETF tracking the S&P 500 (SPY) since the beginning of 2012, the inception of the simulated Dividend Growth Newsletter portfolio. Almost every dividend-related presentation we made around the country, we talked about how much we liked Microsoft as a dividend growth idea. The stock was originally added to the simulated Dividend Growth Newsletter portfolio at inception at ~$26 per share, and we started the company out as an 8% position! It means the world to us to let you know that Microsoft’s stock has now surpassed $100 per share! Seriously – could we possibly have done any better with our top dividend growth idea out of the gates? By Brian Nelson, CFA I … Read more

Crisis In Wall Street Stock Research; The Solution? Independent Investment Research

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Image Source: Sam Valadi “New Wall Street Conflict: Analysts Say ‘Buy’ to Win Special Access for Their Clients… Securing face time for investors with top executives has become a vital revenue source for securities firms…” – Wall Street Journal, January 19, 2017 By Brian Nelson, CFA It is no surprise that buyside firms tend to prefer sell-side institutions that can get them access to the head honchos of companies. Buyside analysts and portfolio managers are talented, and some may have even come from the sell-side (in a previous life, if you can get them to admit it). In many cases, they know exactly what they’re doing (how to analyze a company or industry), and perhaps they have been doing so … Read more

Breaking the Bank…

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Image Source: Tony Webster By Brian Nelson, CFA Financial institutions (XLF, KBE) are unique entities. In good times, the growth of pre-tax pre-provision earnings and return on equity often have more influence over banking entities’ stock prices than anything else, but in bad times, the health of their loan/derivative books and the strength of their capital bases are the most important factors when it comes to buying and selling activity. Throw in outsize leverage, huge derivatives books, and market psychology, and you have, in my opinion, still one of the riskiest sectors out there. As followers know, we don’t like firm-specific exposure to the banking sector. We perform valuation exercises on banks in a rather straightforward way, using a residual … Read more

Deutsche Bank Another Example of Necessary Confidence in Banking Sector

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By Kris Rosemann Let’s walk through the situation with Deutsche Bank (DB) from mid-November through today. The “5 Cs of credit” — character, capacity, capital, collateral, and conditions — is a widely-followed framework and generally-accepted guideline for lending to consumers, but for corporate entities, we think another C is much more important: confidence. In almost every situation where a bank has encountered trouble, it has resulted from a loss of confidence in the sustainability of the entity as a going-concern. The loss of confidence could originate from counterparties, intermediaries, depositors or clients, or from any other core stakeholder. Lack of confidence typically spreads quickly. Quite simply, if the market does not have confidence in a banking entity, that banking entity will … Read more

Brexit: Secession Bells Are Ringing!

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First Baptist Church in Columbia, S.C., where the first secession convention in the United States opened on Dec. 17, 1860. Source: Library of Congress, Washington, DC. Photo. Encyclopædia Britannica Online. Web. 24 Jun. 2016. Global markets are plunging, and the implosion may still be in the early innings. Market valuations remain stretched among stagnant global economic growth, and “Brexit” may be the catalyst for a correction. In the paraphrased words of the well-known The Day of the Jackal author, Frederick Forsyth: the peasants have spoken. On June 23, the UK (EWU) held a referendum, in which anyone of voting age could take part, to decide whether the country should leave the European Union. The turnout was incredible at nearly 72%, and … Read more

Debt, Debt and More Debt

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Image Source: Michael Fleshman Many readers may be familiar with the rhetoric of the Presidential Election Cycle of 2016 and Democratic hopeful Bernie Sanders’ view on making “college tuition free and debt free.” You can take a read of the 6 steps Bernie will take as president to make college debt-free here. Many may find his last point rather intrusive to the heartbeat of the American economy and the driver behind innovation and standard-of-living improvements, but we’ll leave that conversation for another day. But what’s the shocking statistic, right? Get this – and I hope you are sitting down. According to an article by the Journal, “more than 40% of Americans who borrowed from the government’s main student-loan program aren’t … Read more

Your Hard-Earned Money

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By Brian Nelson, CFA It was Thursday afternoon, February 11, crude oil prices just hit a 13-year low, and the S&P 500 (SPY) was about to break below key technical support. Then, just as the markets were to fall further, rumors again emerged that OPEC may be scheduling a meeting to curb crude oil output, driving crude oil prices from the depths and the market higher off technical support. A barrel of crude oil continues to trade below the $30 mark, but it was quite the “save.” From where we stand, the market hasn’t been this fragile than at any time during the past decade or so, including during much of the Financial Crisis. Optimists may be whistling past the … Read more

GE Continues Move to Industrial Focus

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General Electric (GE) continues to make moves to reduce its dependence on GE Capital, the company’s financial segment. The firm signed an agreement March 15 with global investment firms Värde Partners and KKR, along with Deutsche Bank (DB) to sell GE Capital’s Australia and New Zealand Consumer Lending Business at a value of A$8.2 billion. The division of GE provides personal loans, credit cards, and retail finance services and has a solid customer base in both personal and retail finance in Australia and New Zealand. Though we have no issues with GE Capital’s financial position (the company’s Tier I capital ratio stood at a healthy 12.7% at the end of 2014), management will continue to scale back the division to … Read more