FIZZ

Fed Cuts 50 Basis Points, Expect More Market Volatility Ahead

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Image Source: FOMC  The emergency 50-basis point Fed rate cut announced March 3 was largely expected by the marketplace in light of growing economic concerns due to COVID-19, but it does nothing to immunize against COVID-19 and little to stabilize the situation. We continue to monitor the situation closely, and we expect ongoing volatility in the coming days and months as the situation with COVID-19 remains fluid. Having moved to defensive positions in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio in January and having capitalized on the “crash protection” put, we are preparing for our next move. For now, we’re watching and waiting, and we encourage readers that have not yet picked up their copy of … Read more

COVID-19 Crisis Intensifies

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Image Source: CDC. Coronavirus Disease 2019 (COVID-19).  Our dearest members: — The world is being challenged today by what some including Bill Gates believe might be a “once-in-a-century pathogen.” We do not know the eventual outcome, whether the impact of this illness ends up being as profound as the Spanish Influenza of 1918-1919 (which inflicted a death toll in the tens of millions), but we maintain our view the markets have yet to come to grips with the impact of COVID-19 on economic activity and potential ramifications on the global economy and the banking system.  — What is currently a “biological” crisis may turn into an all-out global financial crisis, one that could end up worse than the 2008/2009 mortgage meltdown. Instead … Read more

Has the Stock Market Crash Begun?

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Image: CDC. Transmission electron microscopic image of an isolate from the first U.S. case of COVID-19, formerly known as 2019-nCoV. The spherical viral particles, colorized blue, contain cross-section through the viral genome, seen as black dots. Dear members: This article is our fourth update on COVID-19. The previous three installments can be found here (Feb 22), here (Feb 7) and here (Jan 31). We trust you and yours are well during this global crisis. It’s hard to turn on the television these days without hearing about COVID-19, a novel coronavirus and respiratory illness that continues to spread from person to person around the world. COVID-19 is deadly, and particularly deadly among those 60 years of age and older and those … Read more

ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Resetting Your Mental Model

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Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Keurig Dr Pepper Is Moving in the Right Direction

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Image Source: Keurig Dr Pepper – September 2019 IR Presentation By Callum Turcan Keurig Dr Pepper Inc (KDP) markets, sells, and distributes numerous coffees, flavored soft drinks, teas, waters, juices, mixers, energy drinks, and other types of beverages through either its ownership of the brand or through its various partnerships. The beverage giant’s top brands include 7UP, Dr Pepper, Green Mountain Coffee Roasters, Keurig, Snapple, and Mott’s. JAB Holding Company, a privately-held entity, owns ~87% of Keurig Dr Pepper after Dr Pepper Snapple merged with Keurig Green Mountain last year. We expect Keurig Dr Pepper to generate sizable free cash flows as a combined entity going forward, but we also caution that the company’s hefty net debt load weighs negatively … Read more

Our Reports on Stocks in the Nonalcoholic Beverages Industry

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Image Source: Mike Mozart Structure of the Nonalcoholic Beverages Industry The nonalcoholic beverage segment of the commercial beverage industry is highly competitive, consisting of numerous companies that make various sparkling beverages, water products, juices, fruit drinks, energy and other performance-enhancing drinks. Pricing, advertising, product innovation, the availability of in-store private-label beverages, and health concerns about sugar-sweetened beverages are key drivers that impact demand. Leading brands with high levels of consumer acceptance and an expansive distribution network are sources of competitive strengths. We like the structure of the group. We’ve reallocated our resources to cover more recession-resistant stocks. See here.

Coca-Cola Posts a Nice Quarter But Shares Too Pricey

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By Callum Turcan The Coca-Cola Company (KO) reported third-quarter earnings for fiscal 2019 (period ended September 27) on October 18, which were positively received by the market as the beverage giant showed signs that there’s strong demand worldwide for its offerings. Coca-Cola’s GAAP net revenues jumped 8% year-over-year while its non-GAAP organic revenues increased 5%, supported by higher prices and a favorable product mix that offset the negative impact from reduced concentrate sales. Management noted that Coca-Cola continued to “gain value share” in the ready-to-drink non-alcoholic beverage market. Shares of KO yield 2.9% as of this writing and ended up over 2% during normal trading hours on Friday October 18. Coca-Cola As an aside, it’s important to remember that Coca-Cola … Read more

PepsiCo Posts Solid Quarterly Report, Targets Powerful Long-Term Growth Trends

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Image Source: PepsiCo Inc – IR Presentation By Callum Turcan On October 3, PepsiCo (PEP) reported third quarter earnings for fiscal 2019 (12 week period ended September 7) that were positively received by the market as the beverage and snack company beat both consensus top and bottom line estimates. Management reiterated that PepsiCo sees its organic non-GAAP revenues growing by at least 4% annually this fiscal year and that free cash flows would come in at approximately $5.0 billion, enough to cover approximately $5.0 billion in expected dividend payments. While core constant currency (non-GAAP) EPS is still expected to decline by 1% annually this fiscal year, strong apparent underlying demand for PepsiCo’s products creates room for optimism. Shares of PEP … Read more