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Valuentum Economic Castleâ„¢ Rating Update

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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

Throw December Auto Sales Numbers Away; December Ice Storms and a Late Thanksgiving Holiday to Blame

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The excuses for the subpar selling performance at automakers in December (up just 0.3%) were many: the frigid ice and snow storms that scared customers away; a late Thanksgiving holiday that stole sales from the month; and a shortened holiday shopping season that left consumers scrambling to buy holiday gifts for family and friends, as opposed to spending time car shopping. Though the impact of each contributing factor is difficult to measure, we think the combination of these items was the main culprit for disappointing December auto sales, not that the consumer has decided to forgo car purchases and that the upswing in auto sales has come to an abrupt halt. Some caution is starting to creep into the market—see … Read more

Surveying Results at the Auto Parts Retailers

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Monday was a day auto-parts retailer Pep Boys (PBY) would rather soon forget. The company reported fiscal third-quarter results (ending November 2013) that came up short with consensus expectations. Comparable same-store sales at the automotive retail chain declined 2.8% (well below its targets for low-single-digit expansion), consisting of a 0.5% comparable service revenue increase and a 3.6% comparable merchandise sales decrease. The firm swung to a modest quarterly net profit during the period, but its nine-month diluted earnings per share profit of $0.19 was significantly worse than the $0.51 per share profit recorded in the prior-year period. Same-store sales are decelerating as the quarterly mark (-2.8%) is materially worse than the nine-month tally, which was -1%. Through the first nine-months of … Read more

Ford Shines Bright in November; Potential Channel Stuffing By GM; Toyota Suggests Industry Sales at Fastest Pace Since 2007; Nissan Sets November Record; Honda’s Second-Best November Performance

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On Tuesday, Best Ideas portfolio holding Ford (F) put up its best November US auto sales performance in almost a decade. US sales at the automaker advanced 7% in the month, exceeding the mid-5% consensus forecast, while retail sales were up 9% for the period. The F-Series topped 60,000 sales for the seventh consecutive month (it sold 65,501 F-Series trucks in the month, up 16% on a year-over-year basis), and passenger car strength was led by Fusion and Fiesta sales, which jumped 51% and 26%, respectively. Total passenger car sales achieved the best sales result since 2002. November was a month to remember for Ford!  The automaker announced that it would build 770,000 vehicles in the first quarter of 2014 … Read more

Cooper Tire & Rubber Receives a Generous Takeover Bid

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Early Wednesday morning, American tire company Cooper Tire & Rubber (CTB) announced that it agreed to be acquired by India-based Apollo Tyres for $35 per share ($2.5 billion) in cash. Not only did we peg Cooper’s fair value at $35 per share, the firm also appeared on our list of  The 25 Cheapest Stocks on the Market over $10, perhaps marking one of our best stock calls thus far this year. Apollo paid a 43% premium over the previous day’s closing price, right in line with our above-market fair value estimate. We think Apollo’s offer was fair, and we think the newly-combined entity will be a stronger company. Fears of Cooper’s heavy pension obligations and concerns about intense competition from … Read more

Nelson: The 16 Most Important Steps To Understand The Stock Market

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A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more

How to Think About Corporate Tax Reform

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2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

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Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more

US Congress Is Getting Ready to Pass a Massive ~$2.2 Trillion Fiscal Stimulus Bill

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Image Shown: US equities have started to recover some of their lost ground as the likelihood that the US Congress will pass a massive ~$2.2 trillion fiscal stimulus and emergency spending package, dubbed the CARES Act, has increased significantly over the past week as seen through the bounce in the SPDR S&P 500 ETF Trust (SPY). President Trump has clearly indicated that he intends to sign such a bill into law as soon as possible, with the US House of Representatives expected to take up the legislation this upcoming Friday morning on March 27. By Callum Turcan On March 25, the US Senate worked late into the night to secure a bipartisan compromise on a massive ~$2.2 trillion fiscal stimulus … Read more

GM and Ford Tune Up Operations for the Future of Automaking

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Image source: GM first-quarter earnings report The US auto behemoths continue to place a greater importance on efficient operations and the health of their bottom lines as the industry may be reaching a relative peak in terms of light vehicle production for this economic cycle and as the future of the auto landscape remains uncertain. By Kris Rosemann Key Takeaways Both GM and Ford are keeping a keen eye on the future of the evolving auto and personal transportation markets. We continue to like shares of GM relative to Ford, even as we say we like the direction in which Ford appears to be heading. GM’s shares are trading at an ultra-low earnings multiple, and it pays a very strong … Read more