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Markets Back on Track – Seeking Net-Cash-Rich, Free Cash Flow Generators with Pricing Power!

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By Brian Nelson, CFA The past few trading sessions have tested the conviction of many equity holders, but we remain focused on the long run and believe the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, and the High Yield Dividend Newsletter portfolio (available to registered members of that publication) are well positioned for long-term capital appreciation potential, dividend growth potential, and sustainable high yield dividend income, respectively. During the trading session May 13, the Best Ideas Newsletter portfolio was led by some of our favorite net-cash-rich, free-cash-flow powerhouses. Moving convincingly higher, Apple (AAPL), Cisco (CSCO) and Microsoft (MSFT) have strong net cash positions on the balance sheet and generate impressive free cash flow well in excess of expected cash … Read more

Home Depot Shows the Home Has Never Been More Important

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Image Source: Home Depot. By Brian Nelson, CFA On Tuesday, February 23, Home Depot (HD) reported fiscal fourth-quarter 2021 results (period ending January 31, 2021) that came in better than consensus estimates across the board. Not only did the top- and bottom- lines beat, but comparable store sales growth of 24.5% exceeded even some of the most optimistic forecasts for the home improvement retailer during the period. The average ticket price and the number of transactions advanced, while both professional (“Pro”) and Do-It-Yourself (“DIY”) customer revenue increased at a double-digit pace in the quarter. Home Depot also raised its dividend 10% and now yields ~2.5% on a forward-looking basis ($6.60 per-share dividend on an annualized basis). We continue to like … Read more

ALERT: Raising Cash in the Newsletter Portfolios

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January 27, 2021 ALERT: Raising Cash in the Newsletter Portfolios We are raising the cash position in the simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio to 10%-20%. — By Brian Nelson, CFA — Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. You can read the 2020 recap here. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we’re raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. — For more conservative investors, the high end of this range may even be larger, especially … Read more

Recent Data Indicates US Consumer Spending Holding Up Well, Online Sales Surging

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Image Shown: As of this writing, the S&P 500 (SPY) appears ready to end 2020 on a high note, supported by the resilience of the US consumer. By Callum Turcan The ongoing coronavirus (‘COVID-19’) pandemic accelerated the shift towards e-commerce, and that change has long legs. Retailers that previously invested in their digital operations and omni-channel sales capabilities were able to capitalize on this shift while those that relied heavily on foot traffic were hurt badly. Numerous retailers went under in 2020 including J.C. Penney Company Inc (JCPNQ) and Neiman Marcus. Holiday season shopping data indicates that US consumer spending was frontloaded and grew modestly in 2020, aided by surging e-commerce sales, which advanced nearly 50% on a year-over-year basis. … Read more

Congress Seeks to Strike a Deal

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Image Shown: The S&P 500 (SPY) is trading near all-time highs as of December 16, but political risk could cause some choppiness in the near term. The potential for yet another government shutdown is upon us, but according to key leaders on both sides of the aisle, a deal appears to be within reach. Certain provisions may be left out in order to reach an accord sooner rather than later, however. In any case, we remain bullish long term, as the world continues to work to put the COVID-19 pandemic behind it. By Callum Turcan and Brian Nelson, CFA Funding for most US federal government agencies may run out by the end of this week if both sides of the … Read more

Adding 5 Dividend Growth Gems to the Newsletter Portfolio!

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Image Source: Mike Cohen By Valuentum Analysts We are adding five dividend growth gems to fill the ~10% cash allocation in the simulated Dividend Growth Newsletter portfolio that came from removing Intel (INTC) a number of weeks ago. Each gem will be allocated at a 2% weighting. The changes will be reflected in the upcoming December edition of the Dividend Growth Newsletter (see archives), which will be released December 1. Here are the five additions: Qualcomm, Inc. – 2% weighting Qualcomm (QCOM) has revolutionized the mobile phone industry. Through its own R&D and through partnerships with other firms, the company develops breakthrough technology and then licenses it. The firm has one of the strongest Economic Castles in our coverage. We … Read more

Home Depot and Lowe’s Post Tremendous Comparable Store Sales Growth

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Image Source: Home Depot Inc – Third Quarter of Fiscal 2020 IR Earnings Infographic By Callum Turcan Executive Summary: Home Depot and Lowe’s Companies have experienced incredibly strong comparable store sales growth during the initial phases of the ongoing coronavirus (‘COVID-19’) pandemic. Past digital investments enabled both companies to better meet surging demand during these turbulent times, and demand growth is coming from both professional (i.e. contractors, home builders) and non-professional (i.e. more affluent households in the suburbs) consumers. The biggest thing holding both companies back is their large net debt loads and sizable operating lease liabilities, in our view, though please note that their cash flow profiles are stellar. It appears the North American home improvement and construction business … Read more

Zillow Continues to Disrupt Real Estate Market

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Image Source: Zillow Group Inc – May 2020 IR Presentation By Callum Turcan Record low interest rates for mortgages in the US, largely a product of the Fed’s monetary stimulus measures (quantitative easing and near-zero interest rates), has gone a long way in stimulating demand for homes. According to the US Census Bureau, the national homeownership rate stood at 67.4% in the second quarter of 2020, up ~260 basis points from the same period the prior year. For reference, the domestic homeownership rate has been steadily climbing higher since 2015-2016 (when homeownership rates were in the low-60s% range) according to data provided by the US Census Bureau. Homeownership rates peaked in 2005-2006 at the high-60s% level before sliding significantly lower … Read more

News Brief: Stay at Home Stocks, REITs, Housing, Oracle, and AT&T

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Image: Number of COVID-19 cases reported weekly by WHO Region, and global deaths, 30 December 2019 through 18 October 2020. Source: WHO. The COVID-19 pandemic continues to rage on, though the healthcare community has become more adept at reducing the incidence of death given the many treatments now available to battle the disease. We continue to stay the course with the newsletter portfolios. Many of our favorites include Apple, Microsoft, Facebook, Alphabet, and PayPal, among other moaty, net-cash-rich, free-cash-flow generating powerhouses tied to secular growth trends. Our focus remains on the long haul. The business models of many stay-at-home stocks are solid as they continue to reap the rewards of the accelerated trends of home office use and e-commerce proliferation. … Read more