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Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Dividend Increases/Decreases for the Week of September 26

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Below we provide a list of firms that raised their dividends during the week ending September 26. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week                          Accenture (ACN): now $1.63 per share quarterly dividend, was $1.48. Bank of South Carolina (BKSC): now $0.23 per share quarterly dividend, was $0.21. City Holding (CHCO): now $0.87 per share quarterly dividend, was $0.79. Concentrix (CNXC): now $0.36 per share quarterly dividend, was $0.33. First United (FUNC): now $0.26 per share quarterly dividend, was $0.22. Honeywell International (HON): now $1.19 per share quarterly dividend, … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Alert: Changes to the Newsletter Portfolios

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Image Source: Mike Cohen cc by 2.0. Summary Best Ideas Newsletter portfolio Pepsi (PEP): 4%-6% à 0% McDonald’s (MCD): 4%-6% à 0% Amazon (AMZN): 0% à 4%-6% Nvidia (NVDA): 0% à 4%-6% Dividend Growth Newsletter portfolio Honeywell (HON): 3%-4% à 0% McDonald’s (MCD): 3%-4% à 0% Meta Platforms (META): 0% à 3%-4% Booking Holdings (BKNG): 0% à 3%-4% By Brian Nelson, CFA 2024 proved to be a great year for stock investors. The Dow Jones Industrial Average ETF Trust (DIA) has advanced nearly 15% year-to-date on a price-only basis, while the SPDR S&P 500 ETF Trust (SPY) is up a whopping 25%+ on a price-only basis. The Invesco QQQ Trust (QQQ) is up even more at a 27% advance in … Read more

Honeywell Adjusts Full Year 2024 Guidance

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Image: Honeywell’s shares have traded sideways the past couple years. By Brian Nelson, CFA Honeywell (HON) reported mixed third quarter results October 24 with revenue coming in a bit light relative to the consensus forecast and non-GAAP earnings per share beating what the Street was looking for. Sales came in at $9.7 billion in the quarter, up 6%, while organic sales advanced 3%. Its operating margin was 19.1%, down from 20.9% in the prior year period due mostly to an impairment related to classifying its personal protective equipment (PPE) business as assets held for sale. The company’s segment profit increased 6% in the quarter, and its segment margin came in at 23.6%–above the high end of prior guidance by 30 … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

Honeywell Adjusts Full Year 2024 Guidance on Margin Pressures

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Image: Honeywell’s shares have traded sideways for the past 12-18 months. By Brian Nelson, CFA On July 25, Honeywell (HON) reported better than expected second quarter results with revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Reported sales advanced 5% thanks to organic revenue growth of 4%, hitting the high end of its previous guidance. Adjusted earnings per share of $2.49 was above the high end of its previous guidance. Thanks to strength in its ‘Building Automation’ and ‘Energy and Sustainability Solutions’ divisions, orders were up 4%. During the second quarter, ‘Aerospace Technologies’ sales advanced an impressive 16% on an organic basis from last year’s quarter, marking the eighth consecutive quarter of double-digit organic expansion. … Read more

Boeing to Acquire Spirit AeroSystems

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Image: Boeing’s shares have traded sideways the past few years as it works to fix safety issues. By Brian Nelson, CFA Boeing (BA) has been plagued with safety issues the past couple of years as the company’s decision to cut costs by outsourcing much of its manufacturing operations has created a whole host of problems. Two deadly plane crashes of its 737 MAX coupled with a blown-out area of the fuselage in a recent Alaska Airlines (ALK) flight are but a few missteps that have plagued the aircraft maker. On July 1, Boeing announced that it would roll back some of its outsourcing, announcing that it would bring fuselage maker Spirit AeroSystems (SPR) back into the fold. Boeing’s purchase of … Read more