The “Luck” and “Randomness” of Index Funds
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JCP
Retail Weakness Not Gone Yet; Is J.C. Penney a $0?
Let’s talk J.C. Penney, Foot Locker, American Outdoor Brands, and Vista Outdoor. By Kris Rosemann We’ve been watcing the retail landscape closely as it relates to the health of the consumer. Department store operator JC Penney (JCP) bucked the positive trend of department stores rallying following their respective earnings releases with its fiscal fourth quarter report before the open March 2. Shares sold off aggressively following the announcement of results, despite comparable sales climbing 2.6% from the year ago period. Gross margin improved 50 basis points thanks largely to lower promotional activity, a positive development across department stores this quarter as consumer spending remains robust (US consumer sentiment jumped to 99.7 in the month of February from 95.7 in January, … Read more
Video: Quants! You’re NOT Measuring VALUE and Nelson’s Theory of Universal Value
President of Investment Research Brian Nelson defines the concept of universal value and shows how quantitative statistical methods are inextricably linked to those of fundamental, financial, business-model related analysis. Value does not exist in respective process vacuums! Value is universal. Find out why. Running time: ~10 minutes. Tickerized for Valuentum’s stock and ETF coverage universe. Transcript Hi this is Brian Nelson from Valuentum Securities, and this is the tenth edition of a series that I call “Off the Cuff,” where I get in front of the camera and I talk for ten minutes. This is what we have to talk about today. We have to talk about this concept: The Theory of Universal Value. Value does not exist in vacuums … Read more
Shopping for Income Within Retail in a Digital World
Image Source: Mike Mozart The 2017 holiday shopping season has shown that e-commerce has never been stronger and it will only continue to grow. But there is still potential for income generation among more traditional retailers. Investors must be tremendously discerning in this area, however, as margin, and ultimately free cash flow, pressures remain prevalent. We like Walmart, Target, Costco as income ideas in retail, but TJX Companies and Best Buy may be worth a look. We’re avoiding the department stores and teen retail like the plague, regardless of their Dividend Cushion ratios. By Kris Rosemann and Brian Nelson, CFA What an incredible time we’re living in. For those that study history, the US’ pressure on other countries like China … Read more
Recent Stock Drops; Dividend Cut Coming at Plains?
Image Shown: Plains All American’s stock price may be building in a distribution cut that may materialize in the near term. Several companies disappointed the Street as of late. Though the broader equity markets have been generally calm and steadily-advancing, some underlying constituents have been anything but. By Brian Nelson, CFA It’s been a bull market for some time, but that doesn’t mean all is calm within the ranks. Plains All American (PAA) disappointed investors August 8 after performance during its second quarter came in below expectations and the company lowered forward guidance. We’ve been cautious on the master limited partnership (MLP) space and critical of certain industry-specific metrics for some time, so the disappointment shouldn’t be surprising to our readership. … Read more
Not Worried About Priceline, Boeing; Yes Worried About Fickle Retail
Image Source: Mike Mozart Priceline and Boeing have been here before. Fickle retail continues to succumb to the Amazon effect. By Brian Nelson, CFA The Dow Jones Industrial Average (DIA) closed just shy of the 21,000 mark on May 11, while the S&P 500 (SPY) ended the session at ~2,395. We continue to ride the wave in the equity markets higher, even as we exercise caution almost across the board. First-quarter earnings season has actually been quite good, however, with the “blended earnings growth rate for S&P 500 companies north of 10% (it was 13.5% with more than 80% of S&P 500 companies reporting). FactSet noted in its May 5 report that this pace of growth is the highest since … Read more
Valuentum’s 3 Breakthroughs in the Field of Finance and More
Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more
Around Retail: Aspirational Brands Battle Consumer Perception
Summary · After positive data reads in the months of October and November, things may finally be looking up for retail spending, but the impact of discounting looms large for many in the space. There are pockets of weakness and strength. · Aspirational and luxury goods manufacturers and retailers are not only subject to the pressures of the promotional retail environment, but also are subject to additional outside forces such as tourism and brand perception. While not dead, mall traffic has been challenging. · Whether it is next-generation wearable technology, a refined online presence, a reduction in markdown allowances, or an enhanced shopping experience, luxury goods companies continue to invest for sustainable growth. Fossil and Richemont have been caught by … Read more
Part III: Nelson’s Evaluation of Berkshire’s 2015 Annual Report
<< Go back to Part I << Go back to Part II By Brian Nelson, CFA It’s always a wonder to open up on the Berkshire Hathaway (BRK.A, BRK.B) annual report for a large variety of different reasons, but every time I do I can’t help but ponder yesteryear through the table on page 2, “Berkshire’s Performance vs. the S&P 500.” I think I have a unique knack for imagining what might have been if today’s standards would have been applied to Berkshire in the 1970s, perhaps in some ways how many baseball fans may think about whether the legends of the past would have put up the type of numbers that they did if presented with today’s dynamics. For … Read more
Fundamental Strength To Outweigh Short-Term Volatility
Image Source: texasfeel Union Pacific Battling Declining Volumes We continue to be fans of Union Pacific (UNP) on a fundamental level, and we fully expect the company to be gearing up for material improvement further down the line as the end-markets it serves stabilize. Union Pacific reported weak quarterly results April 21, as operating revenue fell 14% from the year-ago period. The sharp drop was driven by an 8% decline in volume, as measured by total revenue carloads. Coal volume dropped 34%, industrial products volume decreased 10%, and agricultural and intermodal volumes fell in the low to mid-single digit range. Flat chemicals volume and automotive volume growth of 7% were no match for offsetting the other declines, and average revenue … Read more