MCD

Video: Indexing/Quant Bubble, Pitfalls of Backward Multiple Analysis, and Thoughts on the CAPE Ratio

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President of Investment Research Brian Nelson talks about what causes a stock pricing bubble, notes how the “price setters” are disappearing in today’s market, explains the pitfalls of backward-looking multiple analysis, and shares his thoughts on the CAPE (cyclically-adjusted price-to-earnings) ratio. Running time: ~11 minutes Internet Content & Services: AABA, AKAM, ANGI, BIDU, FB, GOOG, GRUB, JD, LNKD, SOHU, TCEHY, TRIP, TWTR, TZOO, ULTI, WBMD, YELP Internet Content & Catalog Retail: AMZN, BABA, EBAY, EXPE, GRPN, IACI, LQDT, OSTK, PCLN, QVCA, STMP

Bellwethers Drive Dow Jones Past 23,450 – Cheers!

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Image: The stock market is partying like it’s 1999 or 1929, or 1987. You pick. Cheers! Creative Commons, Ruth Hartnup. The market is reacting positively to calendar third-quarter earnings reports during the trading session October 24, and the Dow Jones Industrial Average (DIA) has now surpassed 23,450+. The rally in US equities ensues. Stocks mentioned in this note: General Motors (GM), McDonald’s (MCD), and Caterpillar (CAT). By Brian Nelson, CFA General Motors Delivers!!! We couldn’t be more excited for holders of newsletter portfolio idea General Motors. The auto giant released a solid third-quarter report October 24 that has sent shares rallying to ~$46 each. If you remember, GM’s stock was languishing in the mid-$30s when we penned our September piece, … Read more

Video: Explaining the Valuentum Buying Index

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The Valuentum Buying Index (VBI) stands on the shoulders of giants in finance in uncovering investment ideas.  Brian Nelson, CFA: This is Brian Nelson from Valuentum Securities. Today, I would like to talk about our Valuentum Buying Index, the stock selection methodology that we use and apply across our entire coverage universe. But before I get into some of the specifics, I’d like to provide more or less a summary. Essentially what the Valuentum Buying Index does is it highlights undervalued stocks that are going up in price. Undervalued stocks with good momentum…Value-ntum stocks. So, at the core, the Valuentum Buying Index tries to find stocks that we think have a very strong likelihood of equity price appreciation. It breaks … Read more

Earnings Roundup: McDonald’s, 3M, IBM

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Let’s recap a few big earnings announcements. By Brian Nelson, CFA McDonald’s (MCD) Stock Has Been Super Sized We expect to raise our fair value estimate of McDonald’s following second-quarter results, released July 25, that showed ongoing strength in comparable store sales and the operating income benefits of continued refranchising efforts. Incredibly, global comparable store sales at McDonald’s increased 6.6% in the second quarter, blowing by consensus estimates, and operating income advanced at a 24% clip on a year-over-year basis. Management noted that the second quarter marked the “strongest global comparable sales and guest count results in more than five years.” Nothing appears to be able to stop McDonald’s these days, and increased refranchising de-risks its business model from ongoing … Read more

Labor and the Economic Cycle

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As we arguably near the “peak” in the business cycle, labor is starting to demand more, a dynamic that we believe is emblematic of the period of aging economic expansion. Let’s have a look at what’s happening in the fight for higher wages. By Brian Nelson, CFA Each business cycle is different in both magnitude and duration, but there are some common qualities that define where an economy might be within the cycle. First, it has been more than 8 years since the March 2009 stock-market panic bottom, a period that witnessed firms such as Lehman Brothers, Bear Stearns, and AIG (AIG) flounder. The unemployment rate peaked at 10% during that difficult time. Since then, the US economy has emerged … Read more

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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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

Dow 21,000+; Forward P/E on S&P 500 ~18!!!

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By Brian Nelson, CFA To say that the broader equity market is “extended” is an understatement. After testing the 20,000 mark on the Dow Jones Industrial Average (DIA), stocks have now plowed through 21,000 in such a fashion that can only be compared to the euphoric trading activity of 1999 when the index surged to 11,000 from 10,000 over roughly the same time frame. Who remembers the days of the dot-com bubble? The market is clearly off its rocker, but the market isn’t always on its rocker. Stock prices under and overshoot intrinsic value all of the time. It’s a part of the markets, as much as oxygen is necessary for human life. The markets overshot to the downside during … Read more

#14? You Can’t Control The Market

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Image shown: Wall Street Journal front pages from the Financial Crisis — a reminder that an investor cannot control the markets.

Should this be added to the “13 Steps…” piece?

McDonald’s: Buyback-Driven Earnings Growth and Faltering US Comps

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McDonald’s shares continue to plow ahead as if nothing is wrong. Consolidated sales fell, net earnings dropped, US comps faltered, and all of the company’s EPS performance during the fourth quarter, results released January 23, was buyback driven. The company is trading at 22 times trailing earnings and holds a sizable net debt position. By Brian Nelson, CFA The Golden Arches introduced its all-day breakfast initiative in the US in October 2015, and we had been skeptical of its sustainable incremental contribution. We believed the efforts would only amount to a one-time shot in the arm to performance, if they were successful at all. For years, McDonald’s (MCD) had argued that serving breakfast all day would be a catastrophe when … Read more