MMM

Fiscal Cliff Averted; Aerospace Rallying

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After a volatile December, two of our favorite aerospace names, Astronics (click ticker for report: ) and EDAC Technologies (click ticker for report: ), are rallying significantly after a deal was finally reached to avert the fiscal cliff. Precision Castparts (click ticker for report: ), which had steadily moved higher during the fiscal-cliff ordeal thanks to optimism surrounding its planned acquisition of Titanium Metals (TIE), is also seeing strength today. We assumed both profit taking and overblown fears of defense cuts were the culprit behind the increased volatility, and it seems as though that could be the case. We continue to see substantial upside at these firms thanks to the massive, multi-year commercial aerospace backlogs of the large airframe makers. Our Best Ideas portfolio … Read more

You Are Ahead of the News As a Valuentum Member

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Remember When We Said Economic Prognosticators Were Off Their Rockers? From the September 2012 edition of our Best Ideas Newsletter (see page 2), released September 15, 2012: “Could you imagine if you had listened to bond-king Bill Gross (please note he is not the equity king), Marc Faber (author of the Gloom, Boom & Doom report) or the Economic Cycle Research Institute (ECRI), which called for a recession in September 2011 – some 30% in the S&P 500 ago (yes, 30%!). Aside from being incorrect, bearish economic prognosticators fully admit that their expectations have little to do with what may happen to the equity markets in the future (as Bernanke’s unlimited QE has shown). Still, such admissions do not stop … Read more

FAQ: Why Doesn’t the ‘Percentage Undervalued/Overvalued’ Match Up to the Actual Discount/Premium to Valuentum’s Fair Value Estimate of the Company?

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We view the intrinsic value of a firm as a range, not a single point estimate. So instead of us saying that a company is worth exactly $55 per share, for example, instead we’d say it is worth between $50 (low end) and $60 per share (high end) — think of this range as our margin of safety. We use a margin of safety due to the inherent uncertainty of predicting with absolute precision a firm’s future free cash flow stream — a firm’s future free cash flows determine our estimate of the company’s intrinsic value, and the future is not known yet. As a result, the ‘percentage undervalued/overvalued’ (as shown on our 16-page reports) is calculated by comparing the firm’s current price with the … Read more

FAQ: How Is Your Best Ideas Portfolio Doing This Year?

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At Valuentum, we task ourselves with a tall order. While most investment newsletters compare themselves to a market benchmark, we go one step further. We want to deliver positive returns to you, our subscriber, year after year, in addition to outperforming the market benchmark. Below, we outline a table that shows the outperformance we provided to our members since the time they joined.  So, for example, if you joined as a member on April 13, 2012 our Best Ideas portfolio has offered 3.8 percentage points of outperformance. Or, if you joined on July 13, 2011, our Best Ideas portfolio has offered 22 percentage points of outperformance. Importantly, did you know that, according to Advisor One, only 13% of hedge funds are beating the S&P … Read more

A Dual Focus on Valuation and Yield Is the Best Way to Combat Changes in Future Dividend Tax Rates

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With a potential hike in the dividend tax rate just around the corner, there is no more important time than now for income investors to evaluate their existing portfolio holdings to determine whether they are well-positioned for a higher-tax environment. Assuming there are no changes to the current trajectory, the top dividend tax rate is expected to rise to 39.6% next year (up from 15% currently), and the highest-income earners will see a Medicare surtax on top of that. Evaluate All Aspects of a Dividend Investment First of all, we think those investing in high-yielders (firms) at any price (HYAAP) may be most affected by this change in tax rates. These high-yielders at any price (HYAAP) tend to be favorites of those at or near retirement, particularly given the paltry payouts on fixed … Read more

3M Lowers 2012 Revenue and Earnings Outlook

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On Tuesday, 3M (click ticker for report: ) reported mixed third-quarter results and lowered its revenue and earnings per share outlook for 2012. Though we plan to make a few slight changes to our valuation model, we don’t expect a material change to our fair value estimate. 3M’s revenue dropped 0.4% from the same period a year ago, though organic local-currency revenue advanced 2.2%. On an organic local-currency basis, revenue increased 4.3% in its health care business, 3.3% in its industrial/transportation segment, 1.4% in its consumer/office segment, 1.3% in its display/graphics segment, 0.7% in its safety/securities segment, and 0.1% in its electro/communications segment. However, with the exception of its display/graphics segment and electro/communications segment, performance decelerated from the pace of expansion … Read more

3M Issues First-Quarter Results; Raises Bottom End of Full-Year Guidance Range

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3M (MMM) issued strong first-quarter results Tuesday that revealed expansion in almost every business segment. The company’s performance was one of the better ones we’ve seen from industrial firms so far this quarter. We also liked GE’s (GE) report here and Honeywell’s (HON) report here and were quite pleased with the recently upwardly-revised outlooks from Parker-Hannifin (PH) and Illinois Toolwork (ITW). 3M’s management followed the lead of its industrial peers and also raised the lower end of its full-year 2012 earnings-per-share outlook range. Our fair value estimate of the company remains unchanged, however. << Our 16-page Equity Report on 3M (MMM) – login required On a reported basis, net revenue advanced 2.4% thanks to an 8.6% jump in its Industrial and Transportation segment, a 5.5% improvement … Read more