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October Dividend Growth Newsletter Introduction

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Dear Member, The month of September represented some tough sledding for the markets, and we think things will get worse before they get better. If you missed our write up on the seven reasons why we think we’re due for a fall, please be sure to catch up on the piece here. We made a number of changes to the Dividend Growth portfolio since the release of the previous edition of the newsletter. Let’s make sure you didn’t miss anything. For one, yesterday, we added S&P 500 SPDR put option contracts to the portfolio to protect the large gains. Specifically, we added protection in the form of 5 put option contracts on the S&P 500 (SPY), with November 22 expiration … Read more

What Is Fat Pitch Investing?

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“I call investing the greatest business in the world … because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.” —Warren Buffett, Interview in Forbes magazine (1 November 1974) “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’” –Warren Buffett, 1999 Berkshire Hathaway Annual Meeting, … Read more

Best Ideas Newsletter Excerpt: A+ for Altria and Apple

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By Brian Nelson, CFA Just as I’m writing the intro to this edition of the September edition of the Best Ideas portfolio, the good news keeps coming. If you’ve read anything about our top holdings, you’d be hard-pressed to miss a discussion on Altria (MO) and our thesis that goes into the tobacco firm’s 27% economic stake in fast-growing global brewer SABMiller (SBMRY) as support for not only its dividend growth but also its valuation. The news wires are buzzing that SABMiller approached Heineken (HEINY) for a tie-up, and that Heineken rejected its offer. However, there are now talks that Anheuser-Busch InBev (BUD) is looking to put together a bid for SABMiller, and shares of the latter are soaring on … Read more

Performance Update: The Valuentum Buying Index

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Note: A more recent analysis of the Valuentum Buying Index rating system can be accessed at the following link: /Value_and_Momentum_Within_Stocks_Too A version of this article was published October 26, 2013. By Brian Nelson, CFA We periodically update the performance results of the Valuentum Buying Index (VBI), the stock-selection methodology that drives idea-generation within the Best Ideas portfolio. The academic studies of the Valuentum Buying Index can be accessed here (white paper) and here (AAII). The latest iteration of the performance, dated September 3, 2014, continues to showcase the strong sorting mechanism embedded within the investing framework, particularly when the index is coupled with qualitative oversight and portfolio management skill. Sorting winners from losers is what the Valuentum Buying Index has been designed to … Read more

Dividend Increases for the Week Ending August 22

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Below we provide a list of firms that raised their dividends during the week ending August 22. 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 Altria (MO): now $0.52 per share quarterly dividend, was $0.48. American Financial Group (AFG): now $0.25 per share quarterly dividend, was $0.22. Brinker (EAT): now $0.28 per share quarterly dividend, was $0.24. Chemical Financial (CHFC): now $0.24 per share quarterly dividend, was $0.23. Commercial Bancshares (CMOH): now $0.19 per share quarterly dividend, was $0.165. Evans Bancorp (EVBN): now $0.34 per share semi-annual dividend, was $0.31. G&K Services … Read more

Newsletter Portfolios: Altria Ups Dividend; eBay Still Assessing PayPal Spin-off

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Valuentum makes two actively-managed portfolios available to members: a Best Ideas portfolio (housed in the monthly Best Ideas Newsletter) and a Dividend Growth portfolio (housed in the monthly Dividend Growth Newsletter). Each portfolio has a different goal and a different strategy. The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds each idea from a Valuentum Buying Index rating of a 9 or 10 (consider buying) to a rating of a 1 or 2 (consider selling). The goal of the Best Ideas portfolio is to generate a positive return each year and to exceed the performance of a broad market benchmark. The Dividend Growth portfolio seeks to find underpriced dividend growth … Read more

Altria Raises Lower End of 2014 Earnings Guidance Range

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Tobacco giant Altria (MO) reported second-quarter results Tuesday. The firm is one of the most widely-followed stocks on our website and is included in both the Best Ideas portfolio and Dividend Growth portfolio. Though Altria’s revenue expanded modestly, net of excise taxes, in the quarter thanks to the firm’s tremendous pricing power, cigarette smoking continues its steady and expected decline in the US. The company’s second-quarter adjusted domestic shipment cigarette volume dropped ~4% in the period, though its core brand Marlboro continues to increase its retail share of the total cigarette category (up 0.3 retail share points in the second quarter). Altria’s smokeless products segment fared better, growing both the top-line and operating income at a faster clip than the … Read more

Beer and Cigarettes

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Update: Shortly after the publishing of the following article, Reynolds American announced that it would acquire Lorillard in a deal valued at $27.4 billion, or a deal price of $68.88 per share (in-line with the high end of our fair value estimate range for Lorillard, as predicted). For more details >> ————— Let’s pick up right where we left off. On May 22, we commented that Reynolds American (RAI) and Lorillard (LO) have been looking to combine operations. Here’s what we wrote at that time: According to recent reports, tobacco giants Reynolds American and Lorillard continue to work to tie the knot. The speculated deal is rumored to be a three-way transaction that involves Reynolds’ shareholder British American Tobacco (BTI), … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

The Risks of Dividend Growth Investing

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Did you know that if you invested in retail-focused REIT Realty Income’s (O) stock in October 1994 with an original investment of $8,000, your current annual dividend income would be $2,190, equivalent to a yield on cost north of 27%?!?! For any dividend growth investment, yield on cost is the current annualized dividends divided by the original investment, or $2,190/$8,000 in this example. The benefits of dividend growth investing have never been more evident, and a prudent, well-defined dividend growth plan targeting the ‘right’ companies over the next 20 years could result in your portfolio generating a 27% yield on cost in a couple decades, too! Though this sounds fantastic (and perhaps, unreal), investors must be aware of the significant … Read more