SAM

Big Tobacco, Brewers Want to Continue Consolidation; Altria to Benefit

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Altria (MO) is a holding in both the portfolio of the Best Ideas Newsletter and the portfolio of the Dividend Growth Newsletter. The company operates in one of the strongest industries in our coverage universe as it relates to structural composition (think Porter’s 5 forces). The oligopolistic tobacco industry is attractive in a number of ways. Firms in the industry sell an “addictive” product (cigarettes and/or smokeless tobacco), have significant pricing power, generate high margins, and have strong returns on invested capital. Though declining trends in smoking in the US, threats of tobacco-related litigation, new tobacco regulation (labeling) that discourages tobacco use, and excise tax price shocks that may impact demand will always be concerns, we tend to like the structural … Read more

Boston Beer Continues Its Phenomenal Run in 3Q; Shares Remain Overpriced

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There’s only one word to describe Boston Beer’s third-quarter results, issued last Wednesday, and that is ‘impressive.’ Net revenue jumped 30% from the same period a year ago thanks to core shipment growth of 29% (993,000 barrels), while net income per diluted share from the period tallied $1.89, an increase of $0.36 per share from last year’s period. Third-quarter gross margins were at the midpoint of the company’s annual gross-margin target between 52%-54%, so cost pressures (increased brewery processing costs and higher ingredient expenses) were largely expected — the measure was roughly 3 percentage points lower than the year-ago mark. The growth of depletions—the total beer volume sold to retailers, excluding product loss due to breakage and samples—was 26% and … Read more

Beam and Boston Beer Post Solid Results

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Leading spirits company Beam (click ticker for report: ) posted fantastic second quarter results led by strong performance from its established brands. Revenue increased 7% year-over-year (5% on a comparable basis) to $638 million, roughly in-line with expectations. Earnings per share increased 8% compared to the year prior to $0.64, also in-line with consensus estimates. Free cash flow was only $1 million for the quarter, but management continues to predict the free cash flow for the full-year of $300-$350 million. Beam has experienced comparable sales growth of 4% year-to-date, with premium brands such as Maker’s Mark (+18%) and Jim Beam (+4%) leading the way. Basil Hayden’s has performed exceptionally well so far this year as consumers show a willingness to … Read more

Nelson: The 16 Most Important Steps To Understand The Stock Market

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A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more

How to Think About Corporate Tax Reform

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VBI Ratings Not as Impressive As We Would Have Liked in 2022

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Image: How the VBI rating system has ranked equities so far this year. By Brian Nelson, CFA At Valuentum, we use the Valuentum Buying Index (VBI) to source ideas into diversified simulated newsletter portfolios, and the VBI may be most applicable to the simulated Best Ideas Newsletter portfolio, where we generally like to include ideas when they register a high VBI rating and remove them when they register a low VBI rating. We always use the VBI in a portfolio setting and never by itself. But what about the Valuentum Buying Index ratings, themselves? How did they “perform” during 2022 in one of the worst years for stock market investors in history? Well, not as spectacular as we would have … Read more

2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

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Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more

US Congress Is Getting Ready to Pass a Massive ~$2.2 Trillion Fiscal Stimulus Bill

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Image Shown: US equities have started to recover some of their lost ground as the likelihood that the US Congress will pass a massive ~$2.2 trillion fiscal stimulus and emergency spending package, dubbed the CARES Act, has increased significantly over the past week as seen through the bounce in the SPDR S&P 500 ETF Trust (SPY). President Trump has clearly indicated that he intends to sign such a bill into law as soon as possible, with the US House of Representatives expected to take up the legislation this upcoming Friday morning on March 27. By Callum Turcan On March 25, the US Senate worked late into the night to secure a bipartisan compromise on a massive ~$2.2 trillion fiscal stimulus … Read more