SBUX

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Dividend Increases/Decreases for the Week of October 3

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Below we provide a list of firms that raised their dividends during the week ending October 3. 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                          Armanino Foods of Distinction (AMNF): now $0.05 per share quarterly dividend, was $0.04. Autohome (ATHM): now $0.59/ADS dividend, was $0.57. Bank OZK (OZK): now $0.45 per share quarterly dividend, was $0.44. Farmers & Merchants Bancorp (FMAO): now $0.2275 per share quarterly dividend, was $0.2213. Kish Bancorp (KISB): now $0.40 per share quarterly dividend, was $0.39. RPM (RPM): now $0.54 per share quarterly dividend, was … Read more

Starbucks’ Turnaround Continues

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Image Source: TradingView By Brian Nelson, CFA Starbucks (SBUX) recently reported fiscal third quarter results that came in better than feared. Global comparable store sales declined 2%, driven by a 2% decline in comparable transactions, offset in part by a modest increase in average ticket. North America comparable store sales declined 2%, less than the 2.49% decline expected, driven by a 3% decline in comparable transactions, offset in part by a 1% increase in average ticket. U.S. comparable sales dropped 2%, driven by a 4% decline in comparable transactions, offset in part by a 2% increase in average ticket. International comparable store sales were flat, while China comparable store sales increased 2% (versus 1.44% estimate), driven by a 6% increase … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Starbucks Posts Lower Than Expected Performance, Turnaround Will Take Time””

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Image: Starbucks’ shares have been volatile the past couple years. By Brian Nelson, CFA Starbucks (SBUX) is in the midst of transition, and new CEO Brian Niccol will have his hands full getting the company back on track. On October 22, Starbucks announced preliminary results for its fiscal fourth quarter, and the outlook wasn’t rosy. For the fourth quarter of fiscal 2024, Starbucks’ global comparable store sales fell 7%, while consolidated net revenues declined 3%, to $9.1 billion. GAAP earnings per share came in at $0.80, down 25% on a year-over-year basis. Non-GAAP earnings per share fell 24% in the quarter. Here is a summary of its fiscal fourth quarter results: The company’s results were primarily driven by softness in … Read more

Brain Teaser – Reflexive versus Reflective

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Dear members: — Jason Zweig of the Wall Street Journal, wrote in his pioneering text, Your Money and Your Brain, a few fun examples of how sometimes the psychological process of anchoring and adjustment can trip us up. — In one notable example, Zweig wrote about how two psychologists Amos Tversky and Daniel Kahneman had asked volunteers to spin a wheel of fortune numbered from 0 to 100. The contestants didn’t know that the wheel was rigged to produce either a 10 or a 65 for the experiment. — After spinning the wheel, the contestants were then asked whether the percentage of total United Nations membership made up of countries in Africa was higher or lower than the number that came up. … Read more

Starbucks’ Mixed Results Speak to Cautious Consumer Environment

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By Brian Nelson, CFA Starbucks (SBUX) recently reported mixed fiscal third quarter results with non-GAAP earnings per share coming in line with the consensus estimate, while revenue came up short. Global comparable store sales declined 3% in the 13-week period ended June 30, 2024, as comparable transactions declined 5%, while average ticket advanced 2%. Non-GAAP earnings per share of $0.93 fell 7% over the prior-year quarter (down 6% on a constant currency basis). Though Starbucks’ fiscal third quarter was mixed, we’re sticking with our $85 per-share fair value estimate for shares. Starbucks experienced weakness across both its North America stores and its International stores. North America comparable store sales fell 2% as a 3% increase in average ticket failed to … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more