SI

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

Siemens-Mitsubishi Consortium Looking to Spoil General Electric’s Deal

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“A tendency for the winning bid in an auction to exceed the intrinsic value of the item purchased. Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item’s intrinsic value. As a result, the largest over-estimation of an item’s value ends up winning the auction.” – The Winner’s Curse (Investopedia) On Friday, Reuters reported that Siemens (SI) and Mitsubishi (MSBHY) are finalizing a joint offer for Alstom’s energy operation, a unit currently under formal agreement to be purchased by General Electric (GE) for $13.5 billion (€9.9 billion) enterprise value and $3.4 billion (€2.5 billion) of net cash — totaling $16.9 billion (€12.35 billion). The news … Read more

The Alstom Situation

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French energy firm Alstom has been in the news a lot recently. From General Electric’s (GE) initial interest in the firm reported April 23 to Siemens’ (SI) offering to top GE’s bid April 27 to the French government politically opposing GE’s bid for Alstom’s assets May 5, the saga continues. As of the latest information available (May 6), Alstom continues to review both GE’s and Siemens’ respective offers: The Board of Directors of Alstom announced…that it has received a binding offer from General Electric to acquire its Energy activities. The scope of the transaction includes the Thermal Power, Renewable Power and Grid Sectors, as well as corporate and shared services. With 65,000 employees, these businesses registered €14.8Bn in sales in … Read more

Industrial Conglomerates Dominate News on Friday

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The latter part of this week brought about a plethora of news from the ‘Industrial Conglomerates’ industry. On Friday, General Electric (GE) announced a 16% increase to its quarterly dividend to $0.22 per share (a 3.3% annual yield). The industrial behemoth was just added to the portfolio of our Dividend Growth Newsletter October 21 on account of its fantastic Dividend Cushion score and solid third-quarter performance. General Electric’s dividend report will be updated with the new information shortly. Also on Friday, Honeywell (HON) approved an authorization to repurchase up to $5 billion of its common stock, now that the firm’s previous $3 billion share repurchase program approved in 2011 is substantially complete. We encourage Honeywell management to be a bit … Read more

Third-Quarter Industrial Earnings Support Exposure in Best Ideas Portfolio

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For starters, if you haven’t yet read through our piece on General Electric’s (GE) third-quarter earnings, it’s a must-read. The step-up in backlog and order trends at the industrial behemoth are quite remarkable, and we think GE’s performance bodes well for the sector as a whole. Still, let’s drill down on a few themes across the industrial space and how our Best Ideas portfolio is well-positioned to capture the strength of underlying trends. Danaher (DHR) Danaher reported third-quarter results Thursday that showed revenue expansion of 5.5% and diluted net earnings per share growth of 9%. The company generated 30 basis points of operating-margin improvement and generated more than $800 million in free cash flow, or about 17.8% of revenue (a very … Read more

Jobs Slashed in Hopes of Operating Margin Expansion

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As the battle over the budget rages on, pharmaceuticals giant Merck (click ticker for report: ) and German conglomerate Siemens AG (click ticker for report: ) announced massive job cuts targeted at reducing annual operating expenses. Merck On Tuesday, Merck announced a bold plan to cut $2.5 billion in annual operating expenses, with the lion’s share of savings derived from marketing and R&D cuts. The firm anticipates $1 billion in cost savings by the end of 2014, with the remainder realized in 2015. 7,500 jobs have already been cut, but the firm will slash an additional 8,500 jobs in order to achieve its targeted cost savings. The restructuring is expected to result in pre-tax costs of $2.5-$3 billion, though only … Read more

Siemens Simplifies; Nokia Diversifies

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German conglomerate Siemens (click ticker for report: ) put its 50% stake in Nokia-Siemens Networks on the chopping block just a few weeks ago, and the firm already has found a buyer: Nokia (click ticker for report: ). Nokia will pay Siemens $2.2 billion (€1.7 billion) for the half of the joint-venture it doesn’t already own—not a bad price for a business that reported €13.8 billion in revenue and €822 million in operating profit during 2012. With adjusted EBITDA of €1.09 billion, Siemens let go of the stake for less than 3x EBITDA.   Image Source: Nokia-Siemens Networks Annual Report With its mobile phone business sputtering, we certainly like the deal for Nokia. The joint-venture has been free cash flow … Read more

Stock Market Outlook for 2021

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By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more

Historic Oil Deal Reached

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Image Source: Chevron Corporation (CVX) – March 2020 Security Analyst Meeting Presentation By Callum Turcan Over the Easter holiday weekend, members from the Organization of Petroleum Exporting Countries (‘OPEC’), non-OPEC members that are part of the OPEC+ group (countries that in the recent past have joined forces with OPEC to curtail global oil supplies in a formal manner), and non-OPEC members outside of the OPEC+ group such as Brazil (EWZ), Canada (EWC), and the United States (SPY) came to an agreement to cut their collective oil output by north of 10 million barrels per day. Global oil and other raw energy resource prices (USO, BNO) have been simply demolished year-to-date due to a combination of demand destruction from the ongoing … Read more

Our Thoughts on Chevron Buying Noble Energy

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Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation By Callum Turcan On July 20, Chevron Corporation (CVX) announced it was acquiring Noble Energy Inc (NBL) through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping … Read more