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Reiterating Our $50 Fair Value Estimate on PayPal

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Image Source: PayPal 2Q presentation, page 10 By Brian Nelson, CFA A quarterly “beat and raise” and a new agreement with Visa (V) weren’t good enough to drive shares of PayPal (PYPL) higher July 22, but we’re not worried. Revenue growth of 19% on a foreign-currency neutral basis and non-GAAP earnings per share growth of 11% wasn’t bad at all. Operating cash flow and free cash flow generation of $696 million (up ~12% year-over-year) and $495 million (up 27% year-over-year) in the quarter wasn’t too shabby either. Through the first six months of 2016, the company has generated $1.1 billion in free cash flow, better than the $740 million mark generated during the same period a year-ago. Active customer accounts … Read more

PayPal’s Growth Engines Still Firing

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Image: PayPal continues to add millions of active customer accounts each quarter. Source: PayPal’s Q1 2016 Investor Update. By Brian Nelson, CFA Revenue up 23%, excluding foreign exchange rate fluctuations. GAAP operating margin up 90 basis points. GAAP earnings per share up 43%, to $0.30. Operating cash flow of $738 million. Free cash flow of $605 million, up 70% year-over-year. 1.4 billion transactions processed. Ended the quarter with 184 million active customer accounts, up 4.5 million. These were just a few headlines in PayPal’s (PYPL) first-quarter report, released April 27. PayPal is mainstream – it’s no longer just a way to send money between friends, if it truly ever was just this. The secular trend toward a cashless society is … Read more

Since 2014: Microsoft Up ~50%; Alphabet Up ~30%, Visa Up ~40%

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Image Source: Brandon Martin-Anderson The past few weeks have been difficult ones for the newsletter portfolios. Sure, we’ve had some great reports from Hasbro (HAS) and Union Pacific (UNP), but the broad performance of some of our high-profile holdings hasn’t been what we’ve grown accustomed to. We’ve been concerned about the market’s “fluff” for some time, but equities have been racing ahead in any case, mostly in light of expectations for ongoing delays in continued contractionary monetary policy by the Fed, so the sluggish reports weren’t exactly what we were looking for to end the week. On Friday, April 22, we were “hit” with three rather glum quarterly reports from Microsoft (MSFT), Google – now known as Alphabet (GOOG, GOOGL), … Read more

Your Hard-Earned Money

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By Brian Nelson, CFA It was Thursday afternoon, February 11, crude oil prices just hit a 13-year low, and the S&P 500 (SPY) was about to break below key technical support. Then, just as the markets were to fall further, rumors again emerged that OPEC may be scheduling a meeting to curb crude oil output, driving crude oil prices from the depths and the market higher off technical support. A barrel of crude oil continues to trade below the $30 mark, but it was quite the “save.” From where we stand, the market hasn’t been this fragile than at any time during the past decade or so, including during much of the Financial Crisis. Optimists may be whistling past the … Read more

Google…Ahem…Alphabet!

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“A falling stock price doesn’t mean the stock is cheaper; it doesn’t mean that the stock will go back up; and it certainly doesn’t mean that the stock can’t fall further. In some cases, a falling stock can become more expensive as it drops, if its value falls by a greater amount.” – Brian Nelson, CFA The company formerly known as Google, Alphabet (GOOG, GOOGL), is surging in after-hours trading February 1. As a result of Google’s stock split in 2014, we include both share classes (non-voting Class C, GOOG, and Class A, GOOGL) in the Best Ideas Newsletter portfolio, collectively one of its largest holdings (5%+). Alphabet, then known as Google, first registered a 10 on the Valuentum Buying … Read more

Alerts: High-grading! GILD–>JNJ; EBAY–>FB

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Pictured: The long-term view of Gilead’s Harvoni franchise has blurred. Prices updated, as of 1:36pmCT. By Brian Nelson, CFA We were very pleased by the market action of Friday, January 29, with the top weightings in each of the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio performing extremely well. Visa (V), the largest weighting in the Best Ideas Newsletter portfolio (7%+), is simply “on fire,” with the company trading ~5% higher on the session at the time of this writing. The high end of our fair value range of $90 per share for shares is starting to look within reach for the credit-card network, “.” Visa generates an operating margin in the mid-60% range (not a typo), and there … Read more

The 20 Something’s Stock Portfolio

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A version of this article appeared on our website March 31, 2015. <Our best ideas at any time are included in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.> The “20 Something’s Stock Portfolio” is the first in a series of articles where we get to the core of what many brand new investors want to do when they are first introduced to the stock market: find exciting companies that they are familiar with that will help compound their wealth over time. Other portfolios that we will share in this series include “The Ultra High Income Portfolio,” “The Economic Castle Portfolio,” “The Dividend Cushion Portfolio,” and “The Intelligent ETF Investor’s Portfolio,” among others. The series of portfolios will … Read more

Analysis: The Best Ideas Portfolio

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Please select the image below to download the report.  Note: The High Yield Dividend Newsletter portfolio, Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Results, including those in the Nelson Exclusive publication, are hypothetical and do not represent actual trading. Past performance is not a guarantee of future results, and actual results may differ from simulated information being presented.  The performance of the High Yield Dividend Newsletter portfolio, Nelson Exclusive publication, Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio have not been externally audited. The following download of the Best Ideas Newsletter portfolio is an internal assessment. Newsletter performance figures, including those in the Nelson Exclusive publication, are prepared by Valuentum. Hypothetical results are … Read more

Leading Investors to Water…

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“Entrepreneurs are never satisfied. They want to do things better. They strive for perfection and use all the ingenuity to their command to achieve it.” – J.W. Marriott Company Name Symbol YTD % Outperform? Apple AAPL 7.84 Y Alibaba BABA -18.37 N Altria MO 18.75 Y Cisco CSCO -1.2 N eBay EBAY 24.26 Y Financial Select SPDR XLF 1.52 N General Electric GE 20.66 Y Gilead Sciences GILD 10.41 Y Google (now Alphabet) GOOG 46.07 Y Google (now Alphabet) GOOGL 46.84 Y Health Care ETF XLV 6.02 Y Intel INTC -3.73 N SPDR S&P Bank ETF KBE 9.25 Y Republic Services RSG 10.09 Y Rio Tinto RIO -31.07 N Teva Pharma TEVA 16.12 Y Union Pacific UNP -32.46 N Utilities … Read more

Explaining the New Page 2 of the Dividend Report

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Note: Please expect the roll out of the new dividend report on valuentum.com/ to occur gradually, in conjuction with the standard industry update cycle. Summary Visa is one of the best companies in one of the best industries. Not only is the firm “everywhere you want to be,” but its high-margin business model throws off a lot of cash. Perhaps what we like best about Visa, however, is its dividend growth potential. Let’s walk through why and uncover the drivers behind its strong Dividend Cushion ratio. It’s hard to find anything wrong with Visa’s (V) business model. The company offers a secure, payment network that is accepted virtually everywhere in the United States. The firm makes money every time a Visa … Read more