WMT

Shopping for Income Within Retail in a Digital World

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Image Source: Mike Mozart The 2017 holiday shopping season has shown that e-commerce has never been stronger and it will only continue to grow. But there is still potential for income generation among more traditional retailers. Investors must be tremendously discerning in this area, however, as margin, and ultimately free cash flow, pressures remain prevalent. We like Walmart, Target, Costco as income ideas in retail, but TJX Companies and Best Buy may be worth a look. We’re avoiding the department stores and teen retail like the plague, regardless of their Dividend Cushion ratios. By Kris Rosemann and Brian Nelson, CFA What an incredible time we’re living in. For those that study history, the US’ pressure on other countries like China … Read more

Buffalo Wild Wings Should Go Private and Hasbro Should Buy Mattel…But at the Right Price

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Image Source: Hasbro There is a lot happening across the M&A landscape as of late. Buffalo Wild Wings has reportedly received a go-private offer, while speculation is swirling that Hasbro is looking to gobble up Mattel. We like the prospects of both scenarios. However, price will always matter. Buffalo Wild Wings should hold out for the very best offer, while Hasbro should be very careful not to overpay for assets that may be past their prime. By Brian Nelson, CFA Buffalo Wild Wings (BWLD) has long been a favorite of ours. You have to read, “3 Reasons Why Buffalo Wild Wings Is a Long-Term Winner” from July 2015. Certainly the beer, wings and sports establishment is facing a host of … Read more

Amazon Casts a Large Shadow Over the Pharmacy Industry

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Image Source: Mike Mozart It is our belief the food retailing industry is in the midst of widespread disruption with Amazon’s attempt to break into the supermarket game with its audacious purchase of Whole Foods. The Whole Foods acquisition is not likely to be an isolated one-off event; instead, it may be a harbinger of Amazon’s ambition to break into new markets, thus expanding its overall percentage of retail sales. We update our views on Amazon and how the company may eventually impact newsletter portfolio holding CVS Health. By Alexander J. Poulos Emulating the Costco Model Amazon’s (AMZN) purchase of Whole Foods (WFM) may be the initial step towards emulating the uber-successful Costco (COST) model where the bulk of profits … Read more

Target, Kroger Launch Counterattack on Amazon-Whole Foods; Industry Earnings to Shrink

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Image Source: Valuentum The pricing war has begun, but it may take years before we see the final effects. Only the strongest may come out ahead, and only those already focusing on giving customers the very best value proposition at the lowest prices may retain share. By Brian Nelson, CFA The grocery store business is now on a path of significant change in the wake of news that Amazon (AMZN) would acquire upscale organic grocer Whole Foods (WFM). The online retailing giant has wasted little time in resetting the product pricing environment at Whole Foods, and we expect that other grocers will have to follow. The group had already been on high alert given recent language from Kroger (KR), suggesting … Read more

CVS Health Still Stuck in Neutral

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CVS Health continues to perform as expected in the current lower reimbursement environment. We remain enthused with the copious amount of free cash flow that the enterprise produces, which has allowed management to continue its shareholder-friendly ways. We remain vigilant for signs of a key inflection point, however, and a catalyst may exist in the results of the current PBM selling season. By Alexander J. Poulos Overview CVS Health (CVS) operates a hybrid pharmacy model–it has melded together a ubiquitous pharmacy chain with a world-class Pharmaceutical Benefit Management (PBM) business. The hybrid model directly contrasts with the model operated by its primary rival Walgreens (WBA), which maintains a focus on pharmacy retail operations. The pharmacy retail field continues to consolidate … Read more

Generic Drug Price Deflation Continues to Weigh on Shares of Teva

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Shares of former Best Ideas Newsletter portfolio idea Teva Pharmaceuticals have come under renewed selling pressure after reporting weak quarterly results due largely to deflationary price pressures felt in the generic drug division. Teva has been relatively powerless in stopping the trend. We had removed the shares from the Best Ideas Newsletter portfolio well before the last leg down, and the Dividend Cushion ratio warned of tremendous risk to the sustainability of the dividend far in advance. By Alexander J. Poulos and Kris Rosemann Generic Drug Deflation Teva Pharmaceuticals (TEVA) maintains its position as one of the world’s largest manufacturer of generic medications, but the marketplace for a generic drug differs from the market dynamics of the branded space. We view … Read more

Video: Explaining the Valuentum Buying Index

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The Valuentum Buying Index (VBI) stands on the shoulders of giants in finance in uncovering investment ideas.  Brian Nelson, CFA: This is Brian Nelson from Valuentum Securities. Today, I would like to talk about our Valuentum Buying Index, the stock selection methodology that we use and apply across our entire coverage universe. But before I get into some of the specifics, I’d like to provide more or less a summary. Essentially what the Valuentum Buying Index does is it highlights undervalued stocks that are going up in price. Undervalued stocks with good momentum…Value-ntum stocks. So, at the core, the Valuentum Buying Index tries to find stocks that we think have a very strong likelihood of equity price appreciation. It breaks … Read more

Amazon To Buy Whole Foods: Not Creative Destruction, Just Destruction

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Image Source: Mike Mozart Amazon announced plans to buy Whole Foods. We’re viewing the news as affirmation of our decision to stay largely away from retail exposure in the newsletter portfolios. We think a bidding war for Whole Foods is possible, mostly to keep it and its real estate out of the hands of Amazon, potentially setting up for a true “winner’s curse” scenario. The winner will overpay. By Brian Nelson, CFA We’re not pleased, but then again, it’s okay. Amazon (AMZN) announced June 16 that it will buy high-end grocer Whole Foods (WFM) for $42 per share in cash. Though we mentioned that Amazon was expanding into the grocery store market anecdotally, we must say that it still is … Read more

Labor and the Economic Cycle

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As we arguably near the “peak” in the business cycle, labor is starting to demand more, a dynamic that we believe is emblematic of the period of aging economic expansion. Let’s have a look at what’s happening in the fight for higher wages. By Brian Nelson, CFA Each business cycle is different in both magnitude and duration, but there are some common qualities that define where an economy might be within the cycle. First, it has been more than 8 years since the March 2009 stock-market panic bottom, a period that witnessed firms such as Lehman Brothers, Bear Stearns, and AIG (AIG) flounder. The unemployment rate peaked at 10% during that difficult time. Since then, the US economy has emerged … Read more

Walmart Comes Roaring Back; Target Is Still Suffering

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Image Source: Mike Mozart Walmart and Target have taken a few body blows from Amazon, but the fight is far from over. Walmart is executing much better than Target at the moment. By Brian Nelson, CFA Shares of Walmart (WMT) are now approaching $80 per share following a combination of a strong market tailwind and first-quarter results, released May 18, that revealed that, while the discount retailer may have taken its share of blows from Amazon (AMZN) the past few years, it is not out of the fight by a long shot. Excluding currency fluctuations, total revenue during the first quarter of 2017 advanced 2.5% thanks in part to solid performance at Walmart US, where comparable store sales advanced 1.4% … Read more