XLU

NextEra Energy’s Outlook for the Next Few Years Looks Solid

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Image Source: NextEra Energy By Brian Nelson, CFA NextEra Energy (NEE) reported mixed second quarter results July 23 with revenue coming in slightly lower than forecast, but non-GAAP earnings per share exceeding the consensus forecast. On an adjusted basis, NextEra Energy’s earnings in the quarter were $2.164 billion, or $1.05 per share, compared to $1.968 billion, or $0.96 per share in the second quarter, of 2024. Management had the following to say about the results: NextEra Energy delivered strong second-quarter results with adjusted earnings per share increasing by 9.4% year-over-year. We believe the continued strong financial and operational performance at both FPL and NextEra Energy Resources positions us well to meet our overall objectives for the year. During the quarter, … 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

Earnings Roundup: TSLA, NEE, IBM, CMCSA, NOW

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By Brian Nelson, CFA Tesla (TSLA) Misses Fourth-Quarter Expectations as Continued Uncertainty Looms Image: The Model Y was the best-selling vehicle globally in 2023. Image Source: Tesla Tesla missed fourth-quarter expectations on January 24, and the market continues to shy away from the electric-vehicle maker surrounding continued controversy over CEO Elon Musk’s request to have greater voting control over the company. We think Tesla may be past its prime heyday years, and while the firm hauled in a nice chunk of free cash flow during 2023 ($4.4 billion) as it retains a net cash position ($29.1 billion), the company will likely never find its way into the newsletter portfolios, which house our favorite ideas for consideration. In the quarter, Tesla’s … Read more

2023 Was a Fantastic Year! Are You Ready for 2024?

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By Brian Nelson, CFA 2023 was a fantastic year by almost any measure, with the S&P 500 (SPY) advancing almost 25%. The markets bounced back from a very difficult 2022 and overcame a crisis in the regional bank sector and rising mortgage rates through the course of the year. The great promise of artificial intelligence [AI], easing inflation, and a dovish Fed pivot late in the year helped to propel the broader indices higher. As we look out into 2024, we think there are 12 reasons why investors should stay aggressive in this new bull market, “12 Reasons to Stay Aggressive in 2024.” Valuentum’s newsletter suite has delivered throughout the good times and bad times. 2023 numbers were great, but … Read more

The Dividend Growth Newsletter Portfolio’s Outperformance

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The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. Note: This article corrects the degree of outperformance of the simulated Dividend Growth Newsletter portfolio, as of the date of the calculation (~3.6% –> ~9.4%). By Brian Nelson, CFA Excluding dividends, we estimate that the simulated Dividend Growth Newsletter portfolio is down roughly 4.9% through the interim session October 30 from the beginning of 2022, beating the … Read more

We Like NextEra Energy’s ESG Focus But Capital Market Conditions Now Showing Cracks

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Image Source: NextEra Energy By Brian Nelson, CFA We’ve written in the past about NextEra Energy (NEE), and our latest note can be found here. The company remains one of our favorite utilities, but mostly because of its renewables energy exposure as it relates to ESG considerations. When it comes to utilities, more generally, however, we tend to take a pass on almost all of them given the capital intensity involved in their operations and their interest-rate sensitivity, especially now in an environment where interest rates are returning to “normal” levels in the mid-single-digits. The forward estimated dividend yield on the Utilities Select Sector SPDR ETF (XLU) stands at ~3.8% at the time of this writing, and if investors are … Read more

Big Cap Tech and Large Cap Growth Remain Safe Havens

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Image: The stylistic area of large cap growth, which is heavily represented in the Best Ideas Newsletter portfolio, is doing fantastic so far in 2023. Hi everyone: Brian here. I wanted to check in to see how everyone is doing. As expected, many of the interest-rate sensitive names are getting hammered. This should not be surprising by any stretch. The utilities sector (XLU) is down more than 20% this year. We’ve emphasized why we’re not fans of utilities in this article. The consumer staples (XLP) sector is down nearly 8% so far in 2023. We’ve emphasized why we’re not expecting much from consumer staples in this article. Equity REITs (VNQ) are down more than 8% year-to-date, and we’ve emphasized why … Read more

NextEra Energy Expects 10% Annual Dividend Growth

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Image: FPL accounts for a large portion of Nextera Energy’s earnings. Image Source: Form 10-K By Brian Nelson, CFA NextEra Energy (NEE) is one of our favorite utility ideas. The company operates two principal businesses, FPL, which is the biggest electric utility in Florida, and NEER, which is the world’s largest generator of wind and solar power and a global player in battery storage. FPL has approximately 32,100 MW of net generating capacity and is state regulated, serving more than 12 million people, with residential accounting for a little more than half of operating revenue. FPL operates four nuclear power plants. NEER has 27,400 MW of total net generating capacity and represents one of the largest wholesale generators of electric … Read more

Don’t Let “Them” Spin the Narrative

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By Brian Nelson, CFA Let’s call it how it is: 2022 was an absolute nightmare for the 60/40 stock/bond portfolio. During the year, the 60/40 stock/bond portfolio was down 16.9%, according to data from the Vanguard Balanced Index Fund Shares (VBIAX). During 2022, the S&P 500 (SPY) index was down 18.2%, meaning that the 60/40 stock/bond portfolio, despite allocating to 40% bonds, captured over 90% of the downside risk. Modern portfolio theory is dead: Stocks have done far better than bonds during upswings, and only slightly worse during downturns. The risk/reward for the 60/40 stock/bond portfolio just doesn’t add up anymore. Bond prices did not move inversely to stock prices during the COVID-19 meltdown, and they did not move inversely … Read more

NextEra Energy Is a Great Income Growth Idea

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Image Shown: NextEra Energy Inc is a great income growth idea that complies with ESG investing standards as the company is investing heavily in renewable energy power generation assets and battery storage facilities. Image Source: NextEra Energy Inc – June 2022 IR Presentation By Callum Turcan The utility sector is home to companies with stable and highly visible cash flows, particularly as it concerns regulated utility operations, given the essential nature of the services these enterprises provide. Regulated utility operations refers to utilities that participate in rate cases with state-level public utilities commissions (‘PUCs’), with these rate cases largely setting the parameters of what the relevant utility can charge its customers. Generally speaking, PUCs and the rate case process allows … Read more