Seeking Alpha

Brian Nelson

 
View as an RSS Feed
View Brian Nelson's Comments BY TICKER:
Latest  |  Highest rated
  • Lorillard's Shares Are Not Exactly Cheap [View article]
    Thank you all for your questions. We very much appreciate the interest. Our favorite tobacco stock that has been an excellent performer since we added it to our Best Ideas portfolio has been Altria. We think the market is underestimating the value of its stake in fast-growing brewer SABMiller.

    As it relates to Lorillard, we think the firm is 'fairly valued' meaning that it falls within our fair value estimate range. We don't think the company's shares are cheap, but yet we recognize value in the shares and believe the market has it priced fairly. We use a fair value range (the range between the low end of our fair value range and the high end of the fair value range) to determine if a company is fairly valued or not. Only when a company falls outside of this range do we consider a firm truly undervalued or overvalued. This concept is called a margin of safety, which was used by Benjamin Graham, adopted by Warren Buffett, and applied in our process. So, again, we think Lorrilard's shares are fairly valued because the firm is trading within our fair value range.

    This is a great discussion. We do not use a market beta, but a fundamental beta based on the company's underlying risk profile. Therefore, we do not ascribe to the CAPM approach. Instead, we think of our WACC as more of a hurdle rate based on the required returns demanded by shareholders and the underlying business risks related to the investment.

    One of the key variables that we continue to be cognizant of is that tobacco stocks, while revealing substantial pricing power, do have a number of unique risks, especially as it relates to labeling of cigarrettes, excise price shocks, and a general trend toward healthier living. Though we do not think these items are tragic by any stretch of the imagination, to quantify such risks, we use a higher fundamental beta and by extension a higher discount rate.

    Importantly, our analysis is extremely useful in the sense that we provide an upside estimate to valuation, the high end of our fair value range. For Lorillard, this is $48 per share, which actually reveals upside under more optimistic conditions (e.g. a lower discount rate).

    Our DCF valuation process is very polished, though we admit it takes some time to get used. And a rigorous DCF assessment is just one pillar of our stock-selection system. If I can answer any more questions, please just let me know.

    Thanks again for reading.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    brian@valuentum.com
    Feb 22, 2013. 12:54 PM | Likes Like |Link to Comment
  • Why Apple's Intrinsic Value Will Be $1000+ In 3 Years [View article]
    Hi all,

    Thank you for reading our team's article. We certainly appreciate it. If you like our process, please feel free to give our website a look:

    http://www.valuentum.com

    All the best,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Nov 2, 2012. 09:56 AM | 3 Likes Like |Link to Comment
  • Buffett Agrees - Doing Nothing Is The Path To Investment Success [View article]
    Hi all,

    Buffett's strategy has often be mistaken by both himself and his followers. We like to look at the characteristics of the stocks Warren Buffett has invested in. No doubt, they were undervalued, but they also generated outperformance over time -- some may call the latter momentum. By extension, Warren Buffett invests in stocks that are undervalued and that generate good momentum -- what we call 'Valuentum' stocks.

    Here's a quick video on the topic:

    http://bit.ly/QVdecm

    We also have a pretty extensive write-up on this exact topic if anyone is interested.

    All the best,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 31, 2012. 07:10 PM | Likes Like |Link to Comment
  • Ford Smashes Expectations, Stock Remains Ridiculously Cheap [View article]
    Thank you for reading our team's article. Ford continues to be a holding in the portfolio of our Best Ideas Newsletter. Please click the link below to learn more about this publication and the actively-managed portfolio within it.

    http://bit.ly/t66118

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research & ETF Analysis
    Valuentum Securities, Inc
    http://www.valuentum.com
    Oct 30, 2012. 05:23 PM | Likes Like |Link to Comment
  • Panera Shrugs Off Uncertainty [View article]
    Thank you for reading our team's article. We are available for any questions, comments or suggestions.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 30, 2012. 05:22 PM | Likes Like |Link to Comment
  • Linn Energy's Cash Flow Is Fantastic - Expect Nice Distribution Growth [View article]
    Thank you for reading our team's article. We appreciate your interest in our analysis.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research & ETF Analysis
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 30, 2012. 05:20 PM | Likes Like |Link to Comment
  • Why IBM's 3Q Results Were Terrible [View article]
    Thank you all for your comments on our article. Please let us know if there may be anything else. Our complete analysis on IBM can be found at the following location:

    http://bit.ly/S7DH66

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    http://www.valuentum.com
    Oct 20, 2012. 01:31 PM | Likes Like |Link to Comment
  • Expecting Growth In Lockheed's Dividend Despite Tight Defense Budget [View article]
    Hi Reim,

    All that is known is in the past, and all that is value is in the future. The past has very little bearing on the future performance of the stock. Think about all those buggy-whip makers that thought they had a great product only to see the invention of the automobile ruin their business. Looking backwards would have been a collossal mistake. Think Eastman Kodak.

    Remember -- the future is all that matters. There is some benefit to looking at historical numbers in that it allows one to get a feel for historical trends, but a company's value will always be based on the the discounted FUTURE free cash flows of the company. The past is already behind us.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    http://www.valuentum.com
    Oct 15, 2012. 09:17 AM | Likes Like |Link to Comment
  • Follow Einhorn In The Chipotle Short? [View article]
    Hello:

    Thank you for bringing up this discussion. Though there has been a reference in this article to whether the company can grow into its valuation, our view is that Chipotle is finally fairly valued after its significant decline from well over $420 per share.

    If interested and only after giving credit to 'Intangible Valuation' for bringing up this topic, please check out our discounted cash-flow analysis in the following article, which anticipated the large valuation adjustment:

    http://seekingalpha.co...

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    http://www.valuentum.com
    Oct 12, 2012. 11:38 AM | Likes Like |Link to Comment
  • Why Teekay Is Overvalued And Its Dividend Is Not Safe [View article]
    Hi craigkl,

    The point we were trying to make w/r/t consensus is that even after factoring in our above-consensus estimates for Teekay, we still think the firm is overvalued based on our discounted cash-flow model. In doing so, this gives us greater comfortability in making the call. If, for example, we were forecasting below-consensus numbers, it's possible we could be missing something.

    The best way to get a feel for how we look at stocks is to view our methodology (it's a relatively quick read):

    http://bit.ly/viu9MH

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 12, 2012. 10:26 AM | Likes Like |Link to Comment
  • An Introduction To Dividend Growth Investing [View article]
    Hi all,

    I just wanted to follow up to see if I can be any further assistance regarding the tremendous benefits of overlaying a stock-selection process with a dividend growth process. Please contact me at brian@valuentum.com.

    "Our view is that by combining a 'Valuentum' style overlay to sound dividend-growth principles, we can achieve even stronger returns over time. This is the strategy we perform in our Dividend Growth Newsletter.

    We have substantial academic and emperical evidence for the 'Valuentum' style of investing. I've pasted a link to our academic white paper below that shows the risk-adjusted outperformance of investing in a combined value-momentum portfolio over the strategies of value, growth, and other combinations.

    We very much enjoy interacting with investors on this subject because it is not well known within the financial community. The Sharpe ratio of the combined value-momentum portfolio is better, so based on this research, there would be varying risk profiles across strategies.

    Here's a link to the paper my team and I authored:

    http://bit.ly/KVf6Q1

    I hope you may take a read."

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 12, 2012. 10:19 AM | Likes Like |Link to Comment
  • The Risks Of Residential/Mortgage REITs Are Too Many [View article]
    Thank you for your comments about the risks related to mREITs.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    http://www.valuentum.com
    Oct 12, 2012. 10:14 AM | Likes Like |Link to Comment
  • Why United Technologies Is A Potential Income Play [View article]
    Hi Robert,

    Thanks for the question. Based on our forecasts, we think the firm will be able to cover a growing dividend into the future. It's important to note, however, that the future is inherently unpredictable. But based on our well-researched forecasts of future cash flow relative to the size of its dividend payments, we find its future cash-flow generating capacity and balance sheet to be adequate at this time. The construct of the Valuentum Dividend Cushion can be found at the following location:

    http://bit.ly/Qhv1Ji

    Thanks for reading.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 12, 2012. 10:10 AM | Likes Like |Link to Comment
  • Why United Technologies Is A Potential Income Play [View article]
    Hi rcpatrick5443,

    Based on our analysis, United Tech can cover the expected growth that we have forecasted in its dividend based on future free cash flow generated and after considering its capital structure. We make the Valuentum Dividend Cushion available for all companies in our coverage universe (login required, however):

    http://bit.ly/wThfGP

    Thank you for reading. And please let me know if there may be anything else.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc
    http://www.valuentum.com
    Oct 12, 2012. 10:05 AM | Likes Like |Link to Comment
  • Why Lorillard's Dividend Growth Potential Is Excellent [View article]
    Hi zlzhao22,

    That is a very good point. Cigarette consumption in the US has been falling for years. However, the pricing growth on this unfortunate "addictive" product has profound positive implications on the profitability and cash flows of tobacco firms. Here is a link to additional information about LO and its peers:

    http://bit.ly/wdmqbP

    Thank you for reading.

    Kind regards,

    Brian Nelson, CFA
    President, Equity Research
    Valuentum Securities, Inc.
    http://www.valuentum.com
    Oct 12, 2012. 10:01 AM | Likes Like |Link to Comment
COMMENTS STATS
148 Comments
75 Likes