Minutemen

Long only, value, dividend growth investing, growth at reasonable price
Minutemen
Long only, value, dividend growth investing, growth at reasonable price
Contributor since: 2014
I'm watching. I think the price right now is very reasonable, but the market overall is still very much in panic mode.
I sold this turkey off back in March of 2015 for $70 and glad I did. I divested most of my REITs back then as well as there is just too much uncertainty and volatility in this sector for me. But that's just me.
hat: Bad timing on your part due to the unforeseen great recession. Black Swan events do happen. So if one believes we are headed for (or currently in) a global recession, then now is not a good time to invest in any equity (in terms of near-term capital preservation). But if you believe that market fears are overblown, then now is an excellent time to invest.
Jack: Take a look at the share price in 10 years and get back to us.
hat:
I'm not going to go thru each company one by one, but lets compare VIAB with DIS.
VIAB:
-Quarterly revenue declined 6% (the film division fell 15% year over year).
-Media networks revenue also decreased 3%
-3% decline in advertising (4% decline in the United States).
-Affiliate fee revenue in the U.S. suffered from lack of product in certain VOD channels, as well as lower affiliate fee rates at AT&T, owing to the DirecTV merger.
-Management lowered its expectation for affiliate fee revenue for fiscal 2016 to low to mid-single-digit growth, down from high-single-digit growth previously.
-Operating margin for the segment fell 40 basis points to 41.2%, owing to increased programming and marketing costs.
-Sales in the film segment fell 15% year over year to $612 million.
-Overall adjusted operating margin fell to 26.6%, as lower revenue growth continues to offset the firm’s expense-management efforts.
DIS:
+Revenue increased by 14% year on year to $15.2 billion.
+The revenue growth occurred at all four segments, with studio entertainment leading the way with a 46% improvement.
+Segment operating income increased 20% to $4.3 billion with an 86% improvement in studio entertainment operating income and a more than 20% improvement at both the parks and resorts segment (this more than offset the 6% decline at media networks, which was was due to increased rights costs, foreign exchange impact, and the timing of the college football playoff games.).
There is quite a few compelling reasons why DIS trades at a premium to its so-called peers, that really aren't peers at all.
D.B. Kim:
Also, where are you getting forward earnings of $5.35 from? According to Yahoo Finance, of 34 analysts covering DIS, the consensus Sept 2016 earnings are $5.66 while the Sept 2017 consensus is $6.17. Those estimates would put a 15x forward earnings multiple for 2016 at $85 and for 2017 at $92.
However, the 5-year average P/E for DIS is 19.3. The current TTM P/E puts it at 18.3. So any way you look at it, DIS is trading at a decent discount to its future earnings estimates and historical P/E valuation.
jade:
Me personally? No. And I didn't sell any of my shares.
But I might if I was a hedge fund manager trying to raise cash and reverse some of the losses on my portfolio. But that is NOT market manipulation. Anyone is free to buy or sell shares at whenever they want. It is a free market. There are risks associated with investing and there are no protections from someone selling their shares for a price that you don't think is reasonable.
D.B. Kim:
What the heck are you talking about? Where do you get single digit growth?
Revenue was up 14%, net income was up 32% and adjusted earnings per share were up 28%, to $1.63 which is the highest quarterly EPS ever for DIS. It is also the 10th consecutive quarter of double digit EPS growth.
That's ridiculous. If HFT were responsible for the downturn, then the upside should have been just as quick. Remember for every seller there has to be a buyer. Right now there are more people willing to sell than those willing to buy, so prices are reflective of that. HFT really only works to manipulate prices by a fractional amount. It has no impact on longer term pricing.
And besides, if you are a long-term investor and HFT is the cause of this drop, isn't that a good thing? Doesn't that provide a great buying opportunity for retail investors? If you are long-term investor, why would you care if the price drops occasionally? Doesn't make any sense.
Now down nearly 5% this morning. Seriously thinking about adding more here, but want to see how the action progresses first. I already hold a fairly large chunk of DIS, but certainly wouldn't mind having more.
Nice article. Thanks for crunching the numbers.
Long KO and looking forward to the pay raise.
Actually, SA author TradeInvestor just crunched the numbers on KO and their dividend. Taking into account free cash flow and a 7% to 8% dividend increase this year, KO could fund the dividend with 58% from its free cash flow.
As stated in the article:
- Coca-Cola has just reported $10.5 billion in cash from operations for 2015.
- Current annual dividend per share to shareholders: $1.32
-So, the company needs $5.72 billion to cover its current dividend commitment to shareholders. That is, the total outstanding shares of 4.34 billion multiplied by $1.32 dividend per share.
-This number represents just 54% of the company's cash from operations for 2015.
-If Coke sticks to its recent trend of a 7% to 8% dividend increase, then the new annual dividend will be around $1.41 per share. Plugging this number to the calculations above, Coke would need about $6 billion to cover its dividends. That would represent 58% of the recent year's free cash flow.
Source: http://seekingalpha.co...
cirrius:
Your concerns about competition don't fit with the facts just reported for KO indicating:
1. Global volume grew 3% in the quarter and 2% for the full year.
2. Global price/mix grew 2% in the quarter and the full year, reflecting strong execution against our strategic initiatives.
3. Gained global value share in nonalcoholic ready-to-drink beverages in both the quarter and full year.
4. Remain committed to the previously announced $3 billion productivity initiative, even with the impact of accelerated refranchising plans.
5. Expect full-year 2016 comparable currency neutral EPS growth of 4% to 6% including the impact of 3 to 4 points of structural headwind, primarily due to refranchising, on comparable currency neutral income before taxes.
KO is a heck of a lot more than just Coca-Cola and sugary drinks.
I see no indications whatsoever that KO as a company is not going to be around much longer. While their payout ratio is currently above the recent average, they are also making moves to increase EPS, including successful cost-cutting measures and refranchising efforts that will reduce capital expenditures.
Mature blue chips can have a much higher payout ratio than other companies. MO has had a payout ratio of around 80% for years and has had no problem increasing its dividend on a regular basis.
Just because some companies from 50 years ago aren't around anymore doesn't mean all companies will fold. Union Pacific and Wells Fargo have each been around for well over 125 years and are doing just fine.
cirriusgator:
No one should be investing in KO if they're looking for a growth stock. KO and several others like it are doing exactly what they are supposed to be doing for my portfolio. They are the steady, reliable blue chips that provide an ever increasing income stream and provide a nice downside protection to my portfolio in turbulent times like these.
Thus while my portfolios have tended to slightly underperform the S&P 500 in strong bull years, they have outperformed the S&P in less stellar years.
Long KO and no complaints.
These are very good numbers considering the current global economy and strong U.S. dollar. Nice job KO!
Yes, PFE has a promising potential blockbuster. Thanks for the comment.
Yampalin: What you are referring to is NOT what I was referring to. I completely agree that what companies like Turing and Valeant did was unscrupulous and purely profit motivated. No question.
What my post was referring to was the political and grass-roots activists' clamor of high pricing of NEW breakthrough treatments, like those for HCV from GILD and ABBV. The price gouging on generic drugs from Turing and Valeant only fueled the fire.
Sorry to hear about your sister's cancer, but I'm glad she was successfully treated.
But the question I raise is about new, more effective treatments and treatments for rare diseases that are going to be expensive. And since there are more treatments for rare or orphan diseases being developed, these treatments are more costly to develop and there is a far fewer number of potential patients (hence, rare diseases).
So how is a company expected to both spend years developing a drug (average development time is 10 years), pay for the development, and then sell these rare treatment drugs to a small population of people? What is their incentive if the govn't says they can't profit from it or that insurance won't cover it?
Should we as a society say, "well, we've made enough progress on diseases, let's just stick with the medicine's we have now from here on out"?
If we stop developing new and effective drugs for diseases, then people will just turn to quack medicine and spend the same amount of money buying bogus drugs that they think will work for their rare diseases.
It's not an easy solution, but just whacking drug companies on the head for making a profit is not the solution.
I am completely aware that there differences in how healthcare is managed in various European countries. But one thing that stands out is that they are more and more moving to privatized insurance just like in the U.S. as their costs of providing care have escalated. Switzerland for example is now completely privatized.
It is not possible in a blanket statement to say the healthcare in any particular developed country is better than another. There are many differences and nuances depending on what you are being treated for.
For some lessons learned from the European countries management of healthcare, interested readers might want to check out this article from The Heritage Foundation. In it they note the following lessons:
Some Lessons
For Members of Congress and state legislators, there are some valuable lessons from the European experience that should be less surprising.
1. If you insist on government management of the health care system, do not expect freedom from waste, inefficiency, or inequity in the delivery of care (look at France).
2. If you want to promise citizens a national or state program of universal insurance coverage, don't expect that you will be able to deliver universal access to high-quality health care. You won't and you can't (look at Britain).
3. If you want to fix prices for medical services, prescription drugs, or other medical devices, don't expect demand for these goods and services to be met or investment in research and development to continue apace. It won't (look anywhere).
4. If you insist, with a straight face, that in a government-run health care system, all of your fellow citizens will be treated equally -- regardless of their class, station in life, or disease condition -- you are not merely enthusiastic or well intentioned. You are lying.
5. Health care policy is complex and difficult. In the reform of America's public health programs, and in creating new opportunities for individuals and families in the private markets, policymakers at the state and federal levels should learn as much as they can about what works and what doesn't in every health care system. In that way, they can better determine what should and should not be done here. The experts assembled by the Centre for the New Europe who came here to speak are an excellent resource.
Source: http://herit.ag/1PWDMM1
Meanwhile the U.S. dollar tumbles to a seven week low as there is growing skepticism over the Fed's likelihood of raising rates further. Thus currency headwinds may subside a bit, or at least not continue getting stronger.
Hey, if you develop a rare but treatable cancer but just to decline to pay for it, that's up to you. The U.S. could adopt the European model where they decline to cover certain drugs each year because of expense. But would you be happy if you knew there were an effective drug that worked for your disease but the U.S. government mandated that insurers could not cover the drug. Maybe you'd be fine with it, but I wouldn't.
Meanwhile the U.S. dollar tumbles to a seven week low as there is growing skepticism over the Fed's likelihood of raising rates further. Thus currency headwinds may subside a bit, or at least not continue getting stronger.
Long MO and PM
I know why they "appear" to be concerned about pharma profits: It's because they know they'll look like cold-blooded reptiles paid off by lobbyists if they say anything different. What congress says or does on the matter has bearing to reality.
I just posted reality on my Instablog. Those are the facts that no one is talking about.
Instablog: http://seekingalpha.co...
fendermon: forget about Apple's total revenue stream. It has really done AAPL investors much good over the past 5 years. I've made more money off the likes of HD, SBUX, and DIS than what has been returned by AAPL over the past 5 years.
yampalin:
That's a long-winded diversion to avoid explaining what you actually mean by "exorbitant profits." Whats more, the "recent newspaper and television reports on the issue" that you mention are only news stories regurgitating what the politicians and activists are claiming. They are not the actual facts; they are just opinions. People too often confuse or confabulate opinions for facts (or just plain make up their own facts to support their opinions).
I just posted an Instablog on SA comparing the gross annual profits of three big pharm companies (GILD, ABBV, and PFE) to the profits of three major consumer staples companies (WMT, KO, and PG). You might be surprised to learn that WMT's gross annual profits completely dwarf all three pharma companies, while the gross profits of ABBV and GILD came in last among the six companies.
Moreover, I also looked at R&D costs for all six companies. While the 3 pharma companies each had R&D costs in the billions of dollars annually, the consumer companies had zero.
Link to instablog: http://seekingalpha.co...
What I meant by my comment was that the Apple watch is far from impressive as a product. Or as CNET notes:
"Battery only lasts a little more than a day; most models and configurations cost more than they should; requires an iPhone 5 or later to work; interface can be confusing; sometimes slow to communicate with a paired iPhone; first-gen shortfalls make it feel more like a fashionable toy than a necessary tool."
So what I meant was, Apple should take time to actually bring their watch to a decent reality instead of a partial reality.
Also, while the revenues and profits the watch brought in may sound high in isolation, when you consider them in relation to Apple's total revenue and income stream, they barely move the needle.
I'm not betting against the company (I don't short any company), I'm just not betting for it. Simply buying other companies is not necessarily going to grow the company (they could make bad purchases or overpay). Right now AAPL is just a consumer product company whose primary business is selling phones. They have lost their way as a tech company.
Maybe they should work on making their Apple Watch a reality before they tackle something like virtual reality. So now its vapor ware to the rescue for AAPL. Vapor ware is the saving grace for all struggling tech companies, or former tech companies as the case may be.
yampalin:
Please define "excessively exorbitant profits." What is considered acceptable profits and what is exorbitant? And compared to what?
You also have to consider R&D costs which are MUCH higher for pharma than for other industries. While profits may be higher for pharma companies, say compared to Wal-Mart, pharma has much higher R&D costs, and pharma invests much of its profits back into R&D. So you can't just look at profits for one industry compared to another without taking into account expenses such R&D.
Secondly, my options above are indeed directly related to Clinton and Sanders. Both of these candidates favor reducing pharma profits, which would directly and negatively impact R&D and lead to fewer new treatments. They favor option 2 above because that is what their constituents want, not realizing the negative impact this will have on health, the U.S. economy, and the U.S. position as an innovator in new drug development.
yampalin:
The choice is yours:
Option 1: Continue to see new breakthrough drugs for chronic diseases be developed? A very costly option financially, but reduces illness and saves more lives. Someone has to pay for it.
Option 2: See more affordable drugs for all but substantially reduce the pace and number of new breakthrough drugs for chronic diseases. A much cheaper option but more costly in terms of shortened lives and lives lost.
Both Clinton and Sanders are both blowing smoke as they know that killing the pharma industry as we know it would be ludicrous and impossible. They are just pandering to the populist masses who don't really understand what they are asking for.
I think additional volatility is over uncertainties regarding regarding the Humira patent expiration and lack of market share for Viekira Pak. However, as the author notes, ABBV has been working hard at growing its pipeline and was just awarded three breakthrough therapy designations.
So the question is, is ABBV all about Humira or can the company make a smooth transition to to other profitable drugs? I think they can make the transition AND that Humira will continue to be a major source of revenue and profit for years to come.