Apple: Gross Margin Declines Are Primarily Due To Warranty Accruals And Depreciation And Amortization [View article]
Thank you for a thoughtful, well-written article.
I wonder if the warranty accrual percentage is going to shrink going forward. It's certainly beefed up beginning this FY.
Why do you think it's reasonable to assume that the accrual may decline? I noted the comment in the article, but Apple has introduced many new products over the years. Are there other instances whereas warranty accruals spiked up and then settled down later post-new product introduction?
Caterpillar: Buy Now As The Shares Have Bottomed Out [View article]
The market is really a bunch of stocks, not a monolith. CAT and other machinery Industrials have been laggards. For those with a longer view, the shares represent an opportunity.
Cyclical businesses (like Caterpillar) are loved and then subsequently hated by the Street. If you've got the fortitude, now's the time to buy.
Super Majors like Shell and Exxon take a long view. They tend to think out a decade, not a quarter. Companies like RDS and XOM have taken huge bets on a super-cycle global transition from oil to gas. The success of these strategies will be measured in years.
Aflac's False Currency Woes Create Undervaluation And Opportunity [View article]
I still believe the forex case is much overstated. Aflac shares are denominated in USD. The dividend is paid in USD. The U.S. business generates enough cash flow to cover the dividend easily. AFL management converts few Yen to Dollars. The company has a hedging program in place that helps mitigate currency conversion issues. However, AFLAC management states they don't try to hedge much Yen v Dollars since so few actually are converted.
Investments are made primarily in the country of business residence, but of course there are investments made all over the world.
The translation from Yen to Dollars is done for accounting and reporting purposes. Operating earnings (which exclude currency translation and hedging) are unaffected.
Just as a side note, since the Abenomics / Yen devaluation plan, AFL stock has rallied significantly.
Aflac has been doing business like this for decades. Their management points out this is not their first time around the block when it comes to the issue of currency.
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
maybenot
You're exactly on the right track. There are times, like last summer; when the market is in the doldrums and the yield will get to four percent. That's when I jump on a company like Eaton. The tough part is buying when everyone seems to be saying the world is going to end soon......
More on Annaly Capital (NLY) Q1 earnings: Income of $0.47/share compares to $0.46 in Q4, $0.54 a year ago. Company disposed of $17.2B of Investment Securities for gain of $182.8M vs. $5.3B for gain of $80.3M a year ago - net income in 2013 Q1 was $464.4M. Net interest spread of 91 bps, off 4 bps from Q4 and 80 bps from a year ago. Leverage of 6.6:1 vs. 6.5:1 a year ago. Book value/share of $15.19 vs. $15.85 on Dec. 31, $16.18 a year ago. Conference call tomorrow at 10 ET. Shares up marginally AH. (PR) [View news story]
Interested in the conference call details. The disposal activity may indicate that NLY management believes that the NIM is at or near the bottom and will not fall further. The drop was only 4 bps since 12/31/12.
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
Bahamas1
Your question is a puzzle wrapped in a riddle! I'll still offer a few thoughts and my opinion. That and a buck will get you a cup of coffee.
ExxonMobil and Chevron are two of the five Super Majors. Both are excellent companies possessing the balance sheet, cash flow, and strong management that makes for truly great long-term investments.
I also like the Energy space since the sector has been a bit of a laggard. It's cyclical, but not on the cycle of the Industrial cyclical stocks.
Exxon: The most disciplined of the Super Majors. Outstanding returns on capital. Management truly thinks years out and doesn't care too much for quarter-by-quarter numbers. Dividend is a bit short versus CVX, but dividend growth is excellent. A serial dividend raiser. XOM management prefers share repurchase plans instead of the bigger dividend. Exxon is nearly 50 percent natural gas business. It's no longer a strict oil play.
Chevron: More "oily" company. Returns just slightly behind XOM, but margins are slightly better. Perhaps a current edge on reserve replacement. Bigger dividend yield and the directors will keep raising it, just like Exxon. Chevron stock has outperformed Exxon over the one, five and ten year periods. Hard to argue with that.
Now the punch line:
Long-term, right here, right now, I'd pick Exxon. Three reasons.
First, Exxon stock is being held back because of the XTO gas acquisition. I believe for the duration that gas will eventually replace oil as the fuel of choice here in America. If you believe we're into oil for the next decade or two, then one can disgard this premise.
Second, Chevron has a risk with a legacy Texaco oil spill in Latin America. The stakes are huge and highly political. I don't know how to handicap it. For preservation of capital, XOM is safer.
Third, ExxonMobil stock has a long history of not staying below a ttm 9x P/E for long. It always rebounds from that floor. The normalized P / E is about 13x. The current XOM multiple is 8.9x. I'd take the probability that there's some juice there and I'd take it.
Both companies are outstanding. I suggest both stocks will do you well. Both stocks appear undervalued to me. (For the record, so does Royal Dutch Shell).
We Think Energy Transfer Partners' Distribution Growth Will Accelerate [View article]
Tips2
Having been listening/communicating with ETP for a few years, I believe for certain they want to increase the distribution. It's just a matter of the distributable cash flow being right.
Distribution improvement is very high on management's radar screen. It's recognized this is holding the unit price back.
We Think Energy Transfer Partners' Distribution Growth Will Accelerate [View article]
I have had the opportunity to meet and listen to Mr. Warren, too. He appears to be genuine and thoughtful. I've written several S.A. articles about ETP, offering a positive forward analysis.
Kelcy Warren has taken no salary, bonus or units of either ETP or ETE for a few years now. While I am sure he's not close to the soup line, I appreciate that he's not only taken this action, but I have never heard it publicized or brought up by Energy Transfer.
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
Longer-term I remain quite bullish on ETN. However, I hesitate to buy here simply based upon historic multiples of earnings or cash flow.
I also enjoy listening to Sandy Cutler on Cramer's show. Indeed, the conference call was a positive. Clear and fair. Evidently more sanguine on Europe than most anybody else!
I did point out that it's reasonable to assume multiple expansion, given the merger synergies and future growth potential. Nonetheless, I favor buying when clearly undervalued; for Eaton to reach $73, I believe it will need nearly perfection.
My view is that Eaton can make $4.30 this year. That's above the midpoint guidance. However, I won't premise a P/E greater than 15x without another quarter or two of "beats." As of the close today, the stock's trading at $59.27 with a multiple of 15.3x. Seems about fair value.
Part of the reason for this approach is that I'm already quite long the shares. I bought quite awhile back and much lower, went through the share transition in November, and now the shares have risen another 15% or so.
If I were to start a position, I'd buy small and wait for further drop in price during May before buying more. An alternative is to sell some OTM puts.
Bottom line: this is a one great stock, just at a good, but not a great price....today.
Aflac's False Currency Woes Create Undervaluation And Opportunity [View article]
Daniel and Under the M,
I am curious as to what's being hedged if AFL stock is purchased. The exchange rate appears to be of little consequence to a U.S. investor, but I may be missing something.
Aflac stock and dividends are denominated and paid in USD. The dividend is covered by cash generated via U.S. operations. Of course, the Japan business is done in Yen, but AFL exchanges little money between Japan and here. As a large financial institution, they also participate in their own currency hedging. Gains or losses from exchange rates or hedging is reflected in the operating earnings. Only GAAP.
Warren Buffett's Gem In The Most Undervalued Sector [View article]
Thank you for a well-written article about WFC
Wells Fargo is the best-of-breed U.S. banking stock. Over time, it must return to fair value. Historically, there can be no economic recovery without participation (and corresponding shareholder value creation) from the banking sector.
In my opinion, "Wells Fargo Jr.," is U.S. Bancorp. The business model, metrics, and management style are remarkably similar. Warren Buffett just happens to have a position in that equity, too.
More on Express Scripts (ESRX): Q1 results beat across the board as revenue more than doubled Y/Y. Net earnings rose 39% as the pharmacy-benefit manager's revenue surged, helped by its Medco acquisition. Gross margin widened to 7.5% from 6.9%, including retail pharmacy co-payments. The company raises its full-year earnings outlook by $0.03 a share, now seeing its EPS coming in at $4.23 to $4.33. Shares +2.1% AH. [View news story]
Also of note is CF/share. It rose to $1.16 from $1.09 a year ago. The 2012 figure was effective pre-merger. An EPS beat-and-raise and the significant stock re-purchase plan offers investors some tailwind.
Apple: Gross Margin Declines Are Primarily Due To Warranty Accruals And Depreciation And Amortization [View article]
I wonder if the warranty accrual percentage is going to shrink going forward. It's certainly beefed up beginning this FY.
Why do you think it's reasonable to assume that the accrual may decline? I noted the comment in the article, but Apple has introduced many new products over the years. Are there other instances whereas warranty accruals spiked up and then settled down later post-new product introduction?
Caterpillar: Buy Now As The Shares Have Bottomed Out [View article]
Cyclical businesses (like Caterpillar) are loved and then subsequently hated by the Street. If you've got the fortitude, now's the time to buy.
Shell (RDS.A) "is in much better shape than it was when he started," seems to be the general reaction to Peter Voser's retirement news. But not everyone is enamored with Voser's work, as Shell plans a $120B-$130B capex program for 2012-15, including $33B this year. Perhaps the most interesting part of the news is that Shell will consider external replacement candidates. [View news story]
Aflac's False Currency Woes Create Undervaluation And Opportunity [View article]
Investments are made primarily in the country of business residence, but of course there are investments made all over the world.
The translation from Yen to Dollars is done for accounting and reporting purposes. Operating earnings (which exclude currency translation and hedging) are unaffected.
Just as a side note, since the Abenomics / Yen devaluation plan, AFL stock has rallied significantly.
Aflac has been doing business like this for decades. Their management points out this is not their first time around the block when it comes to the issue of currency.
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
You're exactly on the right track. There are times, like last summer; when the market is in the doldrums and the yield will get to four percent. That's when I jump on a company like Eaton. The tough part is buying when everyone seems to be saying the world is going to end soon......
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
More on Annaly Capital (NLY) Q1 earnings: Income of $0.47/share compares to $0.46 in Q4, $0.54 a year ago. Company disposed of $17.2B of Investment Securities for gain of $182.8M vs. $5.3B for gain of $80.3M a year ago - net income in 2013 Q1 was $464.4M. Net interest spread of 91 bps, off 4 bps from Q4 and 80 bps from a year ago. Leverage of 6.6:1 vs. 6.5:1 a year ago. Book value/share of $15.19 vs. $15.85 on Dec. 31, $16.18 a year ago. Conference call tomorrow at 10 ET. Shares up marginally AH. (PR) [View news story]
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
Your question is a puzzle wrapped in a riddle! I'll still offer a few thoughts and my opinion. That and a buck will get you a cup of coffee.
ExxonMobil and Chevron are two of the five Super Majors. Both are excellent companies possessing the balance sheet, cash flow, and strong management that makes for truly great long-term investments.
I also like the Energy space since the sector has been a bit of a laggard. It's cyclical, but not on the cycle of the Industrial cyclical stocks.
Exxon: The most disciplined of the Super Majors. Outstanding returns on capital. Management truly thinks years out and doesn't care too much for quarter-by-quarter numbers. Dividend is a bit short versus CVX, but dividend growth is excellent. A serial dividend raiser. XOM management prefers share repurchase plans instead of the bigger dividend. Exxon is nearly 50 percent natural gas business. It's no longer a strict oil play.
Chevron: More "oily" company. Returns just slightly behind XOM, but margins are slightly better. Perhaps a current edge on reserve replacement. Bigger dividend yield and the directors will keep raising it, just like Exxon. Chevron stock has outperformed Exxon over the one, five and ten year periods. Hard to argue with that.
Now the punch line:
Long-term, right here, right now, I'd pick Exxon. Three reasons.
First, Exxon stock is being held back because of the XTO gas acquisition. I believe for the duration that gas will eventually replace oil as the fuel of choice here in America. If you believe we're into oil for the next decade or two, then one can disgard this premise.
Second, Chevron has a risk with a legacy Texaco oil spill in Latin America. The stakes are huge and highly political. I don't know how to handicap it. For preservation of capital, XOM is safer.
Third, ExxonMobil stock has a long history of not staying below a ttm 9x P/E for long. It always rebounds from that floor. The normalized P / E is about 13x. The current XOM multiple is 8.9x. I'd take the probability that there's some juice there and I'd take it.
Both companies are outstanding. I suggest both stocks will do you well. Both stocks appear undervalued to me. (For the record, so does Royal Dutch Shell).
We Think Energy Transfer Partners' Distribution Growth Will Accelerate [View article]
Having been listening/communicating with ETP for a few years, I believe for certain they want to increase the distribution. It's just a matter of the distributable cash flow being right.
Distribution improvement is very high on management's radar screen. It's recognized this is holding the unit price back.
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
We Think Energy Transfer Partners' Distribution Growth Will Accelerate [View article]
Kelcy Warren has taken no salary, bonus or units of either ETP or ETE for a few years now. While I am sure he's not close to the soup line, I appreciate that he's not only taken this action, but I have never heard it publicized or brought up by Energy Transfer.
Eaton Corporation PLC: Outstanding Investment, But Wait For A Pullback [View article]
I also enjoy listening to Sandy Cutler on Cramer's show. Indeed, the conference call was a positive. Clear and fair. Evidently more sanguine on Europe than most anybody else!
I did point out that it's reasonable to assume multiple expansion, given the merger synergies and future growth potential. Nonetheless, I favor buying when clearly undervalued; for Eaton to reach $73, I believe it will need nearly perfection.
My view is that Eaton can make $4.30 this year. That's above the midpoint guidance. However, I won't premise a P/E greater than 15x without another quarter or two of "beats." As of the close today, the stock's trading at $59.27 with a multiple of 15.3x. Seems about fair value.
Part of the reason for this approach is that I'm already quite long the shares. I bought quite awhile back and much lower, went through the share transition in November, and now the shares have risen another 15% or so.
If I were to start a position, I'd buy small and wait for further drop in price during May before buying more. An alternative is to sell some OTM puts.
Bottom line: this is a one great stock, just at a good, but not a great price....today.
Aflac's False Currency Woes Create Undervaluation And Opportunity [View article]
I am curious as to what's being hedged if AFL stock is purchased. The exchange rate appears to be of little consequence to a U.S. investor, but I may be missing something.
Aflac stock and dividends are denominated and paid in USD. The dividend is covered by cash generated via U.S. operations. Of course, the Japan business is done in Yen, but AFL exchanges little money between Japan and here. As a large financial institution, they also participate in their own currency hedging. Gains or losses from exchange rates or hedging is reflected in the operating earnings. Only GAAP.
Warren Buffett's Gem In The Most Undervalued Sector [View article]
Wells Fargo is the best-of-breed U.S. banking stock. Over time, it must return to fair value. Historically, there can be no economic recovery without participation (and corresponding shareholder value creation) from the banking sector.
In my opinion, "Wells Fargo Jr.," is U.S. Bancorp. The business model, metrics, and management style are remarkably similar. Warren Buffett just happens to have a position in that equity, too.
More on Express Scripts (ESRX): Q1 results beat across the board as revenue more than doubled Y/Y. Net earnings rose 39% as the pharmacy-benefit manager's revenue surged, helped by its Medco acquisition. Gross margin widened to 7.5% from 6.9%, including retail pharmacy co-payments. The company raises its full-year earnings outlook by $0.03 a share, now seeing its EPS coming in at $4.23 to $4.33. Shares +2.1% AH. [View news story]