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Why Google Has Upside To $800-Plus Per Share
- Google is simply a powerhouse when it comes to search, and we don't think there is another firm in the world that can unseat the behemoth.
- We're also fans of the company's valuation and think investors aren't giving it enough credit for its free cash flow profile. The firm has a very attractive Economic Castle.
- Google is a one of our favorite fundamental ideas, and we don't see that changing anytime soon.
- Very few firms are more attractive. We like the company quite a bit.
What We Think Of Southern Company
- We think a focus on both the valuation opportunity and dividend strength is key.
- We like that more than 90% of Southern's earnings are from regulated subsidiaries. Management is targeting earnings per share in the ranges of $2.80-$2.91 and $2.89-$3.03 for 2015 and 2016,.
- Southern Company registers a ~0 on the Dividend Cushion measure because it pays out a significant amount of earnings as dividends and has a large debt load.
- Still, we expect the company to raise its dividend by 7 cents per annum on the basis of management's near-term expectations.
- On a cash-flow basis, we value Southern Company at $41 per share. The company registers a 6 on the Valuentum Buying Index.
Teva: On The Auction Block?
- Teva still offers an asymmetrical risk-reward opportunity.
- The company’s generic business showed significantly improved profitability.
- We continue to expect Teva to become either a target or a beneficiary from a merger-of-equals scenario.
Why Coca-Cola Is A Great Asset Allocator
- Coca-Cola has become a savvy asset manager, and we think recent moves speak volumes about the company’s strategy to retain dominance in the non-alcoholic beverage space for decades to come.
- We give high marks to Coca-Cola’s management in consummating both of the Monster and Green Mountain transactions.
- Shares of the firm aren’t cheap, however, and we think there will be a better entry point for new money.
We Could Have Done Better With Hewlett-Packard
- In investing, there are always trade-offs, and one of the challenges we face as a publisher is being crystal clear about this.
- We'll acknowledge the view that we didn’t perform as well as we could have with respect to Hewlett-Packard.
- We think it's important that we bring up stocks that we didn't do so well with.
- Having a conversation helps members get a better understanding of the Valuentum process, its many underlying components, and when to make qualitative adjustments to the systematic output, when applicable.
Why Peltz's Reasons For Breaking Up Pepsi Do Not Hold Water
- Breaking Pepsi apart is a bad idea, and Pepsi’s management knows it.
- Nelson Peltz still has this one wrong.
- Let's find out why in this article.
Tiffany Dazzles; Coach Now Yielding ~4%
- Tiffany has been benefiting from a modernization of its classical jewelry line-up, thanks to the ongoing success of its newest ATLAS collection and TIFFANY T jewelry collection.
- Tiffany has raised its earnings target in each of the past two quarters. Fundamentals have never been stronger.
- However, we prefer Coach. Let's find out why in this piece.
General Mills Overpaid For Annie's, But It Probably Had To
- General Mills is about as steady-eddy as it gets when it comes to business models.
- The firm has taken a large leap in scooping up Annie's assets.
- Let's calculate the intrinsic value of General Mills, assuming the Annie's deal is value-neutral.
Why Twitter Isn't Worth A Tweet
- Investors are euphoric about the prospects of social media companies. We think Twitter is late to the game.
- We have to be reasonable here. Twitter is a news service, and there are just too many of those for its business model to be sustainable over the long haul.
- One-hundred forty characters is too short for advertisers to get excited about. If a firm can sell a product in less than 140 characters, then it certainly doesn't need Twitter.
- Let's walk through a valuation of Twitter in this piece.
Boy, Were We Wrong About Yahoo
- We strive to be as transparent as possible -- something we think investors find comforting.
- Yahoo has been a call that frankly we missed. We could have done better.
- Let's get an update on our valuation thesis on the company.
This Firm Has Pricing Power
- One of the strongest pieces of evidence of a competitive advantage is when a firm can raise prices, pretty much at will.
- We think Hershey is one of those companies.
- Let's calculate the firm's intrinsic value and run shares through the Valuentum Buying Index.
Investors Are Overpaying For Federal Realty's Dividend Track Record
- It's sometimes difficult to explain to new investors that a dividend track record isn't worth paying up for. In fact, nothing is worth paying above intrinsic value for.
- Federal Realty has raised its dividend in each of the past 45+ years, longer than any REIT.
- However, we think investors are more focused on the company's dividend growth than its valuation. This could end badly.
- Federal Realty's shares are pricey. Even a minor slip up could send shares tumbling. Short interest has started to bubble.
Calculating Facebook's Intrinsic Value Is Not Insurmountable
- Facebook has a future free cash flow stream just like any other company. The stream can be discounted and a fair value can be estimated.
- The challenge with Facebook is that the company's future free cash flow stream has a wide range of outcomes both to the upside and to the downside.
- This is why Benjamin Graham's margin of safety is critical in evaluating entry and exit points in Facebook. We can't ignore the future because it is difficult to predict.
- Though we weren't fans of its IPO, we revised our view and placed an $80 fair value when shares were in the mid-$40s. Its price has converged to those levels.
- In this piece, let's calculate Facebook's updated fair value estimate and arrive at what we consider to be fair margin of safety.
Evaluating GlaxoSmithKline's Intrinsic Value
- A firm's value is based on the future free cash flows that it generates for shareholders.
- Within pharma and the biotech space, these cash flows can sometimes be difficult to predict.
- Still, we think GlaxoSmithKline is worth a look, and we point to its dividend as a source of particular interest.
Why Nestle Is One For Your Radar
- Nestle's business quality (an evaluation of our ValueCreation and ValueRisk ratings) ranks among the best of the firms in our coverage universe.
- Nestle has an excellent combination of strong free cash flow generation and low financial leverage.
- Keys to Nestle's ongoing success will include brand support, innovation acceleration, and appropriate pricing to meet consumer needs.
How To Evaluate Express Scripts' Timeliness
- Improving one's ability to pick entry and exit points is a valuable way to enhance returns.
- Combining value and momentum indicators in order to determine the timeliness of a particular investment is a strategy for consideration.
- Let's take a look at how this analysis shapes up for Express Scripts.
Assessing The Timeliness Of Unilever's Shares
- Investors must translate qualitative assessments into quantitative outputs to make the best investment decision.
- The intrinsic value calculation of Unilever reflects the discounted present value of its free cash flows, which are a function of its competitive advantages and other qualitative factors.
- Let's apply the Valuentum rating system to assess Unilever's timeliness as an investment.
Evaluating Tyson Foods' Intrinsic Value
- Tyson Foods has been a star performer in recent periods.
- The company has yet to trigger a "we'd consider selling" rating after registering one of the highest scores on the Valuentum Buying Index.
- Though not as attractive as it currently was, Tyson Foods' garners an Economic Castle.
Evaluating J&J Snack's Investment Prospects
- We liken stock selection to a modern-day beauty contest. In order to pick the winner of a beauty contest, one must know the preferences of the judges.
- Let's talk about why we think this and how it applies to J&J Snack.
- We'll also evaluate the firm's return on invested capital and calculate an intrinsic value assessment.
Hasbro's Dividend Growth Prospects Remain Intact
- The Dividend Cushion methodology helped us identify Hasbro as a better dividend growth idea than Mattel.
- Hasbro's brand portfolio is top notch, and its 2015 movie slate is impressive.
- Hasbro’s evolution into a branded and licensing powerhouse remains critical to our dividend-growth investment thesis on the firm.
Buffalo Wild Wings Owns The Next 'Chipotle'
- Buffalo Wild Wings owns a little-known concept called PizzaRev that will do to pizza what Chipotle has done to burritos.
- The beer, wings and sports concept continues to execute well, and its outlook is even better.
- We continue to think Buffalo Wild Wings as a premier restaurant idea.
AmeriGas: How To Think About Timeliness
- We liken stock selection to a modern-day beauty contest. Find out what we mean.
- If a firm is undervalued on a DCF basis and on a relative valuation basis, and is showing improvement in momentum indicators, it scores high on the scale.
- The VBI is a timeliness indicator, and AmeriGas does not garner a high rating.
Evaluating Accenture's Economic Value Creation And Fair Value
- A firm's price is driven by the actions of other investors - not the fundamentals of a company.
- Our process helps unite fundamentals and market behavior in a systematically-driven methodology.
- Accenture is one of the strongest creators of economic value, and let's run shares through our value and momentum process.
Hormel Foods Has Dividend Appeal
- The food industry has been in consolidation mode as of late.
- Hormel Foods has an impressive track record of year-on-year consecutive dividend increases.
- Shares of the dividend growth giant are a little pricey, but let's have a look.
Don't Be Fooled: IBM Still Reporting Low-Quality Earnings
- IBM has become the poster child for poor earnings quality.
- A focus on accounting EPS can punish return on invested capital (as money is plowed back into overpriced stock to boost EPS). This is what management is doing.
- It's hard to accept that IBM is no longer the IBM it once was - it is playing EPS games and pulling the wool over investors' eyes.
- The agreement with Apple is a sign that IBM has conceded defeat - and would rather work with Apple than suffer at the hands of the revolutionary iPhone maker.
- There are a plethora of other tech names that we prefer in either the Best Ideas portfolio or Dividend Growth portfolio.
Key Insight: Johnson & Johnson's Net Cash Position
- Price and value are two different things. Price is what you pay; value is what you get.
- Not all value is based on the income statement --- said differently, not all value is calculated as a multiple of earnings, EBIT, or EBITDA.
- Value also emanates from the balance sheet. In Johnson & Johnson's case, the firm has a very nice net cash position.
- Its net cash position can be used as reserves to support dividend health or drive further expansion.
- The net cash position is added to the present value of future cash flows in arriving at equity value. Balance sheet analysis is critical, an area of focus at Valuentum.
Will Dominion Resources Cut Its Dividend?
- Just because utilities are supposed to be safe income vehicles doesn't mean they should be excluded from extensive and objective financial analysis. Right?
- Exelon and First Energy are two examples of how risky utilities' dividends can be -- and shareholders suffered as a result.
- Let's take a look at Dominion Resources' dividend strength.
Leggett & Platt: Evaluating Its Dividend
- Leggett & Platt has increased its dividend for more than 40 consecutive years.
- But what does that tell us about the future dividend increases? Not much.
- Let's have a look at the Dividend Cushion to see if further increases are on the horizon.
AMD Won't Ever Catch Intel
- The bull thesis on AMD centers on fantasy.
- AMD simply doesn't have the financial capacity to outrun Intel over the long haul.
- We don't think AMD will ever create a blockbuster need to permanently reverse fortunes.
General Electric Is Not Getting Any Respect
- GE's shares haven't been performing all that great as of late.
- The company has a record high industrial backlog, expanding cash-rich industrial operations, and a financials portfolio that is de-risking via non-core divestitures.
- The industrial giant also pays a nice and growing dividend. The market may be off its rocker.
Why St. Joe Shareholders Will Inevitably Be Disappointed
- The math simply does not add up in St. Joe's valuation thesis.
- The market is assigning significantly higher per-acre value than recent transaction prices to the remaining land on its books.
- We think the only factor holding the stock up is ongoing de-risking by short investors. Shares are worth $17 each.
Hard Not To Like Grupo Televisa
- Grupo Televisa's credit is rated investment-grade by the agencies (Baa1/BBB+).
- The firm posts a Valuentum Buying Index score of 6, reflecting our "fairly valued" DCF assessment of the firm, its unattractive relative valuation versus peers, and bullish technicals.
- A 6 is not the best score a firm can receive, however. We have a number of firms that register a 9 or 10 on the index.