Since 2011, Lockheed Martin has been compounding at a rate of 30% per year. It has beaten the S&P 500 by over fifteen points annually over that time frame. It is one of my greatest personal investment acts of omission to ignore it when it caught my attention in the $80s as it now trades around $240 per share for a solid tripling in the course of five years (plus the dividend got jacked up.) The reason why the stock prices of Lockheed and other defense manufacturers got so low in 2011 is that there was a strong political dialogue in the United States calling for the curtailment of aerospace and weaponry defense spending.
The defense sector as a whole traded at its lowest valuation since 1991, and investors that scooped up shares in Lockheed Martin and some other defense firms ended up generating some of the best five-year total … Read the rest of this article!
One of the weird quirks that is necessarily associated with being a successful value investor is that attractive entry points are nearly always caused by the aftermath of a stock reporting some business conditions or adverse event that render it unfashionable. In other words, the “value” you find is almost always a direct result of concluding that the rest of the investor community is over-weighing the effects some business impairment will have on the firm’s long-term earnings and valuation.
During the past few years, Wal-Mart ran into the gravitational pull of large numbers as it struggled to grow its revenues that hover near the half a trillion mark (the high water point was $485 trillion in 2014).
The prospect of low earnings growth pushed the price of Wal-Mart’s stock down low into the $50s in 2014 and 2015. Meanwhile, earnings were about $4.50. This meant that, for most of 2015, … Read the rest of this article!
In after hours trading today, Nike stock has fallen nearly 5% to the $52 range. It is my opinion that this makes Nike stock one of the ten most attractive investment candidates right now with a constant-currency P/E ratio of only 22 and a reported P/E ratio of 24. Usually, there aren’t many large-cap companies that can be fairly described as cheap when they trade at that kind of price to earnings valuation level, but the strength of Nike’s balance sheet coupled with its very impressive revenue growth continue to make it an exception.
I thought the earnings report was excellent. In a constant currency basis, sales grew by 10% (7% when adjusted for the strength of the U.S. dollar translation.) This is a company that is actually still doing things the old fashioned way to deliver shareholder returns–it is selling more and more of its product each year. It’s … Read the rest of this article!
Yesterday afternoon, Thomson Reuters announced that it was repurchasing 6.5 million shares of stock in privately arranged transactions as part of its efforts to repurchase approximately 37 million shares through May 2017. As part of the disclosure, Thomson Reuters noted that the privately arranged transactions will occur at prices that are discounted from the quoted market value. You might wonder: Why would these transactions occur below market value rather at market value?
The short answer: It is all about liquidity.
If someone wants to sell 6 million shares of Thomson Reuters on September 26th, the creation of a single sell order would flood the market and drag down the price of the stock immediately. Any sale would have to be spaced out over months (sometimes even years) so that you don’t compete against yourself in the marketplace.
What Thomas Reuters the corporation is doing here is providing large investors the … Read the rest of this article!
If I had to name a stock that shares the most characteristics in common with the Johnson & Johnson of the late 2000s, I would point to Philip Morris International (PM) right now. It has become disfavored the past four years because it has struggled to grow revenues and this struggle has been exaggerated by the strength of the U.S. dollar (remember, Philip Morris International generates 100% of its profits outside the United States so that a strong U.S. dollar will artificially lower earnings while a weak U.S. dollar will artificially raise earnings. And by artificially, I mean that the earnings shifts due to currency fluctuations are illusory unless it is part of a fundamental shift in the equilibrium of exchange rates between the dollar and everything else.)
This struggle to grow earnings has put pressure on the amount of dividend growth that Philip Morris International shareholders have been able … Read the rest of this article!