Saturday, May 20, 2017

TLH Market Review - 5/20/17

Was that the correction we have all been waiting for?  Earlier this week the markets caught a lot of people off guard when all the major indexes dropped 1.50%, and the Russell took a whopping when at one point it was down around 2.50%.  The indexes rallied back to erase most of the losses for the week.  Time will tell if this turns out to be the start of a pullback, or just a blip on the radar screen.  I'd welcome a good 5-10% downdraft in equities.  It'd be healthy for the market to wipe out some weaker hands, and create a nice base for further gains.

YTD the majors are all still showing gains, led heavily by technology stocks, and some lagging by small caps.

S&P 500 - 6.38%
Dow Jones - 5.27%
Nasdaq - 13.01%
Russell 2000 - 0.75%

The drop was so surprising because the Volatility Index(VIX) was testing decade long lows below 10 when all of the sudden it surged 50%+.  That might sound like a huge number but the VIX ultimately only hit a high of 16.30, and it's not abnormal for the index to trade around that number historically. I don't like to think of the VIX as the best overall indicator for tops either. Personally I think it's a bit better at marking bottoms.

We received economic reports his week per usual, and the standout was Industrial Production which rose 1.0%. That's a good number since more manufacturing works its way throughout the economy very well.  Remember about 3 weeks ago I pointed out the decades long time decline in Industrial Capacity Utilization

The Atlanta Fed's GDP Now is predicting a 4.1% increase for Q2. But the New York Fed is only predicting a 2.3% increase for Q2. Why the difference? It comes down to the way each model is calculated.  Either way both reports have cited IP as a reason to boost forecasts this week. 


It was a quiet week on the news front.  No holdings had earnings this week as earnings season wraps up. The portfolio was however a bit choppy due to the overall market.

Global Payments(GPN), PayPal(PYPL), and Visa(V) all hit a 52-week high to start the week. Global Payments now trades with a $90 handle, and Paypal just edged above the psychologically important $50 level for the first time. Needless to say I'm expecting big things from this group. The portfolio isn't shy about focusing on certain sectors such as financial payments, and tobacco.  It means the portfolio can lag the market at times due to it's concentration, but when these sectors are out-performing like they should it translates to much better gains. 

Wednesday, May 17, 2017

Similar Strategies But Vastly Different Outcomes

One thing I like to do is compare the performance of certain groups of stocks, asset classes, or strategies.  Today I'm going to take a look at what appears to be a similar investing strategy, and how it can affect your results with just a few charts.

Many investors are fans of buying the best available stocks. For good reason as they usually carry the following traits:

Saturday, May 13, 2017

TLH Market Review - 5/13/17

Despite what seems to be a constant barrage of worries about European elections, Chinese capital flows, trade & tax reform going nowhere, and dysfunction in DC as normal the markets keep chugging along to new highs just about everyday.

Wednesday, May 10, 2017

Wabtec Increases Quarterly Dividend 20%

There's nothing like waking up on a Wednesday morning to find out you received a 20% pay raise for doing little more than holding some stock in a great company.  Today Wabtec(WAB) announced a 20% hike in their dividend to a quarterly rate of $0.12 from $0.10.  That comes out to a current dividend yield of around 0.58%. For their fiscal year Wabtec is projected to payout $0.46/share in dividends.   That's not a huge yield compared to some other holdings like Altria(MO) which sports a 3.6% yield.

Still WAB has raised it's dividend for 7 years in a row now, and sports a 10 year dividend growth rate of 36%.

Tuesday, May 9, 2017

Earnings - Vector Group, Cognizant Technology

Life got a bit in the way last week but here is a quick earnings recap for Vector Group(VGR), and Cognizant Technology Solutions(CTSH).

Vector Group(VGR) reported Q1 results with EPS of $-0.03 on revenues of $415 million. The loss is mainly due to extinguishing older 7.75% senior secured notes due 2021 with new notes of $850 million principal at 6.125% due 2025.  The company reported strong growth in their tobacco brands as consumers look for discounted options with a 6.2% YoY increase in retail shipments. The stock took a dive after earnings, but that's short term noise. The company is still well positioned within the real estate markets it transacts, and maybe it's looking like the other major tobacco companies have come close to their max price points in a lot of markets judging by the VGR's surge in discount brand sales. That's not exactly a great thought considering the portfolio is heavy in tobacco, but I think this is a short-term industry issue.

Thursday, May 4, 2017

Earnings - AB Inbev, Church & Dwight, Global Payments

We had a trifecta of earnings reports this AM. I say trifecta because all three stocks are up, and as I write this each one is up over 4%.

AB Inbev(BUD) reported Q1 results with EPS of $0.71 on revenues of 12.9 billion. Despite flat overall volumes and a small 3.7% revenue increase, revenue growth in their 3 big brands(Stella, Budweiser, & Corona) grew by 12.1% as consumers continue to stick with big brands they love. The stock is so far up 5.5%. Here is part of managements comments.

Earnings - Facebook

Just about every investor clamors to hear from Apple(AAPL), and Facebook(FB). Since only Facebook is in the portfolio I'll only be commenting on that one. Sorry!!

Facebook(FB) reported Q1 results with EPS of $1.04 on revenues of $8 billion(up 49%).  What is really good to see is

Tuesday, May 2, 2017

Earnings - Altria, Cummins, Emerson Electic, HCP, & MasterCard

An absolute flurry of  earnings reports this morning already as we received results from 5 companies in our portfolio including Altria(MO), Cummins(CMI), Emerson Electric(EMR), HCP(HCP), and MasterCard(MA).

Altria(MO) reported Q1 results with EPS of $0.72 on net revenues of $6 billion.  The company reported a 2.6% decline in smokeable products volume, and a 5% decline in smokeless products. The company re-iterated full year guidance for EPS growth of 7.5%-9.5%. The stock initially dipped this morning below $70, but has fought all the way back up to $71+. Here is what management had to say.

Thursday, April 27, 2017

Earnings - Praxair(PX)

Praxair(PX) reported Q1 results with EPS of $1.35 on revenues of $2.7 billion. The company reported a huge 28% increase in operating cash flow to $710 million. For Q2 the company expects EPS of $1.38-1.43 and for 2017  $5.53-$5.78(GAAP). Shares are flat for the day. Here is what management had to say.

TLH Market Review - 4/29/17

Since I did not do a review last week I'm going to combine some of last weeks data and more recently released reports. This week we had a lot of activity with earnings reports.  I'll get to the economic data first.

Last week we saw Industrial Production and Capacity Utilization.

Wednesday, April 26, 2017

Earnings - HSY, PG, PYPL, SAM

Today we received a slew of earnings reports. This morning we received reports from Hershey's(HSY), Procter & Gamble(PG), and this afternoon will be Paypal(PYPL), and Boston Beer(SAM).

Hershey's(HSY) reported Q1 earnings with EPS of $0.58 on revenues of $1.87 billion. Overall sales increased 2.8% which is in-line with expectations and the industry overall. Nothing to exciting in this quarter so it's business as usual. The stock however has traded negative all day, and dipped below $107 for a bit. Here is what the CEO had to say.

Tuesday, April 25, 2017

Costco Announces $7 Per Share Special Dividend

Today Costco(COST) announced a special dividend of $7.00 per share.  That's in addition to a $0.05 increase in the regular quarterly dividend of $0.45/share to $0.50/share.  To receive an 11.1% raise plus a special dividend which comes out to a 4% payment based on today's close of $172.68.  You can read the company press release here.  The stock is up 3% in after hours trading.

The company stated the special dividend will amount to a $3.1 billion dollar payment to shareholders. That's quite a bit of money. For fiscal 2016 the company paid paid out $746 million to shareholders via dividends. According to the Costco's 2017 Q2 balance sheet they had $4.7 billion in cash on hand. But the company stated they were funding this dividend with additional borrowings. Once again according to Costco's recent balance sheet the company has approximately $5 billion worth of debt. Of that $2.2 billion is current.  The company most recently paid a special dividend of $5 in 2015.

Earnings - Wabtec(WAB)

We received earnings today from favorite 128 year railroad equipment provider Wabtec(WAB). The company reported EPS of $0.77 on revenues of $916 million. The company also completed it's large acquisition of Faiveley Transport. Then proceeded to buy Aero Transport a maker of hatch covers and outlet gates. Then at the end of the quarter they acquired Thermal Transfer a maker of heat exchanger's.  The latter two acquisitions will represent an increase of $65 million to annual sales initially. Sales in the Transit group grew to $568 million and represented 62% of sales on the back of the Faiveley acquisition. Freight sales lagged due to lower freight car and locomotive deliveries, plus  less spending on control related equipment and services.  It will be important to see that type of activity pick back up in the next couple quarters since those are big purchases by railroads, and are a direct indicator of economic health.

The stock has lagged for us lately, but so far is up close to 1% on the day. The company re-affirmed guidance for EPS of $3.95-$4.15. Here is what the CEO had to say

“Our first quarter adjusted earnings were in line with expectations, and we expect improvement during the year. As we work to integrate Faiveley and our other recent acquisitions, we are managing our costs aggressively based on market conditions. We continue to invest in our balanced growth strategies and expect to benefit from our diversified business model and rigorous application of the Wabtec Excellence Program.”

Friday, April 21, 2017

Visa Earnings

Visa(V) reported fiscal year 2017 Q2 results later yesterday. EPS came in at $0.18 on revenues of $4.5 billion. The company reported GAAP net income of $430 million, but adjusted net income of $2.1 billion due to special items related to Visa Europe reorganization costs. The company also announced a new $5.0 billion share repurchase program. The stock almost hit $94/share today but has since backed down to $91-$92 as of writing. I will note that is a new all time high. Here is what the CEO had to say.

“In the face of geo-political uncertainty, Visa continues to execute well against our operating plan and strategic priorities, delivering sustained growth across nearly every part of our business,” said Alfred F. Kelly, Jr., Chief Executive Officer of Visa Inc. "Robust growth in payments volume, cross-border volume and processed transactions drove better than expected results. Looking ahead, we are continuing our efforts across the globe to electronify commerce and digitize economies to the benefit of consumers and societies alike.”

I recently highlighted Visa's and other payment processors performance the other day The stock is now up over 17% for the year, and has returned over 500% not including dividends since it's IPO in 2008. 

Visit to see more great charts.

Thursday, April 20, 2017

Earnings - IBM, PM

As most of you know by now IBM(IBM) reported Q1 earnings that showed the company struggling with lower revenues for 20 quarters in a row.  That sent shares reeling back to $160 on heavy volume.  This has been tough stock for many investors. Especially those that bought back in 2012-2013 when shares were trading at highs. I was fortunate enough to add some to my personal portfolio, which was accounted for under the old tracking method, back in November 2015 when shares were trading near lows.  At that time I bought at $133.93/share.  Still it's hard to own a stock that sees falling revenues year after year.

The bright side is the company has been increasing it's dividend and reducing it's share count.Since Q1 2012 the dividend is up over 86%. Back then the quarterly payout was $0.75 and now stands at $1.40, but I think we can expect a bump for Q2.  Here is the total shares outstanding since 2012.

Share count(in millions)
2012 - 1,155
2013 - 1,103
2014 - 1,010
2015 - 983
2016 - 959

As you can see the share count has been reduced by 17%. That helps keep EPS propped up in the face of falling revenues.  Still it's not how you want to see your company survive. With the most recent quarter coming in with EPS of $1.85 on revenues of $18.1 billion it's not exactly looking to be another bumper year with full year EPS forecast at $11.95. I still believe in their Watson program, and I'm impressed with how well they ramped up strategic imperatives which now represent 42% of company sales. Most other companies would have failed by now.  I'll be patient for the remainder of the year, but patience runs thin eventually. 

Phillip Morris International(PM) reported Q1 2017 results this AM. Q1 EPS came in at $1.02 on revenues of $16.6 billion which is down 1.4%.  The shares have been rocked so far today, and at one point were down more than 4%. The reason is the large decline in their traditional cigarette business which saw volumes shrink by 11.5%. That's an acceleration from recent quarters, and the growth in their Reduced Risk Products including HEETS and Heatsticks has not been enough to offset the fall.  The company guided full year results at $4.84-$4.99. I'll admit I'm slightly worried about that falloff. Fellow portfolio member Altria(MO) has also taken a hit today.  Here is what the CEO had to say.

“Our results were in line with our previously communicated expectation of a relatively weak first quarter, due to lower cigarette volume -- primarily related to low-price brands in specific markets where the impact on our profitability was limited -- and certain timing factors," said AndrĂ© Calantzopoulos, Chief Executive Officer.

"We are fully on track to deliver our full-year EPS guidance, driven by robust pricing and accelerating IQOS volume growth. We anticipate a combined cigarette and heated tobacco unit volume decline of 3% to 4% for the full year.