But what’s more noteworthy is that it is very popular among some of the sharpest active managers who go out of their way to avoid index hugging. In its latest Ultimate Stock-Pickers roundup, Morningstar (MORN) reports that Google is owned by 15 of the 26 fund managers tracked by Morningstar. Microsoft (MSFT) is owned by 16 of the 26, but in terms of assets devoted to a stock, Google ranks as the top conviction holding among Morningstar’s elite cadre of stock pickers. (Full disclosure: Morningstar is an investor in YCharts.)
Unlike Microsoft and Apple (AAPL) Google is a tech behemoth that isn’t full of question marks. When was the last time you heard an activist investor agitating on Google? This chart is a microcosm of a healthy company.
Few companies have been so closely associated with the personality of their CEOs as Abercrombie & Fitch (ANF), and Mike Jeffries in recent years. The pretty-young-people advertising, the controversial hiring practices and the string of strong sales increases were all credited to Jeffries.
Jeffries, who relinquished the chairman’s title recently but remains CEO, could very well be around for years and also wind up being credited with a fabulous turnaround from Abercrombie’s current doldrums. But at age 69, and facing some criticism from investors, it seems more likely that Jeffries mightn’t be around all that much longer.
Marathon Petroleum (MPC), spun off from Marathon Oil (MRO) June 30, 2011, and Phillips 66 (PSX), spun off from ConocoPhillips (COP) April 30, 2012, have predictably exhibited the volatile stock movements of other oil refiners. We take them forward below from the Phillips 66 spinoff date, and see they’ve more than doubled during that time.
As our YCharts colleague Dee Gill explained last October, refining stocks aren’t for the faint of heart, as they rise and fall on the cost of crude oil and on the peculiarities of the refined products markets.
Aetna (AET) and Qualcomm (QCOM) just announced increases to their stock repurchase authorizations and boosted their dividends. That’s about where the similarities end. Aetna is a telling poster child for using aggressive share buybacks to boost per-share earnings results.
As seen in this chart, there’s a wide gap between the growth in Aetna’s EPS and its net income. A 20% drop in shares outstanding goes a long way to explaining how management has engineered EPS to look a lot healthier than its organic income growth would suggest.
Now compare that to Qualcomm. Net income and EPS are pretty much in sync, and Qualcomm actually saw its share base increase over the past five years:
Jeff wonders whether Under Armour is really stealing share from companies such as Nike (NKE) and Adidas (ADDYY), or whether it is simply enjoying a secular tailwind thanks to consumer preference shifting toward more casual clothing.
Here is the exchange between Jeff and YCharts Director of Research, Erik Kobayashi-Solomon.
Staples (SPLS) reports fourth-quarter results later this week – 39 cents vs. a year-ago 46 cents, excluding extraordinary items, is what’s expected – and value investors may sniff a bargain.
After all, Staples has a lovely dividend yield of 3.6%, it has often raised its payout, it’s trading at a forward PE ratio of just 11, and it has a big restructuring underway aimed at restarting sales growth, cutting costs, broadening the products its sells and better competing with the likes of Amazon (AMZN) and Wal-Mart (WMT).
Staples through the first three quarters, ended November 2, 2013, bought back 18.2 million of its shares for $269 million. Not a large gesture, to be sure, but the message seems to be: it’s cheap, so we’ll buy some, and maybe you should, too.
The reports this earnings season from defense contractors reiterated the slowness in that business lately with a mix of good results and worrisome guidance for the coming year. But there’s a reason that investors keep coming back for more of shares like General Dynamics (GD), L-3 Communications (LLL), Northrop Grumman (NOC) and other low- and no-growth defense contractors. Beautiful orchestrations of share buyback and dividend programs keep shareholders in this sector happy even when circumstances don’t.
Few sectors manipulate share numbers and dividends in such investor-friendly ways as defense contracting. General Dynamics, Northrop, L-3, Raytheon (RTN) and Lockheed Martin (LMT) offered investors total returns between about 55% and 90% in the past 12 months despite shrinking revenues and often disappointing forecasts. Investors understand that the shareholder rewards these companies offer can be powerful return-boosting tools, especially because they are paired with cost cutting measures. It’s not revenue growth that’s pumping up share prices in this sector.
YCharts Research has just published a Focus Report on American sports apparel marketer Under Armour (UA). After recently gapping up, UA is trading at lofty valuations compared to its peers and is also screening as overvalued according to YCharts' proprietary quantitative valuation metric, the Value Score.
In this report--our first covering a potential bearish investment--we dig into Under Armour's business to help you understand the factors driving its valuation. Here is an excerpt from the report:
Despite what you may think, the sports apparel business, in which Under Armour competes, has little to do with clothing.
Rather, its essence involves imparting the dream that people can meet their need for self-actualization by wearing the same shirt as their sports hero.
While the business itself is very simple—design goods, hire emerging market, low-cost manufacturers to produce them, then sell them at a stiff mark-up to developed market consumers—because the business is built on intangibles like dreams and self-perception, it is a devilishly difficult one to forecast.
To read the rest of the YCharts 1% Focus Report on Under Armour and sign up to receive future reports from YCharts Research, please click here.
In Warren Buffett’s annual letter to Berkshire Hathaway (BRK.B) shareholders, released over the weekend -- after the standard table showing that in four out of the past five years the company’s per-share book value failed to beat the advance in the S&P 500 – the old guy quickly got around to defending his performance.
Berkshire’s intrinsic value “far exceeds its book value,” Buffett wrote, and by a margin that has widened in recent years. “That’s why our 2012 decision to authorize the repurchase of shares at 120% of book value made sense. Purchases at that level benefit continuing shareholders because per-share intrinsic value exceeds that percentage of book value by a meaningful amount. We did not purchase shares during 2013, however, because the stock price did not descend to the 120% level. If it does, we will be aggressive.”
Money where his mouth is, and all that.
No one’s words – save, perhaps, Vladimir Putin’s – were parsed more closely over the weekend than Warren Buffett’s, as he issued his annual letter to Berkshire Hathaway (BRK.B) shareholders.
There were the usual shout-outs to Berkshire managers for doing a great job; a tutorial on how to think about investing that featured Buffett’s Nebraska farm and a commercial building near New York University; a mild mea culpa on some crummy bonds he bought without first asking Berkshire Vice Chairman Charlie Munger’s opinion; and praise for his equity managers, Todd Combs and Ted Weschler, each now running a $7 billion-plus portfolio, for beating the S&P 500 in 2013.
Oh, and this: Buffett gave such prominence to Berkshire’s investment in Bank of America (BAC) that it wouldn’t be surprising to see it become a permanent holding, and a big one. As you’ll recall, when BofA was really in the dumps in August 2011, Buffett engineered a deal to buy $5 billion in preferred shares. It was not unlike similar deals he struck earlier in the financial panic with Goldman Sachs (GS) and General Electric (GE), lending money at a high rate of interest but also lending his name at a time when the companies needed to calm markets.
With BofA, as with the others, Buffett drove a hard bargain. The BofA preferred, paying 6% annually, included warrants to buy 700 million BofA common shares at $7.14 apiece. So, in addition to the $300 million a year income Berkshire gets, the warrants are currently in the money by about $9.39 a share, or some $6.6 billion.
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- Contributing Editors Dee Gill, Carla Fried, Emily Lambert, Bill Barnhart, Kathy Kristof, Stephane Fitch, Larry Barrett, Bill Bulkeley, Mark Henricks, Suzanne McGee, Ed Silverman, David J. Phillips, Katherine Reynolds Lewis, Theo Francis, Condrad de Aenlle, Amy Merrick