Value investing can be tough. It means thinking in a contrarian manner, while the investing herd stampedes in another direction. Value opportunities usually occur when something is going wrong for a company. Recognizing a headwind that is temporary or fixable, especially when it affects an otherwise healthy company, is what value investors dream of. Aflac, Inc. (NYSE: AFL) is a specialty insurer that offers disability and supplemental medical insurance products in the United States and Japan. Although famous for a talking duck mascot, this is a spectacularly run company. Aflac has raised its dividend for 33 consecutive years, making it… Read More

Value investing can be tough. It means thinking in a contrarian manner, while the investing herd stampedes in another direction. Value opportunities usually occur when something is going wrong for a company. Recognizing a headwind that is temporary or fixable, especially when it affects an otherwise healthy company, is what value investors dream of. Aflac, Inc. (NYSE: AFL) is a specialty insurer that offers disability and supplemental medical insurance products in the United States and Japan. Although famous for a talking duck mascot, this is a spectacularly run company. Aflac has raised its dividend for 33 consecutive years, making it a member of the “Dividend Aristocrats.” In each of the past 10 years, even during the financial crisis of 2008, it has achieved a 15% or better return on equity. This company controls a very specific niche in the market and is the undisputed leader in supplemental insurance products. Despite the fact that it’s headquartered here in the United States, most of Aflac’s business comes from Japan. In 2014, Japanese operations accounted for more than 70% of Aflac’s revenue.  In Japan, the company is performing well, consistently adding policies and growing premium income year in and… Read More

Turnaround strategies can focus on a variety of factors. Some companies shed lagging divisions, while others pursue acquisitions to jump start growth. For John Chen, the CEO of BlackBerry Ltd. (Nasdaq: BBRY), new product development holds the key. In a recent interview at the Milken Institute Global Conference, Chen said his firm will focus on security, privacy and increasing productivity with its devices. #-ad_banner-#His comments come following a February deal with Google, Inc. (Nasdaq: GOOG) and Amazon.com, Inc. (Nasdaq: AMZN) that will bring hundreds of thousands of new applications to BlackBerry users. Is Chen planning to make more announcements that… Read More

Turnaround strategies can focus on a variety of factors. Some companies shed lagging divisions, while others pursue acquisitions to jump start growth. For John Chen, the CEO of BlackBerry Ltd. (Nasdaq: BBRY), new product development holds the key. In a recent interview at the Milken Institute Global Conference, Chen said his firm will focus on security, privacy and increasing productivity with its devices. #-ad_banner-#His comments come following a February deal with Google, Inc. (Nasdaq: GOOG) and Amazon.com, Inc. (Nasdaq: AMZN) that will bring hundreds of thousands of new applications to BlackBerry users. Is Chen planning to make more announcements that could put the Canadian smartphone company back on top? Or is it just another failed attempt to resuscitate the one-time leader in enterprise services? Chen needs a victory. BlackBerry’s shares have surged and slumped in recent years as potential buyouts, new strategies and new management failed to put the company back on track. Not long ago, BlackBerry was a market leader in the mobile enterprise services category. Now, BlackBerry’s share of the global mobile operating system (OS) market is less than 1% (compared to the 96% market share about evenly controlled by Apple iOS and Android OS devices). Read More

What are the characteristics of good business leaders? Honesty, financial responsibility and a focus on rewarding shareholders are surely key attributes. In my mind, management acumen and integrity is probably the most overlooked  aspect that underpins a company’s success. Here’s a closer look at how bad management can sour your investment.    Freeport-McMoRan, Inc. (NYSE: FCX) is a $24 billion (in market value) diversified commodities producer. It owns copper and gold mines along with oil and gas properties. #-ad_banner-#The slump in both metals and oil prices has been a double whammy for this company, but commodity prices will fluctuate through… Read More

What are the characteristics of good business leaders? Honesty, financial responsibility and a focus on rewarding shareholders are surely key attributes. In my mind, management acumen and integrity is probably the most overlooked  aspect that underpins a company’s success. Here’s a closer look at how bad management can sour your investment.    Freeport-McMoRan, Inc. (NYSE: FCX) is a $24 billion (in market value) diversified commodities producer. It owns copper and gold mines along with oil and gas properties. #-ad_banner-#The slump in both metals and oil prices has been a double whammy for this company, but commodity prices will fluctuate through cycles. The key is how Freeport-McMoRan handled the slump, which has negatively impacted investors’ returns. In the first quarter of 2015, the company announced a huge write-down in the value of its oil and gas assets and announced it was considering selling or spinning parts of that division off to “unlock shareholder value.” The truth: the company’s foray into oil and gas was a disaster from the start. A decision to acquire McMoRan Exploration, a former subsidiary, was an unwise move. Even though crude oil prices were high in 2012, McMoRan Exploration was in trouble and running out of cash. Read More

More than three years have passed since the last official stock market correction (entailing a pullback of at least 10%). But deep selloffs have intermittently struck in just about every corner of the market, sometimes producing phenomenal buying opportunities. One of the best: iconic firearms maker Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson was a casualty of the “gun bubble” that popped almost a year ago, triggering a selloff in gun-industry stocks that nearly halved the company’s market value. While asset bubbles are often a function of euphoria, fear was the initial positive catalyst in this case. Read More

More than three years have passed since the last official stock market correction (entailing a pullback of at least 10%). But deep selloffs have intermittently struck in just about every corner of the market, sometimes producing phenomenal buying opportunities. One of the best: iconic firearms maker Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson was a casualty of the “gun bubble” that popped almost a year ago, triggering a selloff in gun-industry stocks that nearly halved the company’s market value. While asset bubbles are often a function of euphoria, fear was the initial positive catalyst in this case. Many feared that the Obama administration would make firearms harder to obtain, which supported rapid growth of gun sales and massive gains for firearm stocks in recent years. At Smith & Wesson, sales more than doubled to a record $627 million in fiscal (April) 2014 from $237 million in 2007 (the year before Obama took office). Between his January 2009 inauguration and May 2014, the firm’s stock rose more than sixfold. But gun demand finally crashed, sinking Smith & Wesson’s sales, profits and stock price along with it. However, the company is in the midst of an impressive turnaround in… Read More

In recent weeks, news reports have suggested that music streaming service Spotify is in the process of raising another $400 million. The proposed cash injection values the firm at a rumored $8.4 billion. That’s a seemingly rich valuation, but these days, fast-growing companies that are transforming industries are meriting such interest in the venture capital community. Yet Spotify’s valuation got me thinking: Why is it worth $8.4 billion, while publicly-traded rival Pandora Media, Inc. (NYSE: P) is valued at less than $4 billion? In early 2014, Pandora had the market value that Spotify now seems to merit. What gives? Surely… Read More

In recent weeks, news reports have suggested that music streaming service Spotify is in the process of raising another $400 million. The proposed cash injection values the firm at a rumored $8.4 billion. That’s a seemingly rich valuation, but these days, fast-growing companies that are transforming industries are meriting such interest in the venture capital community. Yet Spotify’s valuation got me thinking: Why is it worth $8.4 billion, while publicly-traded rival Pandora Media, Inc. (NYSE: P) is valued at less than $4 billion? In early 2014, Pandora had the market value that Spotify now seems to merit. What gives? Surely a closer look is warranted.  To understand the distinctive market valuations, a few issues need to be covered. First, Pandora is public, which means that its valuation is solely a reflection of supply and demand for shares. The company may be worth a lot more, (as I’ll note in a moment regarding analyst sentiment), but a potential change to its royalty deal has kept demand for shares at a low point. Spotify, which doesn’t yet need to cater to the fickle whims of public markets, can garner a valuation that solely pleases a small group of investors: its… Read More

It can take some companies many decades to grow large enough to merit a $28 billion market valuation. News that General Electric Co. (NYSE: GE) is transforming itself created that much shareholder value in just one day.   What has the market so excited? GE announced that over the next two years it would sell off almost all of GE Capital’s portfolio for an estimated $90 billion. Longtime investors remember the sordid history of GE Capital. After more than 100 years of being an industrial and manufacturing powerhouse, the GE of the early 2000’s scarcely looked like the same company. Read More

It can take some companies many decades to grow large enough to merit a $28 billion market valuation. News that General Electric Co. (NYSE: GE) is transforming itself created that much shareholder value in just one day.   What has the market so excited? GE announced that over the next two years it would sell off almost all of GE Capital’s portfolio for an estimated $90 billion. Longtime investors remember the sordid history of GE Capital. After more than 100 years of being an industrial and manufacturing powerhouse, the GE of the early 2000’s scarcely looked like the same company. The company had charged into real estate, commercial and personal lending. #-ad_banner-#And for a while, it looked like GE’s foray into finance was a rousing success. GE capital grew revenues 15% per year from 2003 to 2007 and the earnings from GE capital made up half of the parent company’s earnings in that final year before the crash. GE Capital’s aggressive financial practices came back to haunt it during the financial crisis. Its struggles strangled the parent company and necessitated a lifeline, which Warren Buffett and the U.S. government provided to stave off insolvency. But despite nearly bankrupting the company… Read More

If I asked you to name one of America’s greatest companies, then I would undoubtedly receive a wide range of responses. Many might say Apple (Nasdaq: AAPL) for the way it transformed our daily lives with its revolutionary mobile devices. Some would choose Exxon Mobil (NYSE: XOM), which generates a staggering $437 billion in annual sales. Still others might point to Walt Disney (NYSE: DIS), an iconic business whose beloved movies, characters and theme parks are enjoyed by millions. There is no right or wrong answer, merely opinion. The point is to provoke a… Read More

If I asked you to name one of America’s greatest companies, then I would undoubtedly receive a wide range of responses. Many might say Apple (Nasdaq: AAPL) for the way it transformed our daily lives with its revolutionary mobile devices. Some would choose Exxon Mobil (NYSE: XOM), which generates a staggering $437 billion in annual sales. Still others might point to Walt Disney (NYSE: DIS), an iconic business whose beloved movies, characters and theme parks are enjoyed by millions. There is no right or wrong answer, merely opinion. The point is to provoke a discussion of which attributes make a company “great.” Is it popular products? Dominant market share? Colossal sales? Sky-high profit margins? I, for one, would say none of the above. Let me explain… #-ad_banner-#In The 1927 New York Yankees baseball team is widely regarded as the best team in baseball history. For decades pundits have swooned over the team’s high winning percentage, massive number of home runs and a whole host of other absurd statistics. But none of those stats made the team great; they were simply the byproduct of a great… Read More

Great companies share one key trait: They can sustain market leadership and growth for decades and even generations. Still, on rare occasion, a dependable blue chip will start to lose its way. Over time, factors like increased competition, changing product landscapes or simply a failure to adapt with the changing times can gradually — almost imperceptibly — erode a once-dominant market leader into an outmoded underperformer. Today, perhaps the most poignant example of this is the iconic food products manufacturer Campbell Soup Co. (NYSE: CPB). While Campbell is still formidable, the core products that drove its success for generations are… Read More

Great companies share one key trait: They can sustain market leadership and growth for decades and even generations. Still, on rare occasion, a dependable blue chip will start to lose its way. Over time, factors like increased competition, changing product landscapes or simply a failure to adapt with the changing times can gradually — almost imperceptibly — erode a once-dominant market leader into an outmoded underperformer. Today, perhaps the most poignant example of this is the iconic food products manufacturer Campbell Soup Co. (NYSE: CPB). While Campbell is still formidable, the core products that drove its success for generations are now a hindrance. Simply put, consumers have been shifting to fresh and organic foods, leaving fewer dollars for the company’s less healthful pre-packaged soups, vegetable-based beverages and sauces that account for the bulk of Campbell’s revenue. Because of this trend, the firm has been stunted for many years. At $8.3 billion, the top line increased a mere 9% in the past decade. Current earnings per share (EPS) of $2.41 represent a 4% compound growth rate during that time. In fact, profits have been stuck in neutral since 2010. Campbell’s stock, unsurprisingly, has lagged the broader market. Results are… Read More

As we’ve noted on many occasions over the past few years, investors have shown a clear preference for companies that issue steadily rising dividends and super-sized share buyback plans. Such stocks not only produce solid income streams, but also tend to show above-average growth in earnings per share, thanks to steadily falling share counts. Of course, in StreetAuthority’s Total Yield newsletter, we’ve been clearly focused on this theme. (We define Total Yield as the net dollar value of dividend payments and share buybacks, divided by a company’s market value.)  #-ad_banner-#The newsletter has reaped big gains since it began in 2014. Read More

As we’ve noted on many occasions over the past few years, investors have shown a clear preference for companies that issue steadily rising dividends and super-sized share buyback plans. Such stocks not only produce solid income streams, but also tend to show above-average growth in earnings per share, thanks to steadily falling share counts. Of course, in StreetAuthority’s Total Yield newsletter, we’ve been clearly focused on this theme. (We define Total Yield as the net dollar value of dividend payments and share buybacks, divided by a company’s market value.)  #-ad_banner-#The newsletter has reaped big gains since it began in 2014. Southwest Airlines Co. (NYSE: LUV) is up 114% in 15 months; Anthem, Inc. (NYSE: ANTM) is up 29% in seven months; and Flextronics International Ltd. (Nasdaq: FLEX) is up 15% in just five months. Looking for a way to augment your gains using this approach? Keep a watchful eye for companies that have not yet embraced a Total Yield strategy, but likely soon will. The key is to spot companies that already have robust free cash flow yields. As we’ve seen in recent years, companies with strong free cash flow have focused on dividends and buybacks, rather than the traditional… Read More

For more than a decade, the business of making memory chips was a lousy one. The industry had ample excess capacity and pricing power was non-existent. And then the management team at Micron Technology, Inc. (Nasdaq: MU) decided to change all that. They correctly understood that by acquiring rivals — and then closing down excess manufacturing capacity — they could drive up prices and profits. I looked at this issue in 2012 and shares of Micron eventually soared to $36 from around $6. #-ad_banner-#A healthy supply/demand environment similarly created robust gains for rival chip-maker SanDisk Corp. (Nasdaq: SNDK). Not only… Read More

For more than a decade, the business of making memory chips was a lousy one. The industry had ample excess capacity and pricing power was non-existent. And then the management team at Micron Technology, Inc. (Nasdaq: MU) decided to change all that. They correctly understood that by acquiring rivals — and then closing down excess manufacturing capacity — they could drive up prices and profits. I looked at this issue in 2012 and shares of Micron eventually soared to $36 from around $6. #-ad_banner-#A healthy supply/demand environment similarly created robust gains for rival chip-maker SanDisk Corp. (Nasdaq: SNDK). Not only have these firms benefited from more rational supply trends, they are also benefiting from a powerful growth driver: surging demand, as solid state memory (also known as “flash memory”) is used in a proliferating number of electronic devices. Even personal computer manufacturers are making the switch from disk drive storage to solid state storage in many high-end machines. Yet even the best industries experience temporary headwinds. A recent modest pullback in demand and pricing has led to sharp share price pullbacks for both Micron and SanDisk. In my mind, only one of these two firms is poised for a solid… Read More