Jeffrey B. Brown submits:
Coca-Cola (
KO) announced yesterday that it will raise its dividend from $0.41 to $0.44 a share. This respectable dividend increase provides an excellent excuse to discuss the company that turned a once non-existent industry into a consumer staple. In 2004, the average American drank 53.7 gallons of carbonated soft drinks.
The consumer soft drink industry has enjoyed immense growth over the last few decades. From 1970 to the mid-1990s, Coke and Pepsi (PEP) each achieved average revenue growth of 10% annually. Each now features a widely diverse product line, but originally carbonated soft drinks (CSDs) alone propelled historical growth. The rivalry between Coke and Pepsi was mutually beneficial, as U.S. and worldwide CSD consumption rose year after year.
In the mid-1990s, the industry began to plateau because most people in the industrial had finally been exposed to soft drink products. At this point, rapid diversification occurred and new product lines were introduced, each requiring their own R&D costs. A once-uncomplicated market became flooded with substitute products. Even so, Coke’s profit rose 18% in 2009, benefiting from growth in markets outside of North America and Europe.
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Brendan Wagner submits:
I didn’t lie. This is disgusting.
On $3.547billion in fourth quarter revenue, Dell’s (DELL) consumer division made $9million dollars, for an operating income margin of .2%.
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The 3-Liner:
Motorola (MOT) is a future growth pure play in mobile, with its share price hampered by its poor past management and inconsistent history. The investment thesis for a long play in MOT is centered on the Android-based smartphone reaching a successful launch not seen since the RAZR revolutionized the mobile phone market in 2005. I arrive at a target price of $11.75, an upside of over 65%.
Research Summary:
Motorola steered itself out of trouble in 2009 by improving its cash balance assets, cash flow, and by successfully launching 2 Android-based smartphones. In the final quarter (Q4/2009), Motorola unfortunately provided a disappointing outlook for the current quarter (Q1/2010). More importantly, its forecast for smartphone growth was adjusted downward. At the same time, Nokia (NOK), a stronger but comparable company to Motorola in terms of mobile phone/smartphone growth and to some degree, geographical dynamics, reported far better results.
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Zachary Scheidt submits:
A decade ago, investors were willing to pay any price for a company associated with the internet. It didn’t matter whether the company made money or not – or even whether they had projections for eventually turning a profit. Instead of earnings, investors looked at eyeballs, unique users, revenue growth, and plenty of other less important variables. Analysts who believed that stock prices were too high were ridiculed as a “new age of investing” made old ratios and metrics obsolete.
But as is usually the case, fundamental valuations eventually became important and many of the high-flying internet darlings came crashing back to earth. Some of the companies that were hit particularly hard (many of which had to declare bankruptcy), were the fiber companies which invested in the infrastructure which carried information across short or long distances. The investment in these networks was huge and unfortunately, the companies couldn’t stick around long enough to reap profits from their ballooning costs associated with the network buildout.
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Market Folly submits:
(This post is part of our series on tracking hedge fund portfolios. If you’re unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)
This is the first time we’ve looked at David Tepper’s hedge fund Appaloosa Management in-depth as they’re now in our tracking mix. Before founding his fund, Tepper was a high yield bond trader for Goldman Sachs (GS). He likes to dig up companies that everyone else has called quits on and Appaloosa focuses on concentrated positions in both equities and distressed debt.
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Dobromir Stoyanov submits:
The McGraw-Hill Companies, Inc. (MHP) provides information services and products to the financial services, education, and business information markets worldwide. The company operates in three segments: McGraw-Hill Education, Financial Services, and Information & Media. Just a few weeks ago this dividend aristocrat increased its quarterly dividend by 4.40% to 23.50 cents per share, which was the 37th consecutive annual dividend increase for the company.
The stock has delivered an average annual total return of 10.20% over the past decade.
Earnings per share have grown at an average pace of 7.60% per annum. The company has also has repurchased 2.80% of its outstanding stock annually on average since 2001. For FY 2010, analysts expect the company to earn $2.63/share, which is higher than 2008’s EPS of $2.33. For FY 2011 analysts expect McGraw-Hill to earn $2.95/share. A reduction in the amount of debt being offered could affect the company’s Financial Services segment, which accounts for almost three quarters of its operating profit. Changing regulations and competitive environment could also affect this major segment, which includes the Standard & Poors brand. The remaining 16% and 7% of operating profits are achieved from the company’s education and media segments.
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Steve Alexander submits:
Sharps Compliance (SMED) is a provider of medical waste disposal solutions. The flagship product is the Sharps Disposal by Mail System. This product is simply a sealed, link and puncture resistant container that allows medical waste to be mailed to a disposal center via the U.S. Postal Service or UPS. The waste is tracked electronically, allowing documentation of proper disposal.
Another important product for Sharps is their Medical Waste Management System, or MWMS. This is a comprehensive system designed to meet the waste disposal needs of the “alternate site market”, which simply refers to settings outside of the hospital. In general, MWMS is a package of services, including the Disposal by Mail System, and also inventory, training, data management, and other services that provide for a complete solution for entities such as emergency preparedness services.
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C Stewart submits:
Colin Stewart is a founding shareholder of Toronto-based JCClark, and acts as a Director and Portfolio Manager at the firm, which manages about $300M. Prior to launching JCClark’s Focused Opportunities Fund in June 2005, Colin acted as co-manager of the Preservation Trust. Colin currently serves as Co-Chair for the AIMA Canada Education and Research Committee.
JCClark’s absolute-return-focused investment approach focuses on capital preservation, strong risk-adjusted absolute returns, low correlation to broad equity market indices, and consistent alpha generation.
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Timothy Lutts submits:
Last week, I wrote about the wisdom of buying stocks hitting new highs, recommending both Perrigo (PRGO), the largest U.S. maker of store-brand over-the-counter drugs, and EV3 Inc. (EVVV), which calls itself “Your endovascular company.” Both had a good week, and I still like them long-term.
But today my thoughts turn to light bulbs.
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Michael Shulman submits:
Health care reform is dead, but everyone is now on alert about the need for cost cutting – reducing the nation’s exposure to runaway Medicare and Medicaid expenses and a system that spends twice per capita than other developed nations with worse outcomes. State regulators are refusing to allow health insurance companies to raise rates at will. When health care reform was alive, hospitals were up as more insured people would pay their bills, reducing bad debt. Big Pharma was up because they could push more pills, necessary and unnecessary; equipment makers were down because of a possible tax.
What is an investor to do in the new political landscape of "no health reform?" I would focus on products that save money for providers, save money for companies making products inside the industry and under tremendous cost pressure, or save lives. There are three good ones – Curis (CRIS), Compugen (CGEN) and Cepheid (CPHD) investors should look at, for these companies will outperform their peers with or without reform. Here is a look at the first of the three, Curis.
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Joseph L. Shaefer submits:
Sometimes we get a little too wrapped around the axle cogitating, researching, deliberating and selecting our investment alternatives. We need to take time, relax, have a glass of champagne or beer and remember that nobody bats 1.000 in this business (though there are plenty who will try to make you think they do!)
You may not be able to afford Dom Perignon when times get tough, or a very nice Piper-Heidsieck or even an eminently enjoyable California Korbel. But if ongoing revenue stream during bad economic times are any indication, given a choice of drinking bad champagne or a good beer, clearly many people will choose a good beer.
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Investing, Long Term Investment, stock market | admin February 19, 2010 | 
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