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Dividend Stocks Philosophy Technical Picks

Kimberly-bottom Clark’s line is being eroded by cost pressures, and its stock isn’t providing much value

The pronounced pullback in retailer and consumer inventories in its North American consumer tissue arm (where volumes collapsed 27% against extraordinary 22% growth last year) drove a significant portion of its underperformance in terms of sales and cost leverage. More specifically, excluding this business, sales were up 4% over the same period in fiscal 2020.

Kimberly’s management lowered its full-year forecast, now calling for organic sales to hold flat or decline by up to 2% (versus flat to 1% growth prior) and $6.65-$6.90 in adjusted EPS (versus $7.30-$7.55 prior). While we intend to trim our 2021 outlook (0.6% organic sales growth and $7.41 adjusted EPS pre-print), we’re holding the line on our long-term expectations of 2%-3% sales growth and high-teens operating margins.

Commodity Cost Inflation

While we never anticipated that the significant level of consumer stock-ups realized a year-ago would persist (particularly as consumers become more comfortable venturing outside the home), commodity cost inflation has outpaced our expectations (serving as a 750-basis-point drag to gross margins in the quarter). In this context, Kimberly now sees inflation costs amounting to $1.2 billion to $1.3 billion in fiscal 2021, up from an anticipated $900 million to $1.1 billion prior (primarily reflecting a 30% increase in the market price for pulp in North America and a more than 90% increase in resin). In an effort to offset the hit to profits over the next several quarters, Kimberly is employing a multi-pronged approach, anchored in pursuing around $100 million in additional cost savings this year (totaling up to $560 million) and raising prices at the shelf at a mid- to high-single-digit clip (similar to its peer set).

Kimberly is employing a multi-pronged approach, anchored in pursuing around $100 million in additional cost savings this year (totaling up to $560 million) and raising prices at the shelf at a mid- to high-single-digit clip (similar to its peer set). Kimberly’s price increases hit shelves a few weeks ago, making consumer acceptance difficult to ascertain thus far. However, we are encouraged by management rhetoric that suggests enhancing its value proposition and leveraging consumer insights across geographies and categories has been an area of focus for its product development.

Company Profile
Kimberly-Clark is a leading manufacturer of personal care (around half of sales) and tissue products (roughly one third of sales). Its brand mix includes Huggies, Pull-Ups, Kotex, Depend, Kleenex, and Cottonelle. The firm also operates K-C Professional, which partners with businesses to provide safety and sanitary products for the workplace. Kimberly-Clark generates just over of half its sales in North America and more than 10% in Europe, with the rest primarily concentrated in Asia and Latin America.

(Source: Morningstar)
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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Coke implementing post-pandemic ambitions: leveraging process, innovation, and technology

The runway for growth is supported by ample room for share gains as well as geographic tailwinds. We estimate Coke derives more than 40% of sales from developing or emerging economies with burgeoning middle classes and low per-capita CSD consumption. We expect commercial drinks will become a larger portion of beverage consumption globally, and see the company executing against each of its market-specific strategies.

In developed markets, where Coke has firmly established the resonance of its brands, its strategies are geared toward profit growth driven by innovation. In developing markets, where its trademarks are visible but competition is rife, differentiation and eventual migration into higher-margin offerings is key. In emerging markets where the firm is less established, it is focused on driving volume growth even at the expense of modest margin dilution. We view these approaches as prudent and believe the decision to cull peripheral brands (going from 400 master brands to 200) will facilitate execution.

Financial Strength

We believe Coca-Cola is in stellar financial health. The firm deliberately skews its capital structure toward debt, on the premise that the lower-cost financing ultimately increases returns to shareholders. Coke regularly generates free cash flow above $8 billion (in the high teens to low 20s range as a percentage of sales), even amid the disruption caused by COVID-19. Even higher levels are driven by improving margins and working capital initiatives. Management has made commendable strides toward top-tier receivable and payable management, and the supply chain initiatives combined with a reworked bottler system should yield modest improvements in inventory management.

Moreover, Coca-Cola boasts strong coverage ratios above its peers. Coke’s financial strength is its ability to operate one of the larger domestic commercial paper programs. Issuing commercial paper is an integral part of the company’s cash management strategy, and the fact that investors and financial institutions are consistently willing to finance the company at such low rates lends credence to the reliability of its cash flows.

Bull Says

  • By volume, Coke is almost 3 times the size of its next largest competitor in the global nonalcoholic ready to- drink market, which begets scale benefits.
  • Despite a greater focus on marketing efficiency, its ad budget is still unparalleled and should help maintain consumer awareness and brand relevance.
  • The recently established platform services group should allow Coke to more effectively leverage data and improve technological capabilities across its mammoth production and go-to-market system.

Company Profile

Coca-Cola is the largest nonalcoholic beverage entity in the world, owning and marketing some of the leading carbonated beverage brands, such as Coke, Fanta, and Sprite, as well as nonsparkling brands, such as Minute Maid, Georgia Coffee, Costa, and Glaceau. Operationally, the firm focuses its manufacturing efforts early in the supply chain, making the concentrate (or beverage bases) for its drinks that are then processed and distributed by its network of more than 100 bottlers. Concentrate operations represent roughly 85% of the company’s unit case volume. The firm generates most of its revenue internationally, with countries like Mexico, Brazil, and Japan being key markets outside of the U.S.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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LICs LICs

MEC has released the results for the first half of the year

investment stockbroker risk analysis using multiple devices. Financial analysis using phone app and laptop. Market trading profit.

At a dividend rate of 5 cents per share, the corporation had dividend coverage of more than five years before the dividend was paid. Its earnings for 2020 were 4.6 cents which is almost double to previous year i.e. 2.8 cents. The relative P/E reported to 104.5% by 2020. And the market capital of MEC is not available.

Its portfolio performance since inception is 13.64% p.a. and market share price is currently market at $ 1.225 AUD while trading price is $1.100 as on 26th July 2021. Morphic Ethical Equities Funds NTA is marked at $16.07.21, the Pre-tax $1.4121 per share and the Post-tax $1.3134 per share for the year 2021.

Company Profile

Morphic Ethical Equities Fund (MEC) was established on 02 May 2017. Morphic Asset Management is a global equity investment firm managing the Morphic Global Opportunities Fund co-founded by Jack Lowenstein and Chad Slater. Morphic Ethical Equities Fund is an Australian Listed Investment Company (LIC) (ASX: MEC). Morphic Ethical Equities Fund is an Australian Listed Investment Company (LIC) (ASX: MEC). The Morphic Ethical Equities Fund aims to give investors with a chance to build wealth while remaining assured that they are doing it without harming the environment, people or society.

 (Source: fnarena)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Hardwire Positions in the Project Long-Term Benefits for Harley, but Near-Term Risks Remain Pervasive

While still a significant market player, Harley’s market share fell roughly 800 basis points, to 42.1% in 2020 from above 50% in 2019 (although it has recovered 2.5% of share through June). With the launch of “The Hardwire” strategy, CEO Jochen Zeitz is chasing the highest ROI opportunities for Harley. This is versus the firm’s goal calling for 7%-9% motorcycle operating margins in 2021 (in line with our 9% forecast, if it can mitigate EU tariffs).

Financial Strength

Harley-Davidson carries more debt on its balance sheet than as leverage is required to finance its HDFS arm and offer loans to customers. HDFS generates increased financial risk and weaker profitability when credit standards tighten or credit markets become less liquid. The firm had $1.7 billion in cash and equivalents at the end of June; it has historically strived to hold enough liquid assets to cover its liquidity needs for 12 months.

However, with the consolidation of securitization interests, that ratio jumped to 73% in 2009. The company worked this down to 64% at the end of 2013, but the ratio has risen again above 75% since 2015 with the issuance of incremental debt. The company still has financial flexibility thanks to a $707.5 million revolver (expiring in 2023), a $707.5 million revolver (expiring in 2025), as well as its $350 million facility, which helps address the seasonality of production and shipments. Additionally, Harley maintains flexibility in its capital structure through stock repurchases and dividends (currently at $0.15 per share per quarter).

Harley’s Brand Awareness

  • Harley-Davidson’s brand is more than 115 years old and resonates globally with a wide consumer base, particularly its core market (men over 35). Efforts to reconnect with its core consumer could lead to a unit demand uptick faster than we anticipate.
  • The firm has historically generated strong free cash flow, and we expect it to continue doing so after the pandemic, generating a mid-single-digit average FCF yield over the next decade.
  • Harley has high brand awareness and robust market share in custom and touring segments domestically, two of the most profitable motorcycle categories.

Company Profile

Harley-Davidson is a global leading manufacturer of heavyweight motorcycles, merchandise, parts, and accessories. It sells custom, cruiser, and touring motorcycles and offers a complete line of Harley-Davidson motorcycle parts, accessories, riding gear, and apparel, as well as merchandise. Harley-Davidson Financial Services provides wholesale financing to dealers and retail financing and insurance brokerage services to customers. Harley has historically captured about half of all heavyweight domestic retail motorcycle registrations, a metric it has ceded in 2020 as it has repositioned the business. The firm recently expanded into the middleweight market with the launch of the Pan America model.

(Source: The Motley Fool)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

American Airlines: Significant Revenue Improvement to $19 FVE in the Second Quarter

Passenger revenue increased 105.8% from the previous quarter, the largest increase we’ve seen from U.S. network carrier this quarter, on a 44.4% increase in capacity, a 29.5% increase in load factors to 77.0% and a 10% increase in yield. These metrics remain 24.6%, 11.1%, and 11.4% below 2019 levels, respectively.

Management said business travel improved from roughly 20% of 2019 levels in March to 45% of 2019 levels in June and that much of the increase in demand was from travel within the West Coast. American has not traditionally had much of a presence in business travel on the West Coast, which suggests that the code sharing alliance that American initiated with Alaska Airlines is expanding American’s relevant market.

Company’s Future Outlook

There may be further upside to American’s share gains within business travel, as the firm initiated a code-sharing agreement with JetBlue, which has substantial share in the Northeast. Management said it expects 2022 CASM to be flat relative to 2019 levels, which is not as aggressive a target as peers have guided to. Since American is a domestically oriented airline and the domestic market has recovered faster than the international market, it is expected that the efficiency gains from restructuring should fall to the bottom line faster for American than for more internationally focused airlines as a larger proportion of the network would be in place in 2022.

Company profile

American Airlines is the world’s largest airline by scheduled revenue passenger miles. The firm’s major hubs are Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. After completing a major fleet renewal, the company has the youngest fleet of U.S. legacy carriers.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Fisher’s FVE rose 4%, but pandemic-induced hospital demand is expected to return to normal

The trailing three-year revenue CAGR for homecare hardware has been an impressive 18% despite subdued new sleep apnoea diagnosis rates due to the pandemic. stronger growth in the near term due to Fisher’s recent mask launches and sleeping labs reopening, and growing clinical evidence supporting nasal high flow, or NHF, therapy for homecare COPD treatment to be a structural long-term tailwind.

COVID-19 hospitalisation rates in North America and Europe have come down substantially, with the two regions contributing 74% of fiscal 2021 revenue. We still foresee a significant drop as strong COVID-19-induced sales fade away, and we maintain our fiscal 2022 revenue prediction of NZD 1.6 billion. Widespread adoption depends on growing clinical evidence to support its use for different applications and generally involves direct marketing at each hospital. Our long-run revenue growth forecast for new applications consumables is broadly unchanged, increasing to 16% from 15% previously. Our midcycle group revenue growth and operating margin forecasts of 12% and 32%, respectively, are largely consistent with Fisher’s targets of 12% and 30%, respectively.

Fisher’s proprietary technology

Fisher’s intangible assets and switching costs evident in the hospital division will deliver sustainable excess returns. Fisher’s proprietary technology and patent portfolio have helped maintain its dominant market share and leading product innovation, particularly in NHF therapy. Fisher’s balance sheet is in sound condition and has low financial risk given low revenue cyclicality and a high contribution from consumables revenue.

Fisher has sustainably generated a ROIC at or above 22% though solid reinvestment in R&D and lower-cost manufacturing, and we forecast ROICs on average to continue at the current rate. Potential patent infringement and litigation costs is another potential ESG risk. For instance, Fisher was in patent infringement disputes with ResMed recently and ultimately resulted in NZD 60 million in litigation costs and was settled out of court.

Company Profile

Fisher & Paykel Healthcare is one of the three largest respiratory care device companies globally. It is the market leader in hospital use humidifiers, masks and related consumables and the number three player in the at-home treatment of sleep apnoea using respiratory devices. Both the hospital and homecare markets for respiratory devices are growing strongly in the developed markets in which Fisher & Paykel has a presence. The company earns 42% of its revenue in the U.S., 32% in Europe, 18% in Asia-Pacific and the remaining 8% in emerging markets. Fisher conducts its own R&D and has thousands of patents and pending applications. It manufactures in New Zealand and Mexico and has a multi-channel distribution model.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Technology Stocks

Quest Diagnosis Moving to Normal: Result of Less Demand of COVID-19 PCR

Our top- and bottom-line projections for full-year 2021 remain bounded by management’s 2021 outlook, and the slight adjustments we’ve made to reflect strong cost containment were largely offset by our incorporation of a rise in the U.S. corporate tax rate starting in 2022.

In the absolute, Quest’s second-quarter results look impressive, with revenue up 40% and operating margin at 21% (compared with 16% in the year-ago period). Nonetheless, Quest’s second quarter demonstrated slower growth than seen in the last three quarters as vaccinations have rolled out across the U.S.

Fortunately, as COVID-19 tests wane, the resumption of growth in non pandemic tests has been strong. This has resulted in mix shift gradually driving quarterly gross margin down to 39% versus 43% in the second half of 2020. Profitability in the second quarter remains significantly higher than Quest’s historical levels.

Company’s Future Outlook

It is expected that the demand for COVID-19 molecular tests will settle into a lower, but ongoing level into 2022, considering the significant level of Americans who have not yet been fully vaccinated and the rise of new, more contagious variants. Management indicated that COVID-19 PCR test volume has recently stabilized and begun to grow slightly as viral spread and hot spots have grown. It is further predicted that the margin erosion as volume further shifts toward non pandemic tests.

Company Profile

Quest Diagnostics is a leading independent provider of diagnostic testing, information, and services in the U.S. The company generates over 95% of its revenue through clinical testing, anatomic pathology, esoteric testing, and substance abuse testing with specimens collected at its national network of nearly 2,300 patient service centers, as well as multiple doctors’ offices and hospitals. The firm also runs a diagnostic solutions segment that provides clinical trials testing, risk assessment services, and information technology solutions.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
LICs LICs

APL Provides Update on Conditional Tender Offer (CTO)

The company’s main discount management approach is the CTO. If the average daily discount over the 12-month period ending October 18, 2021 is greater than 7.5 percent, the CTO is triggered. Since the beginning of the term through 14 May 2021, the average daily discount has been 11.5percent.

The CTO allows shareholders to sell APL shares to the company via an off-market buy-back at a price equal to the current post-tax NTA less 2% if it is triggered. A maximum of 25% of the company’s issued capital will be repurchased.

Since the average daily discount stays above the discount threshold of 7.5 percent, the CTO will be triggered until the discount narrows significantly in the future months. There may be an arbitrage opportunity for shareholders depending on where the share price is trading at the end of the time.

NTA before tax was $1.248. The current performance was marked at 21% approximately in June 2021. The present dividend of APL for the year 2021 is 2%.

Company Profile

APL was founded in 2015 by Jacob Mitchell, formerly Deputy Chief Investment Officer of Platinum Asset Management and majority owned by its investment team. Antipodes Global Investment Company (ASX: APL) is an Australian-LIC that offers shareholders exposure to a long-short global equity portfolio with a currency overlay. By purchasing exceptional and undervalued firms, the Company aims to outperform global stock markets while also safeguarding our stockholders from risk and volatility.

(Source: fool.com.au)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
LICs LICs

Pengana International Equities Limited (PIA) Appoints New Manager

New Jersey  based, Harding Loevner LP is appointed as a new investment team. Harding Loevner is a global equity manager with over the staff of 100 employees and over US$84b Assets .

PIA will use the Harding Loevner global equity strategy with the inclusion of PIA’s ethical filters as a result of the appointment.

Currently, Share price of Pengana International Equities Limited (PIA) is $1.360. On 16th July Net Tangible Assets for Pre – Tax is $1.491 and Performance of Pegana International Equities Limited is 14.30%.

Harding Loevner’s investment strategy, as per PIA, supports the company’s goal of providing shareholders with capital growth through holdings in an ethically screened and actively managed portfolio of worldwide firms, as well as regular, predictable, and fully franked dividends.

Currently, IIR Ratings is ‘on watch ’ for PIA and will be full evaluation once it is reviewed for new investment team and strategy is completed.

Company Profile

Pengana International Equities Ltd, formerly Hunter Hall Global Value Limited, is a listed investment company (LIC). The Company’s investment objective is to generate positive absolute returns in excess of the investment portfolio’s benchmark over an investment horizon of approximately five years. The Company operates through investment in securities segment. The Company’s portfolio is invested in equities. The Company invests in a range of sectors, such as consumer staples, financials, healthcare, industrials, information technology, materials, telecom services and consumer discretionary. The Company operates through various countries, such as Italy, Brazil, Australia, Japan, South Korea, the United Kingdom and the United States. The Company gives investors easy access to a portfolio of global equities, including a strategic allocation to Australian equities. The Company’s investment manager is Hunter Hall Investment Management Limited.

(Source: FN Arena )

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
LICs LICs

Ophir High Conviction Fund Striking the Benchmark

Closeup of a stock market broker working with graphs on digital tablet at office. Rear view of stock agent reading bad report and graph. Back view of multiethnic businessman analyzing fall sales.

The fact that both founders have all of their liquid investments here is the most appealing aspect. The share price of this ASX LIC has increased by 21.69% for the financial year 2020. It has a price-to-earnings ratio of 11.08, which is slightly more than its NTA per share of $2.98 as of the P.Y. 2020.

The benchmark for the Ophir LIC portfolio is the S&P/ASX Mid Small Index (ASX: AXMSA). The LIC grew at a rate of 12.7 percent in FY20, compared to a benchmark growth rate of -5.3 percent.

The annualized return since inception (net of fees) is 20.2% on 22 July 2021.

The NAV Performance reported at $3.24 per unit and the Current Unit Price is $3.77 as at 30 June 2021. It grew by 24.7% for the financial year 2021 with market capital of $806 million

Company Profile

The Ophir High Conviction Fund is an ASX-listed small and mid-cap Australian stocks fund with a long only strategy. Ophir is a boutique Australian fund manager established in 2012 by its founders and senior portfolio managers Andrew Mitchell and Steven Ng. The Fund typically invests in a concentrated portfolio of 15-30 non-S&P/ASX 50 companies. The Fund trades on the ASX under the ticker symbol ‘OPH’ as a LIC. The Fund focuses on identifying high-quality businesses with structural development possibilities using Ophir’s thorough fundamental, bottom-up research process.

(Source: fool.com.au)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.