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Recent Articles
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Albemarle Is One of the Best Growth Stories on the Market Today
Aug 2, 2023
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Image: Albemarle is a low-cost producer of lithium derivatives, an end market that is expected to experience tremendous demand in the coming years.
On August 2, Albemarle Corp. reported excellent second-quarter 2023 results that showed net sales advancing 60% and adjusted diluted earnings per share more than doubling in the quarter. For the full-year 2023, net sales are now expected to be between $10.4-$11.5 billion (was $9.8-$11.5 billion) thanks in part to continued strength in electric vehicle (EV) demand. Our fair value estimate for Albemarle stands at $257 per share, well above where shares are currently trading. We think the market is underestimating not only its growth potential but also mid-cycle levels of profitability.
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ICYMI: Let’s Play Devil’s Advocate: What’s the Bear Case for Realty Income?
Aug 2, 2023
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Image Source: Realty Income.
It’s helpful to challenge one’s thesis on a favorite idea every now and then, and we’ve done just that with Realty Income in this article. We see three areas of weakness at Realty Income that could challenge our bullish take on the name: 1) its retail exposure, 2) its financial leverage and arguably unwarranted investment-grade credit rating, and 3) the current rising interest rate environment. Perhaps the most compelling component of the bear case on Realty Income is its massive net debt position and present value of future dividend liabilities that dwarf its annual operating cash flow. The REIT business model isn’t as attractive as many make it out to be.
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Trash Taker Republic Services’ Outlook Keeps Getting Better
Jul 31, 2023
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Image Source: Republic Services.
Republic Services reported solid second-quarter 2023 results July 31, and it raised its full-year 2023 guidance across the board. During the period ending June 30, 2023, total revenue advanced 9.1% with more than half coming via organic means, while GAAP earnings per share of $1.41 exceeded the consensus forecast by $0.10. Republic Services continues to experience strong pricing power, helping to drive double-digit EBITDA expansion in the quarter. Adjusted free cash flow came in at ~$1.265 billion through the first six months of the year. Earlier in July, Republic Services increased its dividend ~8% to a quarterly payout of $0.535 per share (was $0.495). Shares yield ~1.4% at the time of this writing.
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Johnson & Johnson Belongs in the “Too Hard” Bucket
Jul 30, 2023
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Image Source: Johnson & Johnson.
Johnson & Johnson recently entered the “too hard” bucket for us. We dropped J&J from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio on March 13 of the year, as we lost interest in the company given the uncertainties surrounding talc liabilities and the Kenvue split-off. We prefer simplicity across our newsletter portfolios, and J&J’s results have often been messy, to say the least. Though J&J's second-quarter 2023 performance, released July 20, was a bit better, we no longer have much interest in the name, given its net debt position and contingent talc liabilities. We’re also not interested in shares of its split-off Kenvue, having completely removed J&J from the newsletter portfolios prior to the split. We continue to prefer the areas of big cap tech and large cap growth.
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