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Bank of America & Wells Fargo: Where Are They Now?

Bank Of America: A Solid Investment


  • BAC has sufficient regulatory capital and I expect the bank to keep increasing capital returns.
  • BAC’s main business lines are showing robust growth in net income.
  • The bank’s credit profile is strong and getting stronger.

With a better credit profile and regulatory approvals, Bank of America shareholders will be seeing more dollars.

Bank of America (NYSE:BAC) recently ramped up its capital return program for shareholders. The Fed OK'd the bank's capital return program on the heels of passing its Comprehensive Capital Analysis and Review (CCAR) for 2016. With an increase in the dividend to $0.075 on a quarterly basis, BAC now pays $0.30 per year to shareholders; that equates to a yield of 2.1% with BAC's share price as of writing. On top of that, BAC's board authorized the repurchase of $5 billion in common stock over the next year. The $5 billion in repurchases would eliminate 345 million shares at BAC's current price and provide support to the stock price going forward.

Recent Results

What I like from the latest quarter is that BAC's business lines experienced growth in net income across the board save 'All Other' activities, which are not core to the bank's profitability and include hedging activities, equity investments, and its international card business. Global Markets led the way with a 42% increase in net income followed by Global Banking with a 21% jump in net income... READ MORE

Wells Fargo's Bad Loans: Should Investors Be Concerned?


  • Wells Fargo’s stock price has trended lower with diminished earnings.
  • Net charge-offs have increased for Wells Fargo.
  • There’s more than meets the eye with Wells Fargo’s credit quality.

Investor sentiment has turned on Wells Fargo & Co. (NYSE:WFC) and its stock now trades 18% off its 52-week high. WFC has been hurt by the interest rate environment like other banks and a declining interest rate margin has weighed on its earnings. Just recently for Q2 2016, earnings fell year-over-year to $5.6 billion from $5.7 billion; on an EPS basis for the same period, earnings fell from $1.03 in Q2 2015 to $1.01.

The drop in earnings was partly a function of increasing charge-offs. Charge-offs are loans that banks believe they will not recollect. Net charge-offs reflect those loans that were written off but adjusts for those loans that were later recollected. In WFC's case for Q2 2016, net charge-offs jumped to $924 million from $650 million in Q2 2015. That's an increase of $274 million or 42% on a percentage basis. Perhaps more importantly, as a percentage of total loans, net charge-offs increased 9 basis points to 0.39% from 0.30% a year ago. So what's driving this increase? Let's explore it further... READ MORE

Investing in MLPs: Energy Transfer Equity or MLP ETF?

Energy Transfer Equity Is A Total Return Investor's Dream


  • In my opinion, you would want to own this regardless of the Williams ruling.
  • The Energy Transfer family members offer plenty of growth potential.
  • Fat yield on the distribution makes this a good total return vehicle.

By Tony Termini

Energy Transfer Equity not only keeps the oil and gas flowing through its pipelines but also keeps the distributions flowing to its investors.

*Note: This article was a written a day before the recent court ruling in Energy Transfer Equity's (ETE) favor. ETE jumped over 7% after the ruling. Our article on Energy Transfer Partners (ETP) before the ruling can be found here: Is Energy Transfer Partners A Buy?

As I write this article, there is no verdict yet in the trial between Energy Transfer Equity and Williams Companies (NYSE:WMB) regarding their merger (dis)agreement. WMB wants the deal to go through at ETE's original offer price, and ETE wants out... CONTINUE READING

Rely On Predictable Income In Times Of Uncertainty


  • The growth and income offered by midstream energy MLPs could provide a hedge in rough markets.
  • I believe that the sector offers plenty of growth potential.
  • Owning the Alerian MLP ETF offers broad diversification within the sector.
  • While made up of MLPs, the fund can be added to both taxable and qualified investment portfolios.

By Tony Termini

Last Thursday's Brexit vote was as much a shock to global financial markets as it was to political elites in London and Brussels. And, quite frankly, I am not sure whether it will end up being a blip on the radar or the catalyst for renewed global economic slowing and the next bear market.

In my opinion, owning some energy midstream MLPs right now could give you a little hedge against a prolonged flat or declining market. And, the Alerian MLP ETF (NYSEARCA:AMLP) is a great vehicle to use to get broadly diversified exposure to the sector. Before I go into detail about the fund, let's look at midstream energy MLPs in general.

Before you fill the tank with gas or turn the knob of your stove, the refined petroleum and natural gas you'll use makes a long trip to get to you. That trip has three legs... CONTINUE READING

Shopping & Investing: Check Out Kroger & Target

Kroger Will Reward Patient Investors


  • Kroger’s comps are increasing at a decreasing rate.
  • Kroger’s focus on private label offerings makes it truly unique.
  • Kroger generates significant value for its shareholders which is why it could reward investors in the long-run.

By S. Hasan Abid

Kroger's growth is slowing but that is to be expected and the supermarket chain still remains a great company.

Kroger (NYSE:KR), the biggest player in the grocery store space, is developing a habit of beating analysts' earnings estimates and posting positive comp sales growth quarter after quarter. In Q1 2016, despite facing deflation headwinds, Kroger's same-store supermarket sales grew by a reasonably impressive 2.4%. Mr. Market, however, wasn't impressed.

Too often I've seen companies becoming a victim of their own success. Once you start posting comps close to 5%, you raise expectations and then delivering anything below say 3%, has a depressing effect on the stock price. This is exactly why Kroger's stock is languishing slightly below $35, exactly where it was way back in January 2015.

Recall, in Q1 2015 and Q1 2014, Kroger's comps sales growth clocked in at 5.7% and 4.6% respectively. When viewed against these numbers, 2.4% looks small. Does that necessarily mean Kroger's growth is slowing down? Technically, no company can keep growing forever and Kroger's growth is bound to slow down at some point. But as it stands, Kroger has ample room to keep expanding and investors shouldn't be excessively worried about Kroger's comps growth. Fundamentally, Kroger's business remains strong... CONTINUE READING

Weathering Storms Is Becoming A Habit For Target


  • Target’s new bathroom policy has led to a fall in the company’s public perception.
  • AFA has been leading the boycott against Target. This isn’t the first time the retailer has caused controversy.
  • Target was hit by a horrific credit card breach in 2013. The company managed to recover in a year.
  • I don’t think the recent boycott will affect Target’s prospects in the long-run.

By S. Hasan Abid

Ever since announcing its 'inclusive' transgender bathroom policy Target (NYSE:TGT) has yet again come under pressure. According to YouGov BrandIndex, Target's Buzz score, which is a proxy for brand perception, fell by nearly 50% in April 2016, suggesting Target's new rule didn't go down well with many conservative families. The rather infamous American Family Association ("AFA") has been leading the boycott against Target. As per the AFA, around 1.2 million people have signed a petition requesting people to stay away from Target.

Now this clearly is a thorny perception issue and I am not here to debate whether or not Target's bathroom policy is 'correct' from a moral or ethical point of view. That is, quite frankly, beyond the scope of an investment analysis. Nevertheless, it is worth taking a critical look at this issue and assessing how far it affects Target's outlook in the long-run... CONTINUE READING

Prescriptions & Pipelines: Amgen & Energy Transfer Partners

Amgen: A Powerhouse Of The Biotechnology Industry


  • Repatha's success could single-handedly drive Amgen higher.
  • Outside of Repatha, Amgen has a number of exciting and intriguing pipeline drugs.
  • I believe Amgen has everything it takes to become a leading biosimilar company.
  • Amgen's dividends are sustainable.

By S. Hasan Abid

Amgen has drugs in the pipeline that could benefit the company and its shareholders going forward.

Amgen (NASDAQ:AMGN), a powerhouse of the biotechnology industry, discovers, manufactures and distributes human therapeutics globally. 2015 was a fantastic, almost historic year for Amgen as it delivered solid financial results. Surprisingly though, at least right now, the market doesn't seem too interested. My thesis is that Amgen is undervalued and represents a compelling investment opportunity.

Success in the biopharmaceutical industry depends heavily on the robustness of a company's pipeline. Amgen, with no less than 11 compounds in Phase 3 trials, has an innovative and distinguished pipeline capable of fueling the company's growth in coming years. In 2015, Amgen launched four innovative products in oncology and two in cardiovascular disease, including the potentially blockbuster, cholesterol lowering PCSK-9 inhibitor, Repatha. Prescribers seem to be showing genuine interest in Repatha since its launch last summer, and I expect it to compete well with Praluent, a joint initiative of Regeneron (REGN) and Sanofi (NYSE:SNY). Hitherto, Repatha's sales haven't hit the roof, possibly due to the hefty $14,000/year price tag, but this shouldn't be taken as a sign of things to come... CONTINUE READING

Is Energy Transfer Partners A Buy?


  • First, let’s get the Williams merger issues off the table.
  • Valuing MLPs is less straightforward than valuing a public corporation.
  • The Energy Transfer family has lots of relatives.
  • To me, the fundamentals look good and point to higher prices.
  • The great tax-advantaged yield makes this a good total return vehicle.

By Tony Termini

In this article, I will discuss the reasons why investors looking for a combination of both income and capital appreciation should consider buying Energy Transfer Partners, L.P. (NYSE:ETP). Before I do, I want to discuss recent news about the potential merger of ETP's general partner, Energy Transfer Equity, L.P. (NYSE:ETE) with Williams Companies, Inc. (NYSE:WMB).

The planned merger between ETE and WMB has gotten messy and the two companies are headed to court on June 27th. It is my opinion that there are only two possible outcomes here, whether they actually make it into the courthouse or not. Either they'll merge or they won't. The bigger issue boils down to how much money one or the other party is going to be out of pocket if the deal falls through.

So, for purposes of this article, I want to focus all the attention on ETP. When I write the next article in this series about ETE, I'll go into more detail about the merger, if it isn't already resolved by then. So, now I'll get to why ETP makes sense for total return investors... CONTINUE READING

Exxon Mobil Remains A Stalwart & National Oilwell Varco Wants A Fairy Tale

Exxon Mobil: Go Long Now, Hold Forever


  • Exxon Mobil's earnings reports have surprised on the upside in eight of the last nine quarters.
  • Better earnings comps should create another surprise this quarter.
  • Cost reductions and a focus on fundamentals through the commodity price cycle should translate to a higher stock price.
  • Exxon Mobil's dividend offers an attractive yield and plenty of room for growth.

By Tony Termini

Exxon Mobil has been around for a long time and it looks like it's still going to be around for years to come.

Before I begin this piece, you need to know that I own Exxon Mobil (NYSE:XOM) and have no intention of selling it. To really understand why I think you want to buy XOM right now, a little background is important.

In the last three years, the price of a barrel of crude oil has gone from close to $110 down to under $29, and from there, in just the last five months, has bounced back to just about the $50 range. In my opinion, the last three years represent the first phase of the commodity price cycle for crude, and I believe that, from here, the trend will be positive, albeit a little less rapid. Nevertheless, the huge decrease in price has taken oil & gas producers on one heck of a ride... CONTINUE READING

Can National Oilwell Varco Have A Fairy Tale Ending?


  • Please note that this is not a fairy tale, but the story is very good.
  • Even on a non-GAAP basis, National Oilwell Varco earnings still look bad.
  • The chart is downright ugly.
  • Nevertheless, I expect a happy ending.

By Tony Termini

It's time boys and girls for an uplifting story reminiscent of Rip Van Winkle. But, in our story, you don't have to fall asleep, nor does the timeframe need to be 20 years. The hero of our story is National Oilwell Varco (NYSE:NOV) and in my opinion, this is a good one to own. Our story goes as follows.

Not long ago in the world of crude oil, the evil villain supply ravenously consumed unsuspecting demand, driving the price of a barrel of oil from about $110.00 down to roughly $29.00. And, as the chart below illustrates, crude's looking a bit better since hitting that nearly 12-year low... CONTINUE READING

Put Your Investment Shoes On with Nike but Avoid Caterpillar

Don't Time The Market With Nike


  • Nike’s association with FC Barcelona is huge.
  • Revenue contribution of ‘Greater China’ has been climbing since Q1 FY14.
  • If the Chinese are willing to buy Nike’s premium footwear and apparel in difficult economic times, they will only spend more on Nike when economic growth accelerates.
  • China’s growing fitness industry represents a terrific opportunity for Nike.

By S. Hasan Abid

Nike is one of the most recognized brands in the world.

When it comes to brand recognition, there are very few companies in the world that can give Nike (NYSE:NKE) a run for its money. Nike isn't a business that merely sells apparel or athletic footwear, it thrives by selling its brand.

The reason why Nike is a terrific company is that whenever you think that its revenues are reaching an ominous saturation point or growth is slowing down, it surprises you by finding new avenues of growth, reinventing ways to strengthen its brand. A couple of weeks ago Nike extended its current sponsorship deal with FC Barcelona and now, until 2026, we'll be seeing Nike supply kits for the reigning Spanish champions. This deal, worth at least £100 million per season, is being touted as the most expensive kit deal in history and could play a key role in fueling Nike's footprint in Europe and Asia... CONTINUE READING

Caterpillar: Stay Away


  • Caterpillar has reported lower revenues and lower earnings for five consecutive quarters.
  • The company offered analysts lower guidance in its latest earnings report.
  • Economic and industrial forecasts for the near term are less than promising.
  • So, why has this stock rallied more than 30% since January?

By Tony Termini

When Caterpillar (NYSE:CAT) reported Q1 2016 earnings on April 22nd, management told analysts that they were lowering their sales and revenue guidance by about 2% for the remainder of 2016 and cautioned that restructuring costs would go up. This is the fifth time in five quarters that they've reported lower numbers and offered cautious guidance.

There are lots of reasons for the continual declines and they affect every one of CAT's operating segments. Lower energy prices have hurt CAT in both its Energy and Transportation business as well as its Resource Industries segment. Weak prices have caused reductions in exploration and extraction. And, this has led to a decrease in the volume of equipment sold into both the oil and gas and mining sectors. The result of this for CAT has been about a 10% decrease in revenue in Energy and Transportation and a nearly 35% revenue decrease in Resource Industries since 2013. The Construction segment didn't help in 2015 as it had the year before. Revenues declined more than $2.8 billion from 2014. In the aggregate, sales are off more than $8.6 billion, or nearly 15%, since 2013... CONTINUE READING

Coca-Cola Struggles & General Electric Has Déjà Vu

Coca-Cola: Buffett's Prized Stock Struggles With Growth


  • KO’s reliance on soda worries me.
  • In recent quarters, KO has reported lackluster sparkling beverage volumes.
  • Americans are becoming more averse to carbonated beverages.
  • Addition of AdeS to KO’s still portfolio will help the company seize some of the increasing demand for still beverages.
  • Nonetheless, much more needs to be done in the still portfolio to offset a declining sparkling portfolio.

By S. Hasan Abid

Americans are increasingly turning away from soda. Will Coca-Cola reverse the trend or go with it?

Ever since being trademarked in the U.S. in 1944, Coca-Cola (NYSE:KO), today, has become the world's largest manufacturer and distributor of non-alcoholic beverage syrups and concentrates. With an operational reach encompassing more than 200 countries, KO is arguably the most valuable and recognized brand in the world.

KO has come a very long way. Just think about it; way back in 1886, John Pemberton's Coca-Cola, on average, served a mere 9 people daily. This figure has now risen to a staggering 1.9 billion people! But what does the future hold for KO... CONTINUE READING

General Electric: It's Like Déjà Vu All Over Again


  • Current changes at GE are reminiscent of the kind made by Jack Welch in the 1980s.
  • The company is vastly different than it was just a few years ago.
  • The catalysts for long-term growth are multi-faceted.
  • Solid fundamentals offer continued long-term dividend growth.

By Tony Termini

I believe that the nearly complete metamorphosis of General Electric (NYSE:GE) puts the stock into a position where its growth prospects will rival those seen in the 1980s. To me GE is a buy right here, right now. Before I get to valuation, I want to compare what's going on at GE now with the GE of some 35 years ago.

In 1981 when Jack Welch took over as Chairman & CEO of GE it was a typical stodgy old industrial conglomerate whose way of doing business had not changed since the 1950s. It was a typical patriarchy in which everyone knew their place and bureaucracy ruled the day. At the time GE remained in businesses that were not core to its operations or which were not leading players in their respective industries. Jack Welch changed all that... CONTINUE READING

Stocks Under the Radar: Manning & Napier vs. BOC Aviation

Take The Money And Run From Manning & Napier


  • This investment manager has been on a great run recently.
  • I don't think the fundamentals support the price, or much upside potential.
  • Assets Under Management just aren't growing - at least organically.
  • The CEO's retirement adds to the uncertainty.

By Tony Termini

Investors may start bailing on Manning & Napier as it fails to grow assets organically.

Since the market hit its low point this past February, Manning & Napier (NYSE:MN) has had a spectacular ride up, rising more than 70%. And that's in just the last 15 weeks! The stock is still technically very strong, and the charts are all flashing short-term buy signals on MN. But I'm not so sure the fundamentals support what's happening. Could MN double in value from here? Maybe, but at the current price, I would be a seller. I'll get to that later. For now, let's look at what may be driving the price higher... CONTINUE READING

BOC Aviation's IPO A Plus For Embraer


  • BOC IPO suggests to me that there is more opportunity in China.
  • Revenue continues to grow in a difficult economic and political climate.
  • The stock trades at a nice discount to the market.
  • Order backlog suggests solid future revenue growth.

By Tony Termini

BOC Aviation just raised $1.1 billion in its IPO and I think that this is going to be a positive development for Embraer (NYSE:ERJ). BOC Aviation buys airplanes and leases them to airlines around the world. The interesting thing is that they currently have just 13 ERJ planes in their fleet.

I'm not saying this will be the event that gets ERJ soaring in the near term. But, in my opinion, it is one of the reasons you want to be long ERJ right now, even though there are a lot of negatives reflected in the stock's price... CONTINUE READING

Disney & Starbucks: 2 Stocks You Can't Ignore

Disney: The Happiest Stock On Earth


  • Shanghai Disneyland should add incremental earnings in the near-term.
  • The stock is off almost 8%, which to me is a buying opportunity.
  • ESPN doesn’t appear to be the problem some expected.
  • Monetizing the brand is the key to long-term growth.

By Tony Termini

Disney's new theme park in Shanghai should be a huge hit like its parks in the United States.

I bought The Walt Disney Company (NYSE:DIS) on July 3, 1997 and have held it to this day. Here's why I think you want to buy it now.

The newest DIS theme park will open in Shanghai in a couple weeks extending the Happiest Place on Earth brand further into China. Given the price movement of the stock in the last few weeks, I think that right now would be a good time to add DIS to long-term portfolios (I will be buying the October 100 calls after this article is published). I also think you definitely want to own DIS before they report 3 rd quarter 2016 earnings on August 9 th. Before I discuss the fundamentals and what, in my opinion, will drive earnings higher through 2017, let's look at what's going on right now.

When DIS reported 2nd quarter 2016 earnings on May 10 th, they missed analysts' expectations by $0.04. The result is that the stock is off by more than 7% since then... CONTINUE READING

Starbucks: Can't Stop, Won't Stop


  • SBUX had a terrific Q2 fiscal 2016.
  • China’s growing middle class is most likely to patronize SBUX’s brand.
  • SBUX has decided to jump into the RTD tea market at an opportune time.
  • This is as good a time as any to buy SBUX.
  • Shares possess an upside potential of at least 10%.

By S. Hasan Abid

Few can disagree that Starbucks (NASDAQ:SBUX) under Howard Schultz is one of the most successful businesses in the world today. Currently SBUX operates a whopping 25,000 stores in 70 countries around the globe and despite the company's vast scale of operations, it is showing no signs of slowing down.

SBUX's latest earnings transcript was literally 'as bullish as it gets'. Global comps and U.S. comps were up by a staggering 6% and 7% respectively. Compared to last year, GAAP EPS increased by 18% in Q2 fiscal 2016, while non-GAAP operating income and margin expanded by 11% and 0.3% respectively. In particular, I was impressed to see considerable improvement in profitability of SBUX's China store portfolio that was accompanied by 5% transaction growth.

All this is well and good. There can be no doubts about the underlying strength of SBUX's business. But choosing healthy businesses is just one aspect of investing. Intelligent investors, as per Benjamin Graham's philosophy, ought to invest in solid growth but not 'overpay' for it. Hence, I wonder: If I buy SBUX now, will I be overpaying for it... CONTINUE READING

Can Both Costco & Wal-Mart Be Good Investments?

Is Costco Finally Running Out Of Steam?


  • Weakening foreign currencies and lower oil prices have been dragging down Costco’s comps but I remain confident about the underlying strength of Costco’s business.
  • Costco has boundless opportunities to grow outside North America.
  • Still, Costco has not reached a ‘full’ penetration level in the U.S.

By S. Hasan Abid

You might be seeing more Costco shopping carts in America's heartland soon.

Costco's (NASDAQ:COST) top-line growth in Q3 fiscal 2016 did not exactly knock investors' socks off but the company's growth story remains intact. In the last 5 years, Costco has expanded its retail footprint immensely and after adding 7 new warehouses in Q3, Costco now operates 705 warehouses globally. Bears, still, are quick to point out that Costco, despite having a robust business model, is a mature business whose growth opportunities in the U.S., its main market, are bound to dwindle drastically sooner rather than later. The goal of this article is to assess the validity of claims like these and discuss Costco's growth prospects... CONTINUE READING

Wal-Mart: A Dividend Aristocrat That Won't Die


  • Wal-Mart has a solid dividend history. In the last 25 years, it has consistently increased dividends.
  • The company can easily support a 10-15% annual dividend growth rate for at least a decade.
  • Wal-Mart's dividend is still far from entering into unsustainable territory.

By S. Hasan Abid

Last time, we discussed the merits of investing in the world's largest retailer, Wal-Mart (NYSE:WMT). We also talked about how WMT is evolving with time to compete effectively in a future world where online shopping is likely to be a norm rather than an exception. According to Statista, by 2019 there will be 224 million online shoppers in the U.S. As discussed previously, this isn't something that should worry WMT's shareholders excessively, because the company is quickly developing a stronger omnichannel presence and has a fantastic distribution and logistics network, which can help it expand its competitive advantage in the retail space.

As an investment proposition, one of the crucial things that sets WMT apart from many other retailers, including the likes of Costco (NASDAQ:COST), is its status as a "Dividend Aristocrat". We've seen the company raise dividends in each of the last 25 years - an amazing feat. But as a shareholder, should you expect this to continue? How sustainable are WMT's dividends... CONTINUE READING