In this quick note, we share updated data on 40 big-dividend BDCs plus our opinion on investing in them against the backdrop of rising interest rates and slowing economic growth.
80 Big-Yield REITs: Residential Is Ugly, Office Is Worse
Top Growth Stocks - Still Hated
In this quick note, we share updated data on top growth stocks (those with at least 20% revenue growth expectations for this year and next). You’ll notice the names with positive net margins have performed relatively better over the last year (quite the opposite of when the pandemic bubble had full momentum behind it and revenue growth was all that seemed to matter). The table also shows recent performance, short interest, margins, various valuation metrics and more. It’s hard to take a contrarian view, but that’s often a profitable approach for selective long-term investors at lower points in the market cycle (i.e. right now).
Quick Note: Medical Properties Trust Update
Members Mailbag: Medical Properties Trust (MPW) is a big-dividend healthcare REIT (the current yield is 10.4%) that has increased its dividend for 10 years in a row. This makes it tempting to a lot of investors. However, MPW short interest (i.e. investors betting against the shares) has also increased to a very high level (and the shares are down significantly). We previously wrote up MPW in detail here. In this quick note, we provide an update on MPW highlighting a few important things for investors to consider.
Big-Yield mREITs: P/B Data and Ratings
The “High Income NOW” Portfolio
Microsoft (MSFT) ChatGPT Note
Microsoft moved fast to recently invest $10 billion in ChatGPT (an artificial intelligence (A.I.) “chat bot” released in November), and on Tuesday MSFT shares were up as the company shared news on how it plans to use the new technology. In this note, we share some brief information and opinion on the Microsoft news.
Fortinet (FTNT) Earnings Note
This cybersecurity stock (and Blue Harbinger Disciplined Growth Portfolio holding) released strong quarterly earnings results after the close on Tuesday (whereby it beat estimates and it raised forward guidance). The shares are up double digits as a result. In this quick note, we provide some color on its prospects going forward.
Enphase (ENPH) Earnings Note
This energy technology company announced powerful quarterly results after the close on Tuesday, exceeding expectations for revenue and earnings. The shares are up double digits in after hours trading, and the powerful long-term growth story remains fully intact. In fact, the business is accelerating—a very good sign.
Dividend Growth Screener - Updated Data
Dividend Growth Stock Data: Sharing updated data tables, sorted by sector (then industry) for stocks that have increased their dividend for at least 10 years straight (over 300 stocks). The table includes other metrics such as 1-year total return, current dividend yield, dividend coverage, valuation metrices (and rankings), expected growth and more. We’ll be digging into this data deeper this week with the goal of sharing top dividend growth stock ideas trading at attractive prices. We’ve also included a downloadable Excel file for those that like to sort the data differently.
Major Auto Manufacturers: Mkt Cap, Margins, Valuations
Major Car Maker Comparisons: Just a quick “chart break” to share comparative data on the major auto makers in terms of market caps, margins, valuations and growth rates. There’s been a lot of talk about how disproportionately large Tesla’s market cap is to other car makers, but when you take into consideration Tesla’s strong margins and higher growth rate, the story becomes very different. Here is the chart.
New Year: Same Story, Growth Leading Lower
Market carnage continues this year, with tech & growth stocks down more than value. The story remains the same: rates are higher (harder to fund growth) and the economy is slowing (teetering on recession) as the fed keeps hiking rates to fight inflation. The good news is inflation will likely slow (knock on wood) as the pandemic stimulus falls further into the past. Going forward, the top growth stocks are not coming back to prior levels (at least not anytime soon) and value will lead (higher rates are here to stay), and value stocks remain undervalued relative to growth. Here are a few updated growth-versus-value charts (as of 12/31) for perspective…
Accenture (ACN) Earnings Note
This technology and business-operations consulting company released strong quarterly results on Friday (they beat earnings and revenue estimates, increased the dividend again), yet the shares sold off. Despite all the positives (high margins, above industry growth, strong dividend growth, impressive workforce, valuable client relationships) the market was focused on slowing macroeconomic estimates. The market cycle is real, but this business will survive and continue to thrive. It will outpace the market over the next decade, and now is an attractive contrarian time to consider buying shares. We are currently long.
Adobe (ADBE) Earnings Note
This highly-profitable “creative” software company announced record revenue and operating income on Thursday (the shares are up significantly Friday in a declining market), and it’s well-positioned to keep driving profitable growth for the decade ahead. Its products benefit from strong moats (high switching costs), increasing subscription revenue and lots of cash flow to fund growth and buy back shares. This is a business that is positioned to weather the economic cycle well, and it trades at very reasonable valuation multiples, especially considering profit margins and revenue growth guidance both remain robust.
PIMCO CEFs: Special Year-End Distributions
To the delight of many income investors, PIMCO announced Monday that a handful of its big-yield bond funds will be offering special year-end distributions. Here is the press release from PIMCO. And you can read our analysis on these PIMCO funds here here and here.
Intuit (INTU) Earnings Note
This global financial tech platform, and dividend-growth machine, announced quarterly results after the close on Tues, whereby it beat rev and earnings est., but provided mixed fwd guide w/ rev growing at 10-12% (impressive!) vs street est of 12-14%, and also reaffirmed FY’23 EPS guide. It announced its 45th consec qrtrly dividend (annual div has grown 11 years in a row). W/ impressive gross (>82%) and net (>16%) margins, and trading at ~28x fwd non-GAAP earnings, shares remain an attractive buy as its strong moat (high switching costs + network effects) remain firmly intact. We are long the shares in our Income Equity Portfolio w/ no intention of selling anytime soon.
Bath & Body Works (BBWI): Earnings Note
Shares of this specialty retailer (home fragrance, body care, and soaps and sanitizer products) ripped 25% higher after announcing better-than-expected quarterly numbers (whereby they beat earnings and revenue estimates and raised guidance). We are currently long shares in our Income Equity Portfolio, and we have increased our “Buy Under” price following the announcement.
Portfolio Update: Disciplined Growth, Income Equity
Portfolio Updates: You’ll notice both the Income Equity and Disciplined Growth Portfolios have been updated for November. Many of the “Buy Under” prices have been updated to reflected changed market conditions (mainly interest rate hike impacts and quarterly earnings results). There were several rebalancing trades (and one new purchase) in the Disciplined Growth Portfolio, and no new purchases or sales in the Income Equity Portfolio. Rebalanced positions are shown in red (reduced) or green (increased) fonts, and new buys and complete sells are reflected in red (sells) and green (adds) highlights.
Meta Platforms (Facebook parent) Update
Shares down ~70% ytd, but this big tech co remains a money-printing machine. Ad rev still astronomical at $27.7B in Q3 (down 4.5% y/y, tough pandemic comp); gross profit margin astounding 79.5%. The prob is spending whereby opex was ~$15.9B (as if it were still late 2020 and int rates were still ~0.0%). The mkt is reacting positively to today’s announced layoffs of 11,000 employees (13% of workforce)—a step in the right direction considering slowing economic growth/ recession risks. To put things in perspective, every $1B in lower opex spend is ~$0.35 in EPS. W/ 12.8% fwd rev growth (& trading at 10.6x fwd EPS and only 2x EV/Sales), this business is impressive.
Owl Rock (ORCC) Earnings Note
This big-dividend BDC just raised its quarterly dividend by 6.5% and announced a new supplemental dividend, following its strong Q3 results (shares +8%). Net Investment Income was $0.37 (beating expectations by $0.02) and total Investment Income of $314.05M (+16.7% Y/Y) beating by $21.96M. As per the CEO, the strong results were supported by the “tailwind of rising interest rates.” The board also approved a 2022 Repurchase Program under which the BDC may repurchase up to $150 million of the its common stock. Long.