Waste Management, Inc. (WM) | Daily Alert January 30
In one of our top seven sectors is Waste Management, Inc. (WM). Companies with a negative correlations to the ISM (Institute for Supply Management) report of weak manufacturing conditions (caused by a large extent by Trumps trade wars), include WM, with a negative correlation of a negative .91.
The business isn’t glamorous and is under-followed by Wall Street. It has been a great performer for our newsletter since our purchase in 1996 (up 356%), plus it sports a good dividend, based on our cost. It’s a great company.
Sean Christian, The Personal Capitalist, 9524 East 81st Street, Suite B #1715, Tulsa, OK 74133, January 22, 2020
Bristol-Myers Squibb Company (BMY) | Daily Alert February 3
Though I had hoped we would get more of a pullback as part of the round of profit-taking that was already long overdue in Bristol-Myers Squibb Company’s (BMY) stock as last month’s issue went to press, as you can see in the chart, after taking a very brief pause to catch its breath between the December issue and today, the stock is already making another push into new 52-week high territory.
And, as you know, I believe such price action can never be characterized as anything but a bullish clue about the current direction of the overall market). In response to this almost immediate resumption of the uptrend, I am raising the buy limits and adding a few more shares in both Portfolios this month. BMY is a strong buy under $58 and a buy under $68.
Nate Pile, Nate’s Notes, www.NotWallStreet.com, 707-433-7903, January 10, 2020
Bristol-Myers Squibb Company (BMY) recently announced that it is boosting its quarterly dividend nearly 10% to a quarterly rate of $0.45 per share. What is especially noteworthy about the increase is that 1) it is the company’s largest dividend increase in more than a decade; and 2) the increase comes on the heels of the Celgene acquisition.
Bristol-Myers Squibb stock has performed well of late and recently moved to a new 52-week high. I still think there is plenty of upside in these shares.
Bristol-Myers trades at roughly 10 times that earnings estimate, an attractive valuation. Second, the company’s new-drug pipeline received an instant boost with the deal, and we should see fairly quickly some fruits from this deal in the way of new-drug approvals over the next 18 months.
Another reason to like these shares is the dividend yield.
The stock scores extremely well in our company’s Quadrix® stock-rating system, with an Overall score of 99 (out of a possible 100) and strong across-the-board scores in such important subcategories as Value 74, Performance 93, and Momentum 91. Despite the gains in the last few months, I think these shares can be bought at current prices for a double-digit total return in 2020.
Charles B. Carlson, CFA, DRIP Investor, www.dripinvestor.com, 800-233-5922, January 2020
Meredith Corporation (MDP) | Daily Alert February 5
Meredith Corporation (MDP) is the nation’s largest publisher of print and digital magazines, with powerhouse titles such as People, Travel + Leisure and Martha Stewart Living. Complementing these publications, the company owns a portfolio of 17 local television stations. Founded in 1902 by Edwin Meredith with his Successful Farming magazine, the company now has 42 million paid subscribers of its print and digital publications and 30 million viewers of its local television stations. In January 2018, Meredith acquired magazine publisher Time, Inc, for $2.8 billion in an all-cash deal.
While the S&P500 rose over 50% in the five years through mid-2019, Meredith shares remained unchanged. Since then, the market has increased another 10% while Meredith’s shares have dropped 37%, driven by its surprisingly weak guidance that Fiscal 2020 EBITDA will be about 20% below consensus expectations. Much of the problem is that the Time acquisition hasn’t delivered the anticipated advertising revenues as quickly as the company originally expected. Also, $50 million in new strategic investments, as well as other costs, will weigh on near-term profits.
The weak guidance further stoked investor worries that Meredith may be on the losing side of the battle for profitable media relevance, particularly as its print advertising revenues continue to decline. Meredith’s somewhat elevated post-Time debt level, upcoming negotiations with television networks and cable service providers, and changes in their magazine portfolio like the closing of iconic Family Circle, only add to investor concerns. The market appears to be turning the page on Meredith.
Despite these investor concerns, Meredith appears well-managed and well-positioned to remain a solidly profitable provider of relevant content to an attractive target market. The company reaches over 180 million Americans (more than Comcast or Disney) including 85 million millennial women, and is a top-10 digital destination with 150 million monthly unique viewers. It stays focused on the highly valuable American women audience, avoiding straying into other categories in the pursuit of growth. In eight of its twelve television markets, Meredith’s stations are ranked either #1 or #2.
To remain relevant, the company adapts its portfolio to capture growth driven by changes in its audience’s tastes. Their 2016 launch of The Magnolia Journal, based on the highly-watched television series featuring Joanna and Chip Gaines, has become one of the industry’s most successful and profitable launches. Portfolio upgrades include a new quarterly magazine based on the widely-followed “Property Brothers” series, as well as new television shows that leverage their People and Southern Living magazine brands. Importantly, Meredith continues to re-format or cull fading titles.
Based on its strong local television market position, we think Meredith’s upcoming distribution and network affiliate contract renewals will have a limited yet slightly positive effect on the company’s profitability.
Meredith’s revenues and profits indicate its ability to monetize its content. The company is successfully increasing its non-advertising revenues, which now comprise nearly half of total revenues. Advertising revenues are slowly declining, but part of the issue is the unexpectedly weak early results from its acquired Time assets. However, advertising performance in these titles is turning around while television advertising remains healthy. Also, the re-alignment and expansion of its sales force and other initiatives are helping Meredith increase its print advertising industry market share to 36.2%. The company’s profits remain quite healthy, and are likely to grow this year net of the effect of political advertising last year.
Helping to further boost profits, the company has already achieved $430 million in cost-savings from the Time acquisition, with another $135 million still ahead. An upcoming change-over to a new core technology platform should improve its operating efficiency as well as generate more consumer data and engagement.
Meredith produces generous free cash flow, helped by its low capital spending requirements. The company’s top two priorities for this cash flow are to repay roughly $800 million more in debt and fund its well-covered and recently increased dividend. Meredith has already repaid $825 million of Time acquisition debt, partly with proceeds from asset sales, leaving its $2.4 billion in total debt at a manageable 3.3x EBITDA. High-margin political ad revenues likely coming in calendar 2020 would fund an extra one-time $100 million+ paydown.
Meredith shares trade at a discounted 6.8x forward EBITDA multiple. Its strong market position, attention to tactical and strategic changes to maintain its relevancy, solid financials and attractive dividend yield make for a compelling value stock.
We recommend the PURCHASE of shares of Meredith Corporation (MDP) with a $52 price target.
George Putnam III, The Turnaround Letter, www.turnaroundletter.com, 617-573-9550, January 2020