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McDonald’s: A Quality Dividend Aristocrat

Founded in 1940, McDonald's (MCD) is the world's largest quick-serve restaurant chain, with over 38,000 locations in more than 100 countries. Almost all of its restaurants are franchised, meaning the stores are owned and operated by independent business owners. Under a typical franchise arrangement, McDonald's owns or leases the property while the franchisee pays for equipment, signs, seating, and décor.McDonald's ownership of real estate, combined with the co-investment by franchisees, enables the company to achieve restaurant performance levels that are among the highest in the industry. Franchisees are responsible for reinvesting capital in their businesses over time, but McDonald's frequently co-invests with them to help improve their restaurants and operating systems to maintain the company's brand value.

September 30th, 2019|

Wells Fargo Names New CEO, Improving Turnaround Prospects

Wells Fargo (WFC) finally appointed a new CEO to lead the bank following a six-month search effort. Charlie Scharf took the job and will start on October 21. The market was pleased, sending shares of Wells Fargo higher by about 4% today. Before taking the job, Scharf was CEO of Bank of New York Mellon (BK), a firm that Warren Buffett's Berkshire Hathaway has an 8.5% ownership stake in. Buffett upped his stake in BNY Mellon in 2017 and 2018, perhaps a vote of confidence in Scharf since he was named the bank's CEO in July 2017. The Wall Street Journal notes that Scharf "has experience with turnarounds" and was tasked with overhauling BNY Mellon. Prior to his work at the bank, Scharf was [...]

September 27th, 2019|

Prospect Capital’s Dividend Safety Score Downgraded to Unsafe on Investment Performance Risks

Prospect Capital (PSEC) is one of the largest and oldest business development companies, or BDCs.  All BDCs are basically middle market lenders, which means they lend to or take equity stakes in the 200,000 or so subprime businesses that generate about a third of the U.S. economy.Essentially, BDCs serve a market of small companies across the country that regular banks don’t want to touch, helping those businesses fund acquisitions, leveraged buyout transactions, recapitalizations, and growth projects.Prospect Capital's portfolio includes more than 130 investments across nearly 40 industries and nine different investment strategies. The portfolio's annualized yield exceeds 10%, reflecting its higher risk profile.

September 27th, 2019|

No Merger, But Investors Await More Clarity From Management

On September 25, Altria (MO) announced that merger discussions with Philip Morris (PM) ended with no deal. The environment for vaping products weakened significantly over the last month due to increased regulatory uncertainty, which likely prevented the two tobacco giants from reaching an agreement. Philip Morris's stock jumped more than 5% on the news as its shareholders were relieved the company would not expose itself to the more dynamic cigarette and vaping markets in America. However, Altria's stock finished the day slightly lower. It's hard to say why Altria's stock didn't perform better after some uncertainty was lifted. Some speculators may have bought shares in anticipation of Philip Morris paying a premium for the company and headed for the exits once no deal was [...]

September 26th, 2019|
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