News broke last night that the U.S. will impose a 5% tariff on all Mexican imports beginning on June 10 unless Mexico agrees to do more to address illegal immigration problems.  The tariff will increase 5% each month, reaching a maximum of 25% in October. Trump tweeted the 25% level would hold there "until Mexico substantially stops the illegal inflow of aliens coming through its territory." General Motors (GM) saw its stock price fall over 4% this morning. Most U.S. automakers source many of their vehicles and parts from Mexico, so import tariffs threaten to raise their cost of production and disrupt their supply chains, especially depending on how Mexico's government responds. The Wall Street Journal provided an excellent summary of various [...]

Amgen (AMGN) was founded in 1980 and is one of the world's leading biotechnology companies with operations in more than 100 countries. The business develops and manufactures treatments for oncology/hematology, cardiovascular, inflammation, bone health, nephrology, and neurological diseases.  About 77% of the firm's sales are derived from the U.S., and Amgen's product portfolio is concentrated in a handful of drugs (top 5 = 69% of revenue). In the first quarter of 2019, the company's most important drugs included: Enbrel (treats rheumatoid arthritis): 22% of sales (grew 4%)Neulasta (bone marrow stimulant used in cancer patients) 19% of sales (-12% growth)Prolia (treats osteoporosis in postmenopausal women) : 11% of sales (grew 20%)Xgeva (protects bones of cancer patients): 9% of sales (grew 6%)Aranesp (bone marrow stimulant used during [...]

Shares of Qualcomm (QCOM) fell as low as $49 earlier this year as investors fretted over the significant legal risks the company's core licensing business faced. Simply put, the firm was accused by Apple and others of abusing its monopolistic position in wireless chips and charging excessive royalty rates. Investors received good news in April when Apple agreed to drop all litigationagainst the company and signed a new licensing agreement, sending Qualcomm's stock surging more than 20%.  Qualcomm shares topped out at $89 in earlier this month (up more than 80% since February) but have since come crashing down. The stock's initial tumble began in earnest on Monday following the White House's decision to ban U.S. companies from selling to Chinese telecom [...]

Founded in 1898, Archer Daniels Midland (ADM) procures, transports, and processes corn, oilseeds, wheat, and other commodities which are turned into products for food, beverage, animal feed, chemical, and energy uses around the world.  The firm's end products include vegetable oil, protein meal, flour, corn sweeteners, starch, ethanol, and many other food and feed ingredients.  Archer Daniels Midland has an extensive global network of over 750 processing, distribution, and storage facilities, which it uses to efficiently transport and process various commodities and products for customers around the word.  The company operates through four main business segments: Oilseeds (44% of operating profit): processes soybeans and soft seeds into vegetable oils and protein meals. These products can be sold “as is” or further [...]

Since 1997, Kinder Morgan (KMI) has spent more than $60 billion building one of North America's largest midstream infrastructures, providing gathering, storage, transport, and processing services to the oil & gas industry. Kinder Morgan's immense footprint (84,000 miles of pipelines and over 150 distribution and storage terminals) means the company is vertically integrated into almost all parts of the North American oil & gas industry, including:  Every major gas and oil shale formationThe liquified natural gas (LNG) export industryThe oil & gas export industryThe petrochemical industry Providing CO2 for enhanced oil recovery Natural gas pipelines generate 61% of Kinder Morgan's EBITDA, and products pipelines (15% of EBITDA – transports refined products, oil, and natural gas liquids) and terminals (14% of EBITDA [...]

Founded in 1962, Federal Realty Investment Trust (FRT) is one of the oldest REITs in the world. The company specializes in high-quality, neighborhood shopping centers that are anchored by grocery stores and located in large, affluent markets such as Silicon Valley and New York. Today the REIT owns 104 properties, comprising 24 million square feet of leasable area which is under long-term leases to over 2,900 tenants in numerous subcategories. As you can see, Federal Realty's cash flow is highly diversified. No single retail category exceeds 10% of the REIT's operating income, and no tenant is greater than 3% of rent. About 65% of the firm's rent is from tenants who operate in relatively e-commerce resistant industries like grocery stores, [...]

Founded in 1919 in Columbus, Indiana, Cummins (CMI) is the largest dedicated global industrial diesel and natural gas engine manufacturer.The company’s primary markets are highway and heavy-duty vehicles, construction, and general industrial markets, where it serves customers such as Chrysler, Daimler, Volvo, PACCAR, Navistar, CNH Global, Komatsu, and Ford. PACCAR is the largest customer accounting for 15% of 2018 sales. Daimler and Navistar are the next largest customers, and collectively its four largest OEM clients accounted for 35% of last year's revenue. Most of this business is secured under long-term supply deals.The company's products are sold in more than 190 countries via its network of 600 company-owned and independent distributor locations and over 7,600 dealers.  About 60% of Cummins’ revenue [...]

Shares of Bayer (BAYRY) have slumped nearly 50% over the past year. The German manufacturer of chemicals and pharmaceuticals has remained under pressure following its June 2018 acquisition of Monsanto for $63 billion. Buying Monsanto made Bayer the world's largest seed and crop-chemical business, according to The Wall Street Journal. The firm's agriculture business shot up from 22% of 2016 company-wide revenue to 43% in 2018.  Citing Morgan Stanley estimates, The Wall Street Journal stated that the combined business would sell roughly 28% of the world's pesticides, about 36% of U.S. corn seeds, and 28% of soybean seeds. 

Shares of A.O. Smith (AOS) have slumped about 11% over the last two days following a bearish research report released by short seller J Capital Research.  You can read their 66-page report here, but the firm makes the following key allegations against A.O. Smith's business practices and outlook: Short-term performance in China, which accounts for 34% of A.O. Smith's sales, is overstated due to channel stuffing  A.O. Smith has an undisclosed distribution partner in China that could be responsible for up to 75% of its sales in that region; the partner accepts the firm's inventory and helps finance distributors, allowing A.O. Smith to report better gross margins and sales growth in periods of weaker demand Since the macro outlook is deteriorating [...]

In October 2018, we reviewed Vodafone's (VOD) dividend safety and made the following remarks (see our full note here): Vodafone's "Borderline Safe" Dividend Safety Score is hanging by a thread. With the dividend consuming the bulk of Vodafone's free cash flow, plus rising leverage from the Liberty Global deal, the capital-intensive nature of its businesses, and very competitive telecom markets in Europe, there is little room for error. As conservative income investors, we prefer to stick with financially stronger businesses that score closer to 60 or higher for Dividend Safety. Regardless, Vodafone shareholders should make sure they are comfortable with these risks, as well as the size of their position and their overall portfolio diversification. The next year could be volatile for Vodafone [...]