Wyatt Research Week in Review: Nov. 8-14

In investing, as in life, you win some, you lose some. Nobody’s infallible.
Sometimes we choose the right stock, but at the wrong time. Sometimes we flat out miss.
But it’s always nice when we accurately predict the future.
Such was the case with a pair of recent prognostications from two Wyatt Research analysts.
The first came from Marshall Hargrave, who predicted on Sept. 30 that Molson Coors Brewing (NYSE: TAP) could be in for a windfall from the expected regulatory divestitures related to the pending merger of Anheuser-Busch InBev (NYSE: BUD) and SABMiller (OTC: SBMRY).
Sure enough, it was reported this week that Molson Coors is set to acquire SABMiller’s 58% stake in MillerCoors for $12 billion. Molson had first right of refusal to buy the remaining portion of the joint venture, and the $12 billion price tag is clearly an offer it couldn’t refuse. The deal would unite the Miller Lite and Coors Light brands in a two-pronged attack on Bud Light’s commanding market share lead.
Of course, the transaction is contingent on AB InBev and SABMiller receiving the necessary approvals for their merger from the regulatory powers that be, but for now at least, Molson Coors is living the high life.

REIT Rejection

More recently, on Oct. 29 Tony Daltorio predicted that McDonald’s (NYSE: MCD) would resist activist pressure to spin off its real estate holdings into a real estate investment trust. His reasoning: “McDonald’s is basically a real estate company that sells burgers on the side.”
McDonald’s CEO Steve Easterbrook’s conclusion was similar.
“The potential upside isn’t compelling,” Easterbrook stated, “and the future value at risk too great.”
But income investors shouldn’t be concerned. Rather than spin off Mickey D’s brick-and-mortar holdings into a high-yield, higher-risk REIT, Easterbrook and company announced a 5% dividend hike, bringing the quarterly payout to 89 cents a share. That’s good enough for a 3.6% yield based on the recent McDonald’s share price.
I’d rather take a good yield in a blue chip stock with a proven track record and ubiquitous brand name than a higher yield in a fledgling real estate venture any day.
Here are some of my favorite Wyatt Investment Research articles of the week:
Investors Should Stock Up on This Grocery Stock – Commitment to growth and innovation has fueled 54% gains for this grocery stock in 2013, 62% gains in 2014 and 16% gains so far in 2015. Though the stock has risen more than 100% in the past three years it still trades at a reasonable valuation: roughly 19 times 2016 earnings.
Ag Merger Mania on the Horizon – With crop prices shriveling, agricultural companies are under pressure from activist shareholders to improve returns through consolidation. But the possible M&A combinations between all the ag companies are almost too much to get one’s arms around. So grab your merger scorecard.
The Best Income Investment if Interest Rates Rise – Federal funds rate futures contracts are priced with a 68% probability that the Fed will raise interest rates next month. If the Fed does pull the trigger, this investment offers the potential for a rising income stream. And if the Fed doesn’t raise rates, investors still get a stable source of high-yield income on the cheap.
Valeant Fallout Makes These Dividend Stocks Enticing – The Valeant Pharmaceuticals International (NYSE: VRX) fallout appears far from over. Shares of the drug company are now down 70% in just three months amidst allegations that it used a specialty pharmacy to inflate sales through phony customer accounts. Stock prices of many drug companies have been taken to the woodshed because of concerns over what the Valeant issues mean for the rest of the industry. But if you’re looking to avoid the Valeant volatility, look no further than these large-cap biotech dividend stocks.
Activision Changes Tack, Bets on Mobile Gaming – Activision Blizzard (NASDAQ: ATVI) is paying $5.9 billion to acquire King Digital Entertainment (NYSE: KING), the European leader in mobile gaming. The acquisition is immediately interesting because it joins a leader in console video games with a powerhouse in mobile gaming. Yet the deal is somewhat surprising because of Activision CEO Bobby Kotick’s previous aversion to the entire mobile free-to-play business model. Will Kotick’s about-face pay off?
The Best Invest For Kids Stocks of 2015 – Conferences like the annual Invest For Kids charity event in Chicago are typically a great way to find underrated stocks that the market might be overlooking. This year was no exception.
Is This the Tech Bubble 2.0? – Venture capitalist Bill Gurley of Benchmark Capital claims that billion dollar startups delaying their IPOs is “probably the worst advice that’s ever been given in Silicon Valley.” But, is it bad just for Gurley and other venture capitalists? Or are there broader consequences for the market?
Don’t Turn the Lights Off on This Electric Dividend Stock – It’s not an easy time to be an industrial company, but beneath the scary headlines, the best corporations continue to do what they’ve always done: pay dividends. And on Nov. 3, this industrial company raised its dividend to $1.90 per share annualized. This represents the 59th year in a row that it has increased its payout.
Have a great weekend!