Valuentum makes two actively-managed portfolios available to members: a Best Ideas portfolio (housed in the monthly Best Ideas Newsletter) and a Dividend Growth portfolio (housed in the monthly Dividend Growth Newsletter). Each portfolio has a different goal and a different strategy.
The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds each idea from a Valuentum Buying Index rating of a 9 or 10 (consider buying) to a rating of a 1 or 2 (consider selling). The goal of the Best Ideas portfolio is to generate a positive return each year and to exceed the performance of a broad market benchmark.
The Dividend Growth portfolio seeks to find underpriced dividend growth gems that generate phenomenal levels of cash flow and have pristine, fortress balance sheets, translating into excellent Valuentum Dividend Cushion scores. The goal of the Dividend Growth portfolio is to generate a mid-to-high single digit annual return over rolling three-to-five year periods.
This week brought favorable news for two of the holdings in the newsletter portfolios. Altria (MO), which is held in both the Best Ideas portfolio and Dividend Growth portfolio, announced that it will increase its dividend by more than 8%, to $0.52 on a quarterly basis. Altria’s dividend growth prospects are not only cushioned by cash-rich tobacco operations but also by its ~27% stake in global and fast-growing brewer SABMiller. Altria now yields ~4.9% and remains one of our favorite dividend growth ideas in the corporate space.
We’ve long been in favor of eBay (EBAY) spinning off its PayPal division, and news has picked up yet again on this topic. According to reports, “eBay has been telling potential recruits for the position of PayPal CEO that it’s considering spinning off the payments business as soon as next year, according to two people briefed on the conversations.” To us, spinning off PayPal and maintaining the economic relationship via contractual means makes a whole lot of sense, especially when evaluating market valuations for fast-growing payment processors. We think the market is simply valuing eBay incorrectly as we outline in this piece here. We won’t be making any changes to our ~3% weighting in the e-commerce giant in the Best Ideas portfolio and maintain our view that shares of eBay are worth ~$90 each, offering investors’ more than 50% upside.
What is considered a ‘Best Idea’ at Valuentum?
A best idea in Valuentum parlance is a holding in the Best Ideas portfolio and/or the Dividend Growth portfolio. We typically add shares to the Best Ideas portfolio when they register a high rating (a 9 or 10 = a “we’d consider buying” rating) on the Valuentum Buying Index and hold them until they register a low rating (a 1 or 2 = a “we’d consider selling” rating) on the Valuentum Buying Index. We don’t add all firms that register a high score on the Valuentum Buying Index to the actively-managed portfolios due to sector weighting or overall market valuation considerations, among others. The Valuentum Dividend Cushion is a key factor behind adding companies to the Dividend Growth portfolio and is used in conjunction with a company’s annual dividend yield, its price-to-fair value ratio and Valuentum Buying Index rating.