“You all are truly the best. I really mean that. You should know that I read every email I receive, and I truly value our relationship with each and every one of you!” – President Brian Nelson, CFA
It is with great pleasure that I am writing this note to you. In it, I’d like to cover four topics.
First, we continue to grow and grow and grow! We reached another new milestone this quarter with respect to subscriber count.
Both the Valuentum Best Ideas portfolio and Valuentum Dividend Growth portfolio are performing well, and the Valuentum Buying Index continues to identify outperformers, the most recent example was the flawless execution of previously 10-rated Baidu (BIDU). For those following the Dividend Growth portfolio, Microsoft (MSFT) has been a top performer and the software giant just raised its dividend yesterday!
I know many of you have profited greatly on these ideas because I’ve talked about them a lot (in email, in person, and over the phone). I also appreciate that some valued members continue to meet our approach with a healthy dose of skepticism. This is only to be expected, and we wouldn’t have it any other way. Our process is based on tried-and-true principles, and putting them together to maximize profit while minimizing risk is going to take some time getting used to.
Second, this year has also been full of analytical developments. The team worked on expanding Warren Buffett’s economic moat framework in adding Economic Castle ratings to our coverage universe. The Economic Castle rating is a measure that assesses the magnitude of economic value creation over the immediate 5-year period. We think it is a great concept to use with the economic moat, and it can be combined with the plethora of valuable factors used to identify the best performing equities and those that serve all stakeholders well. Rolling this rating out across our vast coverage universe continues to be ongoing.
The Valuentum dividend methodology also continues to advance. During the year, the Dividend Cushion ratio preserved its track record of separating strong dividend growth firms from weak ones. The Dividend Cushion ratio is calculated by dividing the sum of a firm’s balance sheet net cash position (total cash less debt) and its 5-year forecast of free cash flow (cash from operations less capital expenditures) to its 5-year cash dividend payments to arrive at a comprehensive dividend coverage ratio. We think it is one of a kind. The ratio is completely forward-looking and is derived from items directly off the financial statements.
You should continue to expect analytical developments at Valuentum and view improvements to the website as ongoing. Please don’t forget to read and watch the suggested reading and videos (they are in the middle of the home page after logging in). The reports are infinitely more valuable with an understanding of the framework. As it relates to investment research, a good rule of thumb is to not pay for book reports or historical data, but pay handsomely for informed, insightful conclusions and forward-looking analysis (especially if it comes with a great track record). The latter is what we strive to provide at Valuentum.
Third, I’ve been getting a lot of feedback from members on the videos that we’ve been adding to the website recently. From ‘great job tying things together’ to ‘honest and competent’ to some other ones like ‘improve the lighting and wear a blue suit.’ You all are truly the best. I really mean that. You should know that I read every email I receive, and I truly value our relationship with each and every one of you!
But why, you may ask, the uptick in the number of videos recently? Well, I know that many of you have seen my videos on CNBC. It’s a lot of work doing those for a two-minute clip or so. In them, you’ve seen me in my best attire, all dressed up, and looking great in the best of lighting. You already know that this is what I do and that I’m a frequent guest on such shows.
However, for the Valuentum videos, I wanted to make them more personal, more real life — less flashy and less media-oriented. I want you to feel that we’re talking face to face. I want you to see that we’re real people here at Valuentum, working in your best interest. We’re not trying to look the part – we are the part. This is what I’m hoping for with these videos. I don’t think any other service provider has this commitment to such a focused interaction. We’re raising the bar again.
And of perhaps utmost interest, I will be talking economic moats in a video in coming weeks. Trust me — you’re not going to want to miss this. The topic is: Are moats priced into equity prices? The answer will almost surely surprise you — and it’s something you’ve never seen before. The video will be posted soon, and we hope you find this teaser appetizing. We’re pretty excited about it.
Fourth, I wanted to tell you a brief personal story.
I once subscribed to the Wall Street Journal via credit card, and I didn’t know that it was a recurring subscription (or maybe I did, but I can’t really remember). A year had passed so quickly and when it came time to renew, there was some odd charge on my credit card. I was upset. I wanted to cancel immediately. I wanted my money back right this second!
But then I thought about it. I enjoy reading the Wall Street Journal. I set up the payment profile myself, and a subscription to a service is ongoing until it is canceled, whether it’s monthly or annually. I really had nothing to be upset about because I liked the content, and I set up the recurring payment profile. As a result, I decided not to cancel because I really enjoy reading the journal. This is a true story.
I’ve learned from this experience, and I don’t want you to feel the emotional ups and downs with subscription charges that I felt. Therefore, I want to remind you that you are a valued and paying customer of Valuentum. Your payment profile is still active with us regarding ongoing annual or monthly renewals. We appreciate your continued business, and we trust that you enjoy reading and viewing our content, too!
In case you missed it, here’s my latest video on the Valuentum Buying Index. It’s about 5 minutes. I’ll try to keep the videos to that length going forward. And please don’t forget I’ll be talking moats in coming weeks (you will be surprised). Any and all feedback is always welcome.
/Explaining_the_Valuentum_Buying_Index
Thank you all for your attention!
Yours sincerely,
Brian Nelson, CFA
President, Investment Research
brian@valuentum.com
Valuentum Securities, Inc.