Stop Using the Darn PE Ratio For Goodness Sake!
December 15, 2017
President of Investment Research Brian Nelson talks about his views with respect to backtests versus walk-forward tests, and explains why the PE ratio is doomed as a value tool. It’s all psychological. Running Time: ~12 minutes.
Video: What Cash Flow Are You Talking About?
December 14, 2017
President of Investment Research Brian Nelson reviews important topics from the first six episodes of “Off the Cuff,” and goes into great detail about all the intricacies of “cash flow” from traditional free cash flow to enterprise free cash flow valuation. You know you want to watch. Running Time: ~14 minutes To view Valuentum’s updated YouTube page, please see here. Pipelines – Oil & Gas: BPL, BWP, DPM, ENB, EPD, ETP, EVEP, HEP, KMI, MMP, NS, OKS, PAA, SE, SEP, WES
Comment: Verint’s Traditional Free Cash Flow
December 14, 2017
Image shown: Page 1 of 16, Valuentum’s 16-page stock report on Verint (VRNT) Verint is free cash flow positive, implying that non-GAAP earnings adjustments are of high quality. By Kris Rosemann and Brian Nelson, CFA Q: What are your thoughts on this bear case for Verint Systems? “Verint’s Profits Don’t Justify Its High Valuation” A: We’re somewhat puzzled by the financial analysis of the write up, perhaps most with the author’s calculation of free cash flow, which may not truly reflect the goings-on of the cash flow statement (the author defines free cash flow as NOPAT less the change in invested capital). Adjustments to free cash flow are typically made within the valuation context (as NOPAT less the change in
Nelson Answers Questions! Valu + entum
December 13, 2017
President of Investment Research Brian Nelson answers questions about the stock market and investing. Keep the emails and comments coming! Running time: ~10 minutes. To view Valuentum’s updated YouTube page, please see here. Related ETFs: SPY, DIA, QQQ
Video: Nelson’s Active Management Theorem, Poker and “High Society,” Inertia and the Value-Growth Conundrum
December 11, 2017
President of Investment Research Brian Nelson details his simple new theorem of the stock market that may change everything you believe. Nelson explains using poker as an example, and he goes on to caution about the concept of inertia, and how investing has somehow transformed into a “game” — if investors truly believe there are ‘value’ and ‘growth’ stocks. A must-watch intrigue. Running time: ~11 minutes.
Omega Healthcare and Holly Energy Partners: Case Studies in REIT and MLP Income Evaluation
December 11, 2017
An assessment of a REIT’s or MLP’s dividend/distribution strength not only should reflect firm-specific fundamentals, but also external market conditions, which are paramount to the sustainability of most any REIT’s or MLP’s payout. Let’s remind readers of this important dynamic, which is captured via the two different Dividend Cushion ratios, and walk through what goes into the analysis we pursue when making a change with respect to our assessment of a company’s dividend health or safety. By Kris Rosemann and Brian Nelson, CFA Real estate investment trusts (REITs) and master limited partnerships (MLPs) are not your typical operating companies. These business structures have certain provisions that incentivize lofty and growing dividends/distributions, which sounds good, but because these business models tend
Video: Indexing/Quant Bubble, Pitfalls of Backward Multiple Analysis, and Thoughts on the CAPE Ratio
December 10, 2017
President of Investment Research Brian Nelson talks about what causes a stock pricing bubble, notes how the “price setters” are disappearing in today’s market, explains the pitfalls of backward-looking multiple analysis, and shares his thoughts on the CAPE (cyclically-adjusted price-to-earnings) ratio. Running time: ~11 minutes Internet Content & Services: AABA, AKAM, ANGI, BIDU, FB, GOOG, GRUB, JD, LNKD, SOHU, TCEHY, TRIP, TWTR, TZOO, ULTI, WBMD, YELP Internet Content & Catalog Retail: AMZN, BABA, EBAY, EXPE, GRPN, IACI, LQDT, OSTK, PCLN, QVCA, STMP
Follow Up on Loxo Oncology, Clovis Oncology, and Nevro
December 10, 2017
We like to write about a wide range of ideas in the financial markets, even if such ideas may be well beyond the high end of our own risk spectrum. Our writings on the smaller, high-growth (and riskier) ideas in healthcare/biotech, for example, remain an attempt to draw attention to some of the fantastic innovation helping to reshape treatment paradigms. Let’s follow up on some of the high-risk companies in the healthcare/biotech arena that we previously highlighted. By Alexander J. Poulos Loxo Oncology Scores a Major Partnership Image shown: Loxo is bouncing off of support levels following its “gap higher” earlier this year. This looks bullish. Chart as of December 10. In July of this year, we provided a detailed
Global Blood Therapeutics Follow Up
December 10, 2017
In this piece, let’s discuss the recent positive events that have unfolded for Global Blood Therapeutics. By Alexander J. Poulos Global Blood Therapeutics In our initial coverage of Global blood Therapeutics (GBT), we presented our bullish thesis based on some exciting phase 2 data for GBT 440 for the treatment of Sickle-Cell Disease (SCD). We believe the most salient point from our initial report “Best in Biotech? Global Blood Therapeutics’ Promising Treatment for Sickle Cell Anemia” We believe the dramatic drop in irreversibly sickled cells bodes well for the ultimate commercial potential of the product in our opinion. The stunning drop in sickled cells of 77% at the median versus a 9.7% increase in the placebo arm indicates, in our
Addressing the Intricacies of the Dividend Cushion Ratio
December 9, 2017
The Dividend Cushion ratio continues to build an impressive track record of warning investors of impending dividend cuts, but it’s not perfect. Let’s examine a few recent cases. By Kris Rosemann and Brian Nelson, CFA The Dividend Cushion ratio has proven to be an extremely useful tool for income investors to help safeguard their portfolios from dividend cuts, but it does have its limitations. Sometimes, external forces that cannot be captured in the calculation of the Dividend Cushion can impact the sustainability of the dividend payment. Some of these external factors can be as complex as a transformational acquisition, to as straightforward as an unexpected guidance reduction, to as simple as a capital allocation policy change. The board sets the
