Brian Nelson

Cisco Buys Splunk

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Image Source: Brandon Leon By Valuentum Analysts Dividend Growth Newsletter portfolio holding Cisco (CSCO) is all about growing its recurring revenue base these days, and its announcement that it will buy Splunk (SPLK) on September 21 will not only help in a big way towards that goal, but the deal will also position Cisco for tremendous opportunities in the booming market that has become artificial intelligence [AI]. That said, some investors were not fans of the purchase price – some $28 billion in cash – but we think the price is fair and strategically, there’s nothing wrong with adding to the fold an asset-light, recurring-revenue business that has the foundation to be a key long-term player in AI. We’ll be … Read more

Details Regarding Visa’s Exchange Offer

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By Brian Nelson, CFA Best Ideas Newsletter portfolio holding Visa Inc. (V) has a number of different common stock and preferred share classes. Investors in Visa generally hold its class A common stock that is traded on the NYSE, but the credit card giant also has class B and class C common stock as well as series A, series B, and series C preferred stock that are tied to the value of its class A common shares. Due to prior litigation corresponding to its initial public offering and 2007 capital restructuring, Visa has both a U.S. retrospective responsibility plan and a European retrospective responsibility plan, and pursuant to the terms of these plans, the company’s class B and class C … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

Fed Rate Decision, UAW Strike Continues, Microsoft Ups Payout

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Image Source: Mike Mozart By Brian Nelson, CFA If you’re thinking like us about the ongoing Fed rate-hiking cycle, you’re probably thinking that perhaps we’ll see another rate hike or two down the road, even if the Fed pauses at today’s September 20 meeting. However, whether the Fed pauses from here on out or executes a couple more rate hikes, it really shouldn’t matter much to long-term investors. From where we stand, the conversation about interest rates should now be shifting away from worries about elevated inflation to the future positive prospects that correspond to the work that the Fed has already done. With the market-cap weighted S&P 500 (SPY) just a stone’s throw away from all-time highs, despite aggressive … Read more

The Role of Luck in Investing and How To Think About It

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Dear members: — For every Amazon (AMZN) that made it, there are hundreds, maybe thousands, from the dot-com era that didn’t. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla (TSLA), there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. — For every streaming enterprise like Netflix (NFLX), there is a Napster that failed. Most of us probably don’t even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet (GOOG, GOOGL), there’s an AltaVista or Netscape. For every Apple (AAPL), there … Read more

Apple’s Big “Wonderlust” Event Is Business as Usual

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Image Source: Apple By Brian Nelson, CFA On September 12, Apple Inc. (AAPL) hosted its widely-anticipated “Wonderlust” event. The market was anticipating several new products, and Apple delivered. The firm’s iPhone 15 Pro, iPhone 15, Apple Watch Series 9, and Apple Watch Ultra 2 will go a long way to retaining share in smartphones and wearable devices, but the company opted to leave prices unchanged. Many had been expecting a price increase, but we’re not reading too much into Apple’s decision to leave them unchanged, given economic uncertainty in the U.S., Huawei’s release of its latest phone (the Mate 60 Pro) and rising geopolitical tensions between the U.S. and China. The iPhone 15 Pro frankly looks awesome, and it is … Read more

ESG Issues Plague Discover

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Image: Discover’s shares have faced pressure due to a card misclassification issue and the resignation of CEO Roger Hochschild. Discover Financial’s (DFS) shares have faced a difficult 52-week stretch as corporate news hasn’t been great. The company’s equity is down nearly 14%, while the S&P 500 (SPY) is up more than 8% over the same time stretch. Though Discover has the potential to bounce back from the troubles it has encountered, the firm has certainly been in hot water since it disclosed a card product misclassification. From its press release on July 19: Beginning around mid-2007, Discover incorrectly classified certain credit card accounts into our highest merchant and merchant acquirer pricing tier. Incremental revenue resulting from this card product misclassification … Read more

Oracle’s Shares Have Performed Fantastically

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Image: Oracle’s shares may have sold off aggressively during the trading session September 11, but they have done quite well as a member of the Dividend Growth Newsletter portfolio. By Brian Nelson, CFA On September 11, Dividend Growth Newsletter portfolio holding Oracle Corp. (ORCL) reported first-quarter fiscal 2024 results that missed expectations modestly on the top line. Shares tumbled aggressively during the trading session September 12, but we think most of the sell-off is just profit taking. Prior to the report, Oracle’s shares were up more than 50%, while they are up over 64% during the past year. The high end of our fair value estimate stands at $136, while the firm yields ~1.3% on a forward estimated basis. During … Read more

Our Latest Report Updates

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The data for these companies will be updated on their respective web pages this weekend. Download their updated 16-page reports (pdf) by selecting the link below. Chevron (CVX) ConocoPhillips (COP) Enbridge (ENB) General Mills (GIS) Keurig Dr Pepper (KDP) Kimberly-Clark (KMB) Kroger (KR) Mondelez Intl (MDLZ) Occidental Petroleum (OXY) Paramount Global (PARA)  Pioneer Natural Resources (PXD) T-Mobile (TMUS) ———- In our 16-page equity research reports, we offer a fair value estimate for each company based on a rigorous and transparent discounted cash flow process, assess the attractiveness of a stock based on a firm-specific margin of safety, and provide a relative valuation comparison in the context of the company’s industry and peers. Each report includes detailed pro forma financial statements, … Read more

In the News: Lockheed Martin, Apple, Enbridge

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Image Source: Björn Lammers By Brian Nelson, CFA On September 6, Dividend Growth Newsletter portfolio holding Lockheed Martin (LMT) announced in a regulatory filing that it expects to deliver 97 F-35 fighter jets during 2023, down from its previous expectation of 100-120 planes. Reports indicate that the production hiccup occurred at supplier L3Harris Technologies (LHX) with respect to the development of the aircraft’s integrated core processor, pushing back Lockheed’s delivery timeline for the combat jet. Though the news is not good, we’re not reading much into it. Lockheed noted that it continues to produce F-35s at a pace of 156 per year. We’re viewing this as a mere timing issue and not making any changes to our $440 per share fair … Read more