Image shown: The top weighted ideas in the Best Ideas Newsletter portfolio continued to lead the charge during the trading session Friday, July 23. Facebook and Alphabet rallied on favorable reports from social media peers, while Vertex continues to recover thanks in part to encouraging views on CRISPR technology, while Visa looks to be back on track. DPZ had a strong trading session July 22 and experienced some profit taking. Image source: Seeking Alpha.
By Brian Nelson, CFA
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During the trading session July 23, shares of top-weighted Facebook (FB) surged 5.3%, to close at $369.79. In December 2018, Facebook’s shares were trading hands in the mid-$120s, and the past few years have been an absolute boon for those following the Valuentum methodology. Facebook has registered a Valuentum Buying Index rating of a 10 on five separate occasions since April 2018. The stock is up over 35% year-to-date and up nearly 59% during the past 52 weeks. We continue to like Facebook as one of the top weightings in the Best Ideas Newsletter portfolio and peg its fair value estimate at $413 per share.
Facebook hasn’t been the only company that has been on a tear of late. The parent of Google, Alphabet (GOOG) jumped ~3.4% to close at $2,756.32 per share Friday. The company shares a top weighting in the Best Ideas Newsletter portfolio with Facebook, and Alphabet is up more than 57% year-to-date and more than 81% over the past 52 weeks. Our fair value estimate for Alphabet stands at $2,792 per share, and as with Facebook, we expect continued upside potential on an intrinsic value basis. Twitter’s (TWTR) and Snapchat’s (SNAP) second-quarter earnings reports showed the online ad market remains in secular growth mode.
The digital economy is here to stay, and online advertising is not a luxury but rather a necessity. Though many aren’t too big of fans of Facebook, the company, its stock continues to be severely underpriced, as its Shops and Dating features remain under-monetized, while potential at other properties such as Messenger and WhatsApp remain in the early innings, in our view. Our valuation of Facebook doesn’t include the tremendous promise that it holds in other areas of nascent growth and largely only considers Facebook/Instagram, meaning there is further upside potential beyond our fair value estimate range. Alphabet is benefiting from a lot of similar trends.
The chart of the third top-weighted idea in the Best Ideas Newsletter portfolio is looking attractive, with shares of Visa (V) back on track, in our view. The company is up over three-fold the past 5 years, but its shares haven’t kept up with the top two powerhouses of Facebook and Alphabet in recent months. However, it had a strong 2% jump during the trading session July 23. Visa benefits from a tremendous network effect and doesn’t take on credit risk like that of Discover (DFS) and American Express (AXP). It, too, is a play on increased digital purchasing activity, as most businesses and consumers continue to use credit cards to handle online purchases. Visa has been a strong performer for the Best Ideas Newsletter portfolio over the years.
Many know how bullish on the stock markets we have been in recent months, and while the GameStop/AMC Entertainment saga has given us some pause as we remain cautious regarding price-agnostic trading, the backdrop of the financial markets remain sound at the moment. Inflation concerns are overblown, and alternatives in the fixed income market remain unattractive, as the effective yield on junk rated debt remains below that of the fund distribution yield of an ETF that tracks the performance on the top 80 high dividend-yielding companies within the S&P 500 Index. We expect the ongoing rotation of fixed income into dividend growth to add to more stock buying in the coming months to years. Trillions of dollars remain in money market funds.
What we’ve noticed the past few years is that members that subscribe to all of our publications tend to be highly satisfied. This is because they are getting all of our correspondence. Please be sure to subscribe to all of our work. You can subscribe to the Exclusive here, subscribe to the High Yield Dividend Newsletter here, and to our additional options commentary here. Many only with a regular subscription are aware of the success of the Best Ideas Newsletter portfolio but may not know that our capital appreciation ideas and short-idea considerations in the Exclusive have been phenomenal, too. For example, some 55 of 61 short idea considerations have worked out in the Exclusive since inception, and this in one of the biggest bull markets in history!
The High Yield Dividend Newsletter portfolio has been doing great, too. The acquisition of QTS Realty Trust (QTS), a data center REIT, by Blackstone Infrastructure Partners helped drive up the stock price of CyrusOne (CONE) and Digital Realty (DLR)–both included in the HYDN portfolio. Investors continue to warm up to the self-storage REIT space and are driving share prices of the relevant firms higher–good news for CubeSmart (CUBE) and Public Storage (PSA), which are both included in the HYDN portfolio, along with Exclusive income generation ideas National Storage (NSA) and Global Self (SELF). Crown Castle (CCI) is also on a nice upward trend of late (included in HYDN portfolio), aided by recent arrangements with key customers and future clients in the US telecom industry.
We’re excited about new initiatives coming up, too. Our team will be rolling out an ESG (environmental, social, corporate governance) newsletter and ESG simulated newsletter portfolio in the coming weeks to help advisors attract and serve clients in this area. We want our financial advisor clients to succeed, and with recent developments in the ESG space, we feel more comfortable rolling our services to better allow for their growth. We’ll have a broader announcement in this area in the coming weeks. Keep up the great work all, and please don’t forget to spread the word about Valuentum. We appreciate it.
Have a great weekend!
Related: PINS, MGNI, MTCH
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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, and IWM. Brian Nelson’s household owns shares in HON, DIS, HAS. Valuentum owns shares in VOO, SCHG, DIA, and QQQ. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.