Member Articles

What to Do with Tesla?

by

Image Shown: Tesla’s shares have surged during the past 7-8 months driven by a confluence of factors from fundamental improvements, a massive short squeeze, quantitative momentum traders and speculators anticipating its addition to larger indexes. We’re maintaining our view that shares of Tesla are overvalued, and investors need to be careful dabbling in these types of equities where price-agnostic trading is running wild. By Brian Nelson, CFA Tesla (TSLA) is a cult stock. There are those that either love it or hate it, and we seem to be among the few that are in the middle camp. We think the company makes awesome products, and we’re excited to learn more about the Cyber Truck, but its stock has served as … Read more

Alphabet Reports Earnings and Its Fundamentals Remain Stellar

by

Image Shown: Shares of Alphabet Inc Class C, a top weighted holding in our Best Ideas Newsletter portfolio, continued their upward climb in 2019 and maintained their stellar trajectory. By Callum Turcan On February 3, Alphabet (GOOG) (GOOGL) reported fourth quarter and full year earnings for 2019. The firm’s bottom-line beat consensus estimates, but Alphabet’s top-line miss sent shares modestly lower the next day on Tuesday, February 4. We continue to like Alphabet’s Class C shares as a top weighted holding in our Best Ideas Newsletter portfolio with our fair value estimate sitting at $1,440 per share of GOOG (under our base case scenario) and the top end of our fair value estimate range sitting at $1,800 per share of … Read more

Our Reports on Stocks in the Management Services Industry

by

Image Source: GovWin Structure of the Management Services Industry The management services industry is primarily comprised of advisory and consulting firms. The reputation and performance track record of constituents is necessary to drive a high level of repeat/referral business and attract/retain top professionals. Most industry constituents produce consistent cash flows and require very little capital spending to maintain operations. Still, firms remain exposed to capital market changes, including M&A activity and legal/regulatory requirements, which may impact demand for their business and utilization of professionals. We generally like the structure of the group. We’ve optimized our coverage. For consumer discretionary equities, please look here.

Amazon Posts Blowout Earnings, Shares Back Near 2018 Highs

by

Image Shown: After reporting fourth quarter earnings for 2019, shares of Amazon Inc have returned to their 2018 highs as of this writing. By Callum Turcan On January 30, Amazon Inc (AMZN) reported fourth-quarter earnings for 2019 that handily beat consensus expectations. Shares of AMZN are now trading back near their highs first reached in 2018. We like Amazon’s growth trajectory but don’t include Amazon in our newsletter portfolios due to the enormous uncertainty in the company’s key valuation drivers, which has a magnified impact on changes in its fair value estimate. That’s a product of its high operating leverage. Even a ~50 basis point difference in its expected gross margins versus its realized gross margins, for example, could have … Read more

Visa Reports Earnings and Mildly Adjusts Guidance

by

Image Shown: Shares of top weighted holding in our Best Ideas Newsletter portfolio Visa Inc continues to outperform the S&P 500. By Callum Turcan On January 30, Visa Inc (V) reported earnings for the first quarter of its fiscal 2020 (period ended December 31, 2019). While shares sold off on the news, V has since recovered some lost ground and it’s important to keep in mind Visa is up ~42% over the past year as of this writing while the S&P 500 (SPY) was up just ~19% during this period. We continue to like Visa as a top weighted holding in the Best Ideas Newsletter portfolio and given the combination of the firm’s strong long-term technical and fundamental performance (on … Read more

Our Reports on Stocks in the Dollar Store and Department Store Industries

by

Structure of the Multiline Retail (discount) and Department Store Industries The retail discount store industry provides consumable basic needs to customers primarily in the low- and middle-income brackets. More than one third of the industry’s customers live in households that earn less than $20,000 per year, making the group’s results counter-cyclical–as more households generate lower income due to poor economic conditions, store growth and same-store-sales opportunities increase. Still, competition is fierce among constituents and with many other retailers, including grocery stores. But given the niche low-price strategy of participants and their counter-cyclical nature, we like the group. The department store industry faces intense pressure from online retail and fierce competition from smaller retailers and discounters. Firms in the industry tend … Read more

Coronavirus May Trigger Long-Anticipated Global Recession

by

Image: Wuhan New Coronavirus This was the catalyst that nobody was expecting, a novel coronavirus that nobody had in their economic models. We think global economic activity is slowing as we speak, and the spread of the virus may only accelerate in mainland China and elsewhere. Investors should keep a level head and perhaps think about adding protection to their portfolios before it becomes too expensive. By Brian Nelson, CFA How to Use Valuentum’s Investment Research Services >> We’ve walked through a number of scenarios that could trip the global economy into recession–global deflation that tips over the weakest European banks and causes contagion, global military conflict with North Korea or Iran that disrupts economic activity, increased volatility driven by … Read more

Microsoft Continues to Outperform After a Great Earnings Report

by

Image Source: Microsoft Corporation – Second Quarter Fiscal 2020 IR PowerPoint Presentation By Callum Turcan A mid-weighted holding in our Dividend Growth Newsletter portfolio, Microsoft Corp (MSFT) continues to fly higher after reporting second-quarter earnings for its fiscal 2020 (period ended December 31, 2019) on January 29. Microsoft beat on both the top- and bottom-line versus consensus estimates, and shares of MSFT yield ~1.2% as of this writing. Outperformance at its cloud computing operations were largely responsible for the beat and nice forward-looking guidance. Newsletter Portfolio Commentary We continue to like Microsoft in our Dividend Growth Newsletter portfolio even though shares have run up above the top end of our fair value estimate range. The strong performance of Microsoft’s stock … Read more

AT&T Continues to Follow Through With Its Mission

by

Image Source: AT&T Inc – Fourth Quarter and Full-Year Earnings Presentation By Callum Turcan One of our holdings in the High Yield Dividend Newsletter portfolio, AT&T Inc (T), reported full-year and fourth quarter results for 2019 on January 29. Shares of T sold off modestly on the mixed report (adjusted non-GAAP EPS beat consensus estimates but revenues fell short of expectations), and now shares of T yield ~5.6% as of this writing. We continue to like what we see in AT&T as management is delivering on major value creating initiatives: deleveraging, margin expansion, and ultimately free cash flow growth. More information on the High Yield Dividend Newsletter >> Free Cash Flow Giant AT&T generated almost $48.7 billion in net operating … Read more

Debt-Free Facebook’s Free Cash Flow Surges 38%, Adds to Buybacks

by

Image Source: Facebook Q4 2019 slides. Revenue growth at Facebook remains solid, if not impressive. By Brian Nelson, CFA On January 29, Facebook (FB) reported better-than-expected fourth-quarter 2019 results. In the quarter ending December 31, total revenue advanced 25%, but total costs and expenses leapt 34%, translating to operating-income expansion of just 13%. This was better than the full-year number, which showed operating income fall 4% as costs ballooned. We don’t think the market liked the full-year numbers which were weighed down by a weak first half of the year. The fourth quarter, itself, was solid, and Facebook continues to plow ahead. Image Source: Facebook Q4 2019 slides. The company’s operating margin has bounced back significantly. While we expect the … Read more