Member Articles

Question Answered

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Let’s start with the answer first… Answer: Thanks for reaching out. You are correct. The Convergys (CVG) PDF report was updated after the Valuentum Buying Index screen was published (the screen that is on the left column of our home page). The next update of the Valuentum Buying Index screen will include the updated information. The latest article that mentions Convergys, which you reference, explains that there has been a change to the rating since the last screen. The dates are very important, and the most recent information will always be found in the individual PDF reports. We don’t have a hard-and-fast rule for the big middle of Valuentum Buying Index ratings (3-8), which we generally view as “we’d consider holding” … Read more

Long-time 9-Rated Broadcom Soars!

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The Valuentum Buying Index is a system that is designed to generate new ideas. Firms that register a 9 or 10 on the ranking system are ones that our team digs into to decide whether they pass muster for inclusion into the newsletter portfolios. Not all 9’s and 10’s make the cut, but that doesn’t mean they are poor ideas. Once an idea registers a high rating and is added to the newsletter portfolios, it is held until it registers a low rating — thereby, capturing the pricing cycle from undervalued and “going up” to overvalued and “going down.”  The newsletter portfolios are performing great, and so are some of the recent highly-rated companies! Convergys (CVG) was a company that … Read more

Market Is Catching On To Alibaba

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Since Alibaba’s (BABA) IPO in September 2014, we have been adamant about the long-term potential of Chinese e-commerce giant Alibaba. Our fair value estimate of its share price currently sits at $134. Though we expect price-to-fair convergence to happen eventually, it will take some time. Despite currency and country-specific risk concerns, as well as the recent development of potential tax ramifications of Yahoo!’s (YHOO) spinoff of Alibaba shares and whether ultimately the tax bill would land on shareholders’ laps, the company is currently undervalued, and the firm has just started to turn heads regarding the improvement in its monetization rate. To us, it will always be more important that a company is undervalued than where it generates its business. Currency … Read more

A Tale of Two Companies: Duality in the Valuentum Buying Index

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We’re not much for pumping our own chest, and it’s never a good idea to argue by example, but when certain situations help prove our investment beliefs, we take notice. In this piece, let’s take a look at two firms that have been at opposite ends of our Valuentum Buying Index. At the high end of the scale we have American International Group (AIG). The firm has been rated a 9 on the VBI scale–which rates companies on a scale of 1-10–for years now. Our low-end example will be Lumber Liquidators (LL). While the firm’s poor rating may seem like an obvious call, the importance of our rating is based on timing, which will be expanded upon shortly. Let’s take … Read more

Hewlett-Packard Still Not Our Favorite Tech Idea

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Image Source: wlodi On May 21, Hewlett-Packard (HPQ) reported its 2015 second-quarter earnings, which included an update on its turnaround plan and upcoming separation. As you may be aware, HP has had a difficult time combatting secular demand declines and macroeconomic headwinds in recent years, and its near-term outlook remains weak. Though it scores exceptionally well on our Valuentum dividend metrics, the firm’s turnaround plan will likely affect its dividend negatively. Overall revenue is expected to continue to decline in coming periods, but management has high hopes for the effectiveness of the separation of HP into two Fortune 50 companies. Reported revenue for the quarter was a slight miss at ~$25.5 billion, a decline of 7% on a reported basis … Read more

Target or Walmart?

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Image Source: Steven Depolo It’s not the roaring 1990s anymore, investors! There are serious risks to the business models of Target (TGT) and Walmart (WMT), and everyone is looking the other way, consoling themselves with their steady and growing stream of dividends. These investors say, “as long as they pay the dividend, I don’t care,” as if this signals a proud achievement in some way, by which many experienced market participants will then respond, “and now we know why the individual investor is frequently blindsided.” The dividend is a symptom of the health of free cash flow, and management teams can dip into the balance sheet to support the payout. Only trends in free cash flow generation, supported by moaty … Read more

The Tax Man Cometh Anyway?

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Image Description/Source: Berlin Wall, 1963; Roger We ran a video in late January about the concerns we had with Yahoo’s (YHOO) fair value uncertainty, and it turns out they weren’t unfounded (see video). One of our biggest issues surrounding the company was the potential tax ramifications of the spinoff of Alibaba shares (BABA) and whether ultimately the tax bill would land on shareholders’ laps. It turns out that it just might. Bloomberg reported May 19 that the IRS is considering a rule change that would “affect IRS rules for spinoffs by creating new US guidelines that might require a minimum size for active businesses inside the spun-off company.” As it stands right now, Yahoo’s spin-off is just an investment entity with no … Read more

What’s The Deal with US Housing?

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Pictured: An unfinished sub-division in rural Illinois, May 2015. Springtime is here, and housing construction is booming. The US Census Bureau’s latest tally for the seasonally-adjusted annualized rate of housing starts in April came in at 1.14 million, up an incredible 20% from the revised March estimate of 944k (sequentially) and up 9% from the April 2014 rate (year-over-year). That’s some nice expansion, to say the least. Our long-held indirect plays on the US housing recovery have been a couple of ETFs, which focus on an improving consumer credit environment and incremental loan growth from the depths of the Financial Crisis. The two ETFs can be found in the Best Ideas Newsletter portfolio, and we continue to believe that they … Read more

Apple and World Domination?

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Everybody wants to love Apple (AAPL), except those that don’t own it. If you don’t own it, don’t sweat it. We still very much like the company, but there are a number of other companies where we can certainly find common ground. Our cost basis on Apple is but a fraction of where it is trading, and we’re still happy with the latest transaction from the July 24, 2013, email transaction alert when the company was added to the Dividend Growth Newsletter portfolio and when the existing position in the Best Ideas Newsletter portfolio was increased. To us, Apple is not so much a technology company, as it is levered to the ongoing strength toward consumer mobilization, which is inevitable. … Read more

The Invincible S&P 500?

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This is the performance of the S&P 500 (SPY) since the March 2009 panic bottom. It’s incredible, to say the least. US stocks, as measured by the S&P 500 have more than tripled since the doldrums of the Financial Crisis, and for those of us that lived and breathed the markets during every day of the Financial Crisis, the lack of volatility and the ongoing, steady advance seemingly month after month during the past 6-plus years have been incredibly peculiar–and perhaps contradictorily–less-than-comforting. Any market that sets prices on the buying and selling behavior of a wide-variety of participants with differing views shouldn’t be so coordinated and one directional. It seems unnatural, or at the very least, unusual. While others are … Read more