Member Articles

Recent Fair Value Estimate Changes

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Let’s have a look at recent fair value estimate changes across our coverage universe. ——————————————— About Our Name But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant.                          — Warren Buffett, Berkshire Hathaway annual report, 1992 At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of a variety of investing disciplines in order to identify the most attractive stocks at any given time. Valuentum therefore analyzes each stock across a wide spectrum of philosophies, … Read more

Something New!

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Hi everyone: To stay true to our mission, you’ll find something new regarding our methodology. In the coming weeks, you’ll see this table in our work going forward. We just wanted to let you know. We appreciate your membership very much!   ——————————————— About Our Name But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant.                          — Warren Buffett, Berkshire Hathaway annual report, 1992 At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of … Read more

In the News: META, AAPL, AMZN, RSG, DLR, VRTX, XOM, CVX

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Image Source: Valuentum By Brian Nelson, CFA Readers should expect a substantial reduction in our fair value estimate of Meta Platforms (META). The company’s spending is out of control, and the impact on our expectations of free cash flow will be materially punitive. As we have reiterated time and time again in our work, stock prices and returns are based in part on future expectations of free cash flow, and our expectations for Meta’s have changed. A look at how fast things fell apart at Meta is informative.  The company reported Q4’21 results in February 2022, and it’s only been a few months for the company to experience the considerable deterioration — for free cash flow to fall from $12.6 … Read more

Honeywell Jumps on Third-Quarter Report, Strong Guidance

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Image Source: Honeywell By Brian Nelson, CFA On October 27, Dividend Growth Newsletter portfolio holding Honeywell International (HON) reported solid third-quarter performance and provided higher guidance for the full-year 2022. We continue to like the company as an idea in the simulated Dividend Growth Newsletter portfolio, as we expect robust dividend growth in the coming years. The high end of our fair value estimate of Honeywell stands at $224 per share. Shares yield ~2.2% at the time of this writing. During the third quarter of 2022, Honeywell reported organic sales growth of 9%, pointing to a double-digit pace of expansion in ‘Honeywell Building Technologies,’ ‘Performance Materials and Technologies,’ and ‘Aerospace.’ The firm’s operating margin also advanced 90 basis points higher, … Read more

McDonald’s, Chipotle’s Third-Quarter Results Were Solid, Strong Comp Performance

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Image Source: Valuentum By Brian Nelson, CFA On a day where a high-profile stock such as Meta Platforms (META) is down more than 20%, it’s difficult to focus on the positives. But we are – we recently replaced Meta Platforms with McDonald’s (MCD) in the simulated Best Ideas Newsletter portfolio, and we’re not looking back. McDonald’s is popping nearly 4% during the trading session October 27, and we continue to point to the high end of the fair value estimate range for shares as a reasonable intermediate term target ($300 per share). We’ve been quite concerned about the macro environment during the past several months as inflation changed from a positive catalyst to business pricing and strong equity returns in … Read more

Visa’s Stock Remains Resilient, Huge Free Cash Flow Margins

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  Image Source: Visa By Brian Nelson, CFA Visa Inc. (V) is one of our top ideas in the simulated Best Ideas Newsletter portfolio. As a 10%-12% “weighting,” we have been very pleased to see its share price hold up during what is turning into one of the most difficult years for investors in a long time. Year-to-date in 2022, Visa’s shares are down less than 7%, as the ~6% pop during the trading session October 26 (at the time of this writing) has cushioned the blow. Our fair value estimate of Visa stands at $227 as shares yield ~0.93% on a forward annual estimated basis. We’re huge fans of Visa for three reasons. First, the company operates as a … Read more

Microsoft, Alphabet Calendar 3Q Reports As Expected; Pressured By Weakening Economy

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Image Source: Abi Begum By Brian Nelson, CFA We’re playing the long game in the simulated Best Ideas Newsletter portfolio, and we still like large cap growth and big cap tech as a way to generate significant capital appreciation over the long haul. 2022 hasn’t been the best year for these areas, but as with any drawdown in some of the strongest free-cash-flow generating, net-cash-rich, secular-growth powerhouses, we believe that they once again will reach new highs — it may take a bit longer than previously expected, however. On October 25, 2022, two of our favorite companies, Microsoft (MSFT) and Alphabet (GOOG) (GOOGL) reported calendar third-quarter results. We had been expecting weakness in the PC market as well as in … Read more

Chinese Stocks Bludgeoned!

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Image: Large cap Chinese equities are now back to levels first reached more than 15 years ago on a price-only basis, to levels first attained in early 2006. By Brian Nelson, CFA Successful investing is as much about selecting big winners such as Exxon Mobil (XOM) and Chevron (CVX) as it is about avoiding big losers – and wow have Chinese stocks been bludgeoned! The iShares China Large-Cap ETF (FXI) traded down nearly 10% on October 24, 2022, putting its 5-year declines at a whopping 50%+, on a price-only basis. The FXI is now back to levels, on a price-only basis, first reached at the beginning of 2006, more than 15 years ago. We don’t include any Chinese ADRs in … Read more

Chip Stocks — Geopolitical Uncertainty Heightens in China; ASML, QCOM Still Strong Long-Term Considerations, But Expect Near-Term Fundamental Weakness

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Image Source: The U.S. Department of Commerce By The Valuentum Team The global economic environment continues to reel from heightened inflation, which is pressuring consumer discretionary spending, but geopolitical uncertainty remains at a fever pitch. Russia’s invasion of Ukraine has unsettled investors, but the back-and-forth between the U.S. and China has chipmakers in the crosshairs. On October 7, 2022, the U.S. Department of Commerce released the following report aimed to restrict China’s ability to attain advanced computer chip technology: The Department of Commerce’s Bureau of Industry and Security (BIS) is implementing a series of targeted updates to its export controls as part of BIS’s ongoing efforts to protect U.S. national security and foreign policy interests. These updates will restrict the … Read more

Must Watch: MPT Failures and High Yield Dividend Breakdown Spiral!

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Did you know that Valuentum’s income ideas are holding up great this year, far better than the traditional 60/40 stock/bond portfolio and what some call “sucker” yields, those companies with 8% dividend yields or higher? — The 60/40 stock/bond portfolio is down ~20% so far in 2022 and some high-yield stocks like mortgage REITs are down nearly 40%, but Valuentum’s income-oriented simulated newsletter portfolios, the Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio, are estimated to be down just 8.4% and just 10.1%, respectively, in 2022. — Preventing huge drawdowns in retirement is the name of the game, and those pursuing modern portfolio theory (MPT) have been caught by surprise, while income investors reaching for 8%+ yields may have just experienced permanent … Read more