Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Aug 31, 2022

Valuentum: Outlook for Europe, China Is Bleak
Video: Valuentum's Associate Director of Research and Co-Portfolio Manager of the simulated newsletter portfolios, Callum Turcan, shares his thoughts about the global economy. Europe is facing considerable pressure from energy prices, while China may face a mortgage meltdown. Join Valuentum for this brief 6 minute video to get up to speed on the goings-on of the global economy and what troubles may be lurking ahead.

Apr 26, 2022

Dividend Growth Idea Lockheed Martin Doing Its Best to Arm Western Allies
Image Shown: Dividend growth idea Lockheed Martin Corporation is very shareholder friendly. The defense contractor is doing its best to arm Ukraine and other Western allies during these difficult times. Image Source: Lockheed Martin Corporation – First Quarter of Fiscal 2022 IR Earnings Presentation. The Russian invasion of Ukraine in February 2022 and simmering geopolitical tensions in East Asia between Western aligned nations and China over Taiwan and other issues have created a backdrop that is conducive to significant increases in national defense spending. Though we hope peace prevails soon, the realities on the ground in Ukraine and elsewhere call for North Atlantic Treaty Organization (‘NATO’) member nations and other Western aligned nations to ramp up their military budgets to deter future threats and to prepare for worst case scenarios.

Apr 14, 2022

Weekly: We're Bullish on This Self-Inflicted Market Sell-Off; Plus Meta (Facebook), PayPal, Consumer Staples, and HPQ
We have a lot to cover in this week's Valuentum Weekly, but one thing is clear: We remain bullish on stocks for the long run.

Mar 14, 2022

Valuentum Weekly: Yields on New Series I Savings Bonds Have Soared!
The Dow Jones, S&P 500 and NASDAQ futures are all indicated up Sunday night (March 13), but that may not mean much when trading kicks off tomorrow. The start to 2022 has been one of the worst stretches during the past decade, but broader market indexes still aren't down much, even after factoring in several expected rate hikes by the Fed and economic sanctions on Russia due to the war in Ukraine. According to data from Seeking Alpha, the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and Nasdaq (QQQ) are off ~12%, ~10%, and ~19% so far this year, respectively. However, this weakness compares to (and is inclusive of) incredible 5-year price-only returns on the SPY, DIA, and QQQ of ~77%, ~58%, ~146%, respectively, so it's hard for stock investors to be disappointed in much of anything, even if all they were able to do was match the returns of the S&P 500 the past 5 years. Many, however, unfortunately, diluted those 5-year returns with hefty bond and international exposure and sometimes large AUM fees, so the weakness in 2022 is probably more painful for some than perhaps it should be. In any case, we remain bullish on stocks for the long run, with a heavy bent toward large cap growth and big cap tech with tactical overweight "positions" in big cap energy.

Mar 7, 2022

Valuentum Weekly: Outsized Energy Exposure Continues to Buoy Newsletter Portfolios
Image: Light crude oil futures once traded for roughly -$40 (negative $40) during the COVID-19 crisis, but have now rocketed to more than $120 in recent trading. Image Source: TradingView. The S&P 500, as measured by the SPY, is down 9% year-to-date, a modest pullback, in our view, particularly in light of the fantastic performance the past few years. Though not necessarily welcome, a down year every now and then for the broader market indexes and a modest bear market can only be expected, at times. The Dow Jones Industrial Average, as measured by the DIA, is down more than 7% year-to-date (not too bad), while the Nasdaq--as measured by the QQQ--and 'disruptive innovation' stocks--as measured by the Ark Innovation ETF--have fallen more than 15% and 36%, respectively, so far this year (data from Seeking Alpha). We like how the simulated newsletter portfolios are positioned. Energy resource prices continue to surge (with WTI crude oil prices skyrocketing north of $120 per barrel at last check), and they are bringing energy equities higher along with them. The simulated Best Ideas Newsletter portfolio, simulated Dividend Growth Newsletter portfolio, and simulated High Yield Dividend Newsletter portfolio are all materially overweight energy equities relative to the energy sector’s weighting in the S&P 500, and we expect to maintain such high tactical "exposure." Both the Energy Select Sector SPDR ETF and the Vanguard Energy ETF soared to 13-year highs last week. Our favorite energy ideas are the largest two energy majors, Exxon Mobil and Chevron, and both have hefty 'weightings' in each of the three aforementioned simulated newsletter portfolios. Russian equities, as measured by the RSX, are down nearly 80% so far this year, and we're pleased to say that we've largely avoided the fall out. We continue to like the broader areas of U.S.-heavy, large cap growth and big cap tech when it comes to long-term secular exposure, and we continue to like energy as a tactical overweight for the foreseeable future across the simulated newsletter portfolios, as much as we did even prior to the huge advance in energy resource prices and the invasion of Ukraine by Russia.

Feb 27, 2022

Valuentum Weekly: Putin, the Aggressor, But Did “the West” Cause the Conflict in Ukraine?
We think the newsletter portfolios are well-positioned for inflationary pressures and believe the areas of large cap growth and big cap tech remain the places to be—names like Alphabet, Facebook, Microsoft, Apple and the like. Not only are these equities shorter-duration, more defensive areas relative to more speculative tech, but they also are shielded more from geopolitical uncertainty than international exposure, which many managers seek under modern portfolio theory. We’re also maintaining our bullish view on the energy sector in the near to medium-term. However, please be aware that, while strategically we like the areas of large cap growth and big cap tech because of their moaty business models, attractive valuations, large net cash positions and strong free cash flow generating capacities, we view the overweight “positions” in the energy sector in the simulated newsletter portfolios as tactical short-term decisions given their cyclical nature. The simulated Best Ideas Newsletter portfolio, after coming off huge years in 2019, 2020, and 2021, is performing about in line with the major indexes so far this year and doing far better than more speculative areas, where many investors found themselves caught like a deer in headlights. We remain bullish on stocks for the long run--and our favorite individual ideas remain in the simulated newsletter portfolios, within our additional options commentary and in the Exclusive publication. Stay diversified. May we see peace in Ukraine soon.

Aug 14, 2020

Our Thoughts on Chevron Buying Noble Energy
Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation. On July 20, Chevron Corp announced it was acquiring Noble Energy through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping in mind the firm had approximately 1.85 billion shares outstanding on a weighted-average diluted basis as of the second quarter of 2020. The deal is expected to close during the fourth quarter of this year and is forecasted to generate $0.3 billion in annualized run-rate cost synergies one year after closing.

Jun 16, 2020

Exxon Mobil Puts on a Brave Face
Image Source: Exxon Mobil Corporation – November 2019 Guyana IR Presentation. Near-term oil prices and most importantly, the oil price futures curve, have improved materially since just a couple of months ago when it looked like the sky was falling. For the first time ever, WTI turned negative in April 2020 for physical deliveries due May 2020 of light sweet oil to Cushing, Oklahoma, as storage options were limited (and arguably, many speculators had jumped into the market not fully aware of the risks they were taking on). Exxon Mobil Corp has seen its share price recover considerably since the drop, though we caution that management’s commitment to the dividend will prove a hard task if things do not improve materially in the short-term. As of this writing, near-term futures for WTI and its international counterpart Brent are trading near $40 per barrel. In the face of COVID-19, low raw energy resource prices (Exxon Mobil’s upstream operations form its largest single business segment), and subdued demand for refined petroleum and petrochemical products (from gasoline to plastics) have significantly weakened Exxon Mobil’s cash flow profile. The ongoing coronavirus (‘COVID-19’) pandemic has shaken energy markets to their core in ways we have not seen ever before. Shares of XOM yield ~7.4% as of this writing. We give Exxon Mobil a Dividend Cushion ratio at 0.2, though its Dividend Safety rating is “GOOD” given the company’s ability to tap capital markets, especially debt markets as the oil giant carries high quality “A-rated” investment grade credit ratings. There is a limit to how much debt Exxon Mobil can take on to cover its dividend obligations, however, which we will cover in greater detail in this article.

Apr 13, 2020

Historic Oil Deal Reached
Image Source: Chevron Corporation - March 2020 Security Analyst Meeting Presentation. Over the Easter holiday weekend, members from the Organization of Petroleum Exporting Countries (‘OPEC’), non-OPEC members that are part of the OPEC+ group (countries that in the recent past have joined forces with OPEC to curtail global oil supplies in a formal manner), and non-OPEC members outside of the OPEC+ group such as Brazil, Canada, and the United States came to an agreement to cut their collective oil output by north of 10 million barrels per day. Global oil and other raw energy resource prices have been simply demolished year-to-date due to a combination of demand destruction from the ongoing coronavirus (‘COVID-19’) pandemic and the emergence of a price war between Saudi Arabia and Russia. Please note that oil demand destruction due to the “cocooning” of households (and the related drop off in refined petroleum product demand from automobiles, airplanes, etc.) may be as high as 35 million barrels per day according to some analysts, an enormous figure that’s resulting in major stockpile buildups all over the world. Other analysts don’t necessarily see the level of demand destruction as that high (projections are being updated constantly); however, they are still calling for a drop off in demand that’s in the ten(s) of millions of oil barrels per day range (at least in the short-term, depending on how long the pandemic lasts). Even if this agreement is effectively implemented, that won’t result in oil prices (and other raw energy resource prices) returning to pre-COVID-19 levels in the short/medium-term, in our view, but will make emerging from this pandemic an easier task given that global oil storage capacity is nearing its limit. As of this writing on April 13, oil prices are trading up modestly but are still down by well over 50% year-to-date.

Mar 20, 2020

Stress in the Oil & Gas Industry Grows as Major Energy Exporters Hunker Down
Image Shown: WTI is down almost 61% over the past year as raw energy resources prices were decimated by the news that OPEC and non-OPEC members couldn’t reach another production curtailment deal in early-March 2020. Upstream capital expenditures are coming down aggressively in the US shale patch and elsewhere, and just as importantly, even the bigger firms are throwing in the towel and scaling back their ambitions. Exxon Mobil has recently pledged to make material cuts to its capital expenditure budget, while Chevron is considering such a move, as are others. It will take a lot more than that to stabilize raw energy resources pricing given the demand destruction caused by the ongoing COVID-19 pandemic, with many households in major demand regions (namely the US and Europe) now “cocooning” in their homes to wait out the crisis. That’s on top of an expected surge in oil supplies from OPEC and non-OPEC nations, with an eye towards Saudi Arabia, the UAE, and Russia. We caution our members to not catch a falling knife here.