Valuentum Exclusive Analysis for the Discerning Investor

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Oct 22, 2023

There Will Be Volatility
Image: An ETF tracking Russell 1000 "growth" stocks has outperformed an ETF tracking Russell 2000 "value" stocks since the beginning of 2021. To us, the market remains hypersensitive to almost every economic data point that hits the wires, and we’re just not going to play that game. The macro headlines and never-ending news flow are what many quant and algorithmic traders are trading on, and to a very large extent, for investors with a long-term horizon, these macro data points just don’t factor into the equation. When valuing equities, we’re always after mid-cycle expectations, not peak or trough performance, so our valuations implicitly embed a "normal" recession. Warren Buffett didn’t become a billionaire buying and selling on macro data points, and volatility is simply to be expected given the proliferation of price-agnostic trading these days. Instead of panicking over higher interest rates, we think investors should view the Fed’s work thus far as future potential dry powder to stimulate both the economy and the markets. Whenever you feel like stocks are no good, have a read of Warren Buffett’s classic piece written during the Great Financial Crisis, “Buy American. I Am.” To us, we still like stocks for the long run. Happy investing!

Oct 10, 2022

Best Idea Vertex Pharma Outperforming in 2022
Image Shown: Shares of Vertex Pharmaceuticals Inc, an idea included in our Best Ideas Newsletter portfolio, have performed incredibly well year-to-date through October 2022. Vertex Pharma’s performance this year has been stellar, and its financial position is rock-solid. The company has ample financial firepower to invest heavily towards commercializing its existing drug development pipeline and is well-positioned to ride out the numerous exogenous shocks seen of late (inflationary pressures, geopolitical tensions, and the increasing likelihood of a global recession in the near term). We continue to like shares of VRTX in the simulated Best Ideas Newsletter portfolio.

Aug 19, 2022

Nelson: The 16 Most Important Steps To Understand The Stock Market
Image Source: Tim Green. We outline the '16 Most Important Steps to Understand the Stock Market.' We think it's important to take a read of these key stock market tenets when things are going great -- and perhaps even more important when things aren't going your way. This continues to be a working document.

Jan 30, 2022

Our Favorite Biotech Vertex Pharma Powers Ahead, Leaps 6%+
Image: Vertex Pharma continues to soar toward our fair value estimate. The biotech arena is difficult to navigate, which is why we tend to play it a bit more conservative than most. Vertex Pharma has an established, cash-flow generating portfolio of cystic fibrosis therapies, which has helped to establish a net cash rich balance sheet and a steady stream of robust free cash flow, unlike many biotechs that need external capital and are at risk of never reaching commercialization. We’re excited about Vertex’s clinical pipeline of potentially transformative genetic therapies, and we like its exposure to CRISPR gene-editing technology, which could be a huge business in the years ahead. Vertex Pharma remains our favorite biotech play and an idea in the simulated Best Ideas Newsletter portfolio.

Dec 2, 2021

Best Idea Vertex Pharma Boosts Guidance (Again), Buying Back Stock While Awaiting Key Clinical Trials
Image Shown: Vertex Pharmaceuticals Inc is one of our favorite biotech ideas. Image Source: Vertex Pharmaceuticals Inc – Third Quarter of 2021 IR Earnings Presentation. Vertex Pharma has a robust drug pipeline, though all eyes are on its potential CTX001 treatment. Should the treatment receive the green light from key healthcare regulators, Vertex Pharma’s financial performance would benefit from a major growth catalyst. In the meantime, we think it is prudent for Vertex Pharma to continue leveraging its financial strength to repurchase sizable chunks of its stock. We like Vertex Pharma as an idea in the Best Ideas Newsletter portfolio.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Jan 21, 2021

ICYMI: Valuentum's Brian Nelson on the Latest Howard Marks' Memo: "Something of Value"
Valuentum's President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks' latest memo, "Something of Value," January 11, 2021.

Nov 16, 2020

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process
With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company's revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There's a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Apr 23, 2018

Incyte’s Ongoing Disappointments and Ultragenyx’s Exciting Development
Image shown: Ultragenyx's promising pipeline of opportunities. Ultragenyx March 2018 Presentation. The pharma/biotech sector, unlike other mainline industries, is driven by the clinical data readouts on the next-gen molecules in the clinical pipeline. We have witnessed many exaggerated moves with an often-binary outcome on the smaller single molecule entities, but we also have witnessed a negligible impact on the broader, more-diverse industry behemoths. We wanted to touch on a few recent data readouts to illustrate the volatile, risky yet potentially lucrative nature of the industry.

Oct 12, 2017

An Overview on Valuing Junior Biotech Companies -- Does Clovis Fit the Bill?
The biotech industry remains one of the most fascinating yet perplexing industries for investors. Anecdotes of the entry-stage biotech with a home-run new therapy are often romanticized, but the reality is the vast majority of molecules fail in various stages of clinical testing.  Due to the boom-bust nature of the industry, many are wary of investing in the space, and traditional valuation metrics are not as useful due to a large number of such speculative entities being in the pre-revenue stage. With this in mind, let’s take a glimpse into our thought process when evaluating upstart biotech companies.