Valuentum Exclusive Analysis for the Discerning Investor

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Aug 15, 2024

Walmart Raises Its Fiscal 2025 Outlook
Image Source: Walmart. Walmart’s adjusted earnings per share for fiscal 2025 is now targeted in the range of $2.35-$2.43 (was $2.23-$2.37). The company ended the quarter with total debt of $47 billion and cash and cash equivalents of $8.8 billion. Walmart hauled in $5.9 billion in free cash flow during the first six months of the year, well in excess of the $3.3 billion it paid in dividends over the same time period. We liked Walmart’s second quarter report, its raised outlook for fiscal 2025, and the company’s very healthy dividend. Shares yield 1.2% at the time of this writing.

Aug 9, 2024

Paper: Value and Momentum Within Stocks, Too
Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks.

Feb 14, 2024

Coca Cola’s Pricing Strength Continues to Power Results
Image: Coca-Cola’s pace of price/mix expansion continues to drive strong performance. On February 13, Coca-Cola reported strong fourth quarter results that exceeded expectations on both the top and bottom lines. The standout metric in the quarter was organic revenue growth, which advanced an impressive 12% in the quarter thanks to a solid 9 percentage-point increase in price/mix and 3 percentage-point expansion in concentrate sales. The company’s outlook for 2024 was strong as well, with the company targeting organic revenue expansion of 6%-7% for the year, and we like the momentum behind Coca-Cola’s performance. The Dividend King continues to deliver for investors, and while shares are trading above our fair value estimate, investors can do a lot worse than investing in Coca-Cola, in our view.

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.

Jun 28, 2022

High Yield: Diversified Refiner Phillips 66 A Good Replacement for Broad Consumer Staples Exposure
Image Source: Phillips 66 Investor Update May 2022. Phillips 66 is a top-notch operator in the downstream space with impressive refining and petrochemical assets supported by various midstream operations. Its investment-grade credit rating (A3/BBB+), with stable outlooks, better enables Phillips 66 to tap capital markets at attractive rates, something that we especially like when considering new ideas in the high yield dividend space. A growing global middle class and a growing global population supports Phillip 66's longer term outlook for refined product demand. We like the company as a high yield dividend consideration.

Jun 20, 2022

Consumer Staples Struggling with Higher Inflationary Costs, Group Hits 52-Week Lows
Image: The Vanguard Consumer Staples ETF (VDC) has notched a new 52-week low, and investors should note that we don’t think consumer staples entities are immune to an environment of higher inflation, where their price increases may not be fully absorbed by the consumer. Due to the commoditization of many of the goods produced in the consumer staples space, we think the consumer may instead trade down to off-brands or white label (“store brand”) products than pay up for branded merchandise. From where we stand, bellwethers in the consumer staples sector can’t price successfully ahead of inflationary headwinds, and many are experiencing tremendous gross margin pressure. Not only this, but in many cases, we think branded staples are experiencing demand (volume) destruction as consumers balk at price increases that still fall short of offsetting the heightened cost environment. Many consumer staples equities have huge net debt positions and hefty dividend obligations, and while many of the types of products they produce consumers cannot do without, we think we might see the consumer staples group’s share prices come under continued pressure in this market environment and eventually fetch what we think would be a market multiple (roughly three turns of earnings lower, or ~19x earnings to ~16x earnings). Even if this may not happen, however, there still appears to be some tough sledding ahead on a fundamental basis given report commentary, and we’ll look to evaluate our newsletter portfolios and their exposure to the consumer staples arena in the coming weeks to months. What remains clear is that the outlook for many consumer staples entities is not pretty.

Jun 14, 2022

Prologis Buying Duke Realty as Logistical Real Estate Market Consolidates Further
Image Shown: Prologis Inc is merging with Duke Realty Corporation through an all-stock acquisition that will see Prologis cement itself as a logistical real estate powerhouse in the US and worldwide. Image Source: Duke Realty Corporation / Prologis Inc – June 2022 IR Presentation announcing the acquisition of Duke Realty by Prologis. On June 13, Prologis Inc announced it was buying Duke Realty Corporation through an all-stock transaction worth ~$26 billion when including the assumption of debt. In the wake of severe capital market volatility, some major deals in the real estate investment trust (‘REIT’) space are still getting done. Back in May 2022, Duke Realty rejected Prologis’ previous offer worth ~$24 billion as being “insufficient” which prompted Prologis to sweeten the pot to get a deal done.

Jun 9, 2022

Best Idea Dollar General Beats Consensus Estimates and Raises Guidance in the Face of Substantial Headwinds
Image Shown: Dollar General Corporation’s GAAP net sales rose in the first quarter of fiscal 2022 on a year-over-year basis due to growth in its net store count. Image Source: Dollar General Corporation – May 2022 8-K SEC Filing. As a discount retailer, Dollar General is contending with myriad headwinds though its underlying business is holding up quite well. We continue to view its capital appreciation upside potential quite favorably, and its dividend program offers incremental upside potential. Shares of DG yield ~1.0% as of this writing.

Apr 25, 2022

High-Yielding Philip Morris Adeptly Navigating Exogenous Shocks
Image Shown: Utilizing a combination of innovation and brand strength, Philip Morris has been able to grow its market share of the tobacco industry in relevant regions in recent quarters. Image Source: Philip Morris – First Quarter of 2022 IR Earnings Presentation. There are a lot of reasons to like Philip Morris International as a high-yielding income growth opportunity. Its portfolio includes numerous top selling cigarette brands including Marlboro, L&M, Chesterfield, Parliament, and others. After splitting with Altria Group back in 2008, Philip Morris has the right to sell these cigarette brands in international markets while Altria Group has the right to sell these branded tobacco products in the US market. Philip Morris is a free cash flow generating powerhouse that utilizes its immense pricing power, along with ongoing cost structure improvement initiatives to offset secular declines in cigarette unit volumes to support its financial performance. We appreciate that Philip Morris is transitioning towards sales of alternative tobacco products such as its IQOS heated tobacco unit (‘HTU’) offering to support its longer term growth outlook. We include Philip Morris as an idea in the High Yield Dividend Newsletter portfolio and shares of PM yield a nice ~4.8% as of this writing. Sales of its IQOS products have grown robustly in recent years, and in our view, there is ample room for additional upside potential here. Before covering that upside, let’s first go over the developing legal situation in the US as it concerns marketing its IQOS product.

Apr 20, 2022

Shares of Newsletter Portfolio Idea Johnson & Johnson Off to the Races!
Image Shown: Shares of Johnson & Johnson, an idea in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, are shifting higher. On April 19, Johnson & Johnson reported first-quarter earnings for 2022 that missed consensus top-line estimates but beat consensus bottom-line estimates. The company lowered its guidance for 2022, but shares of JNJ rallied during regular trading hours that day as its underlying performance remains strong. J&J suspended guidance for its coronavirus ('COVID-19') vaccine sales, though we want to stress that these sales were not needle-moving as it concerns our estimate of the company’s fair value. The firm was selling the vaccines on a not-for-profit basis and didn’t intend to change that until the end of this year or until 2023 (or potentially never). J&J also pushed through a 7% sequential increase in its dividend on April 19, with 2022 marking its 60th consecutive year of payout increases, earning the firm the coveted Dividend Aristocrat status. We include shares of JNJ in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Shares of JNJ yield ~2.5% as of this writing. Johnson & Johnson’s business model is in the process of getting fundamentally altered due to the planned separation of its consumer health business from its pharmaceutical and medical devices operations, which is expected to occur within less than two years. As we have noted in the past, J&J is also steadily working on putting its various legal issues behind it, though its planned business separation along with its legal issues fundamentally altered its proposition as a straightforward dividend growth opportunity. We continue to like J&J in our newsletter portfolios, though we are keeping a close eye on how its business separation strategy will ultimately pan out. Let's dig into the details in this article.