Valuentum Exclusive Analysis for the Discerning Investor

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Oct 6, 2020

Third-Level Thinking and "Keynesian Convergence"
Image: The analytical process of the Valuentum Buying Index rating system. At Valuentum, we seek to identify strong, competitively-advantaged companies that are underpriced [with solid cash-based sources of intrinsic value (net cash, strong expected free cash flows)] whose share prices are either 1) also advancing, 2) have strong relative pricing strength, or 3) have just started to begin to advance toward an intrinsic value estimate (with a nice growing dividend to boot, where applicable). Third-level thinking is our foundation at Valuentum, and it continues to serve investors well.

Sep 16, 2020

Our Thoughts on Nvidia Acquiring Arm
Image Source: Nvidia Corporation – Nvidia to Acquire Arm IR Presentation. On September 13, Nvidia Corp announced it would acquire Arm Limited (a semiconductor company with a heavy focus on smartphones and gaming devices) from SoftBank Group Bank Corp. and SoftBank’s Vision Fund through a transaction valued at approximately $40 billion. That deal will see Nvidia pay SoftBank and the Vision Fund $12.0 billion in cash (including $2.0 billion payable at signing), $21.5 billion in Nvidia stock (equal to 44.3 million shares at the time of the announcement, though that figure could change as it depends on NVDA’s average closing price over the last 30 trading days), and the deal has an earn-out component that could see Nvidia pay an additional $5.0 billion in cash or stock if certain financial hurdles are met. Furthermore, Nvidia will issue $1.5 billion in equity to Arm’s employees if the deal closes.

Sep 9, 2020

Our Thoughts on the Widespread Launch of 5G Services
Image Shown: The evolution of wireless networks and telecommunications technology over the years. Image Source: Intel Corporation – November 2019 State of 5G Presentation. The rollout of 5G telecommunication networks is upon us and we want to draw our members' attention to some of the key companies with meaningful exposure to this space. Many are excited about what opportunities 5G technology could enable. To ride out the ongoing coronavirus (‘COVID-19’) pandemic we prefer large-cap tech companies with pristine balance sheets, quality cash flow profiles, and firms whose growth outlooks are underpinned by secular growth tailwinds. Between Broadcom and Qualcomm, we are keeping a closer eye on Qualcomm given its more manageable net debt load and the company’s aforementioned near-term catalysts.

Sep 8, 2020

Dividend Growth Selection in a Low Yield Environment
Image Source: EpicTop10.com. Management's willingness to pay is critical, so an understanding of how dividend growth has been the past few years is very important, but when we look for fantastic dividend growth ideas for the future, we also want to make sure that the management team has the capacity to keep raising the dividend--meaning there's so much more to dividend growth assessments than backward-looking analysis. For starters, we want our long-term dividend growth ideas to have strong competitively-advantaged business models, solid secular growth trends or recession-resistant characteristics, impressive balance sheets (sometimes and preferably with hefty net cash positions) and growing future expected free cash flows (strong Dividend Cushion ratios).

Sep 3, 2020

3 Lessons in Portfolio Management Over 10 Years
Image Source: http://www.epictop10.com/. "When I left as director in the equity and credit department at Morningstar in 2011, I thought I knew a whole heck of a lot about investing. I felt like I was one in the top 5-10 in the world as it relates to the category of practical knowledge of enterprise valuation (maybe include Koller at McKinsey, Mauboussin at Counterpoint, and Damadoran at Stern on this list). After all, I oversaw the valuation infrastructure of a department that used the process extensively, and the firm was among just a few that used enterprise valuation systematically. Then, at Valuentum, our small team would go on to build/update 20,000+ more enterprise valuation models. There can always be someone else out there, of course, but I don't think anybody has worked within the DCF model as much as I have across so many different companies. That said, through the past near-10 years managing Valuentum's simulated newsletter portfolios, I've also learned a number of things to become an even better portfolio manager." -- Brian Nelson, CFA

Sep 3, 2020

The Merits of Concentrated Portfolios
Image Source: QuoteInspector.com. To some degree, each investor has to pick their own preference. With widely-diversified index investing, firm-specific risk is largely eliminated as such investors are taking on only systematic risk. On the other hand, investors seeking portfolio concentration are taking on firm-specific risk, in addition to systematic risk. This could either help mitigate broader market movements or exacerbate them. I hope this was helpful, and may today's nearly all-green Best Ideas Newsletter portfolio brighten your spirits. Let us look to even better times ahead.

Sep 1, 2020

Valuentum Website Overview
Overview of the key features of www.valuentum.com (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information.

Aug 24, 2020

Nvidia Bets Big on Data Centers
Image Source: Nvidia Corporation – 2020 Annual Meeting of Stockholders Presentation. On August 19, Nvidia Corp reported second quarter fiscal 2021 earnings (period ended July 26, 2020) that beat consensus top-line estimates (on a GAAP basis) and consensus bottom-line estimates (on a non-GAAP basis, as its GAAP earnings were slightly lower than consensus estimates). Nvidia has several things going for it including a pristine balance sheet (meaning a net cash position), a data center business that is growing at a brisk pace (which we will cover in this note), a high quality cash flow profile (relatively low capital expenditure requirements to generate meaningful revenues), and its outlook is supported by secular growth tailwinds, particularly as it relates to demand from cloud computing providers. Shares of NVDA yield a negligible ~0.1% as of this writing.

Aug 17, 2020

August Best Ideas Newsletter!
Image: The Best Ideas Newsletter portfolio. We migrated to weighting ranges at the beginning of 2018. The image above is as of the close April 15. Portfolio concentration among strong-performing equities has been the key to outperformance. Since the last update, we've witnessed some big moves from our top-weighted entities: Berkshire Hathaway (+10.7%), Facebook (+8.7%), and PayPal (+11.2%). These three entities comprise roughly 34% of the Best Ideas Newsletter portfolio at the high end of the weighting ranges, more than offsetting the weaker performance from lower-weighted Cisco and Intel during the month. We continue to focus on over-weighting our "best of the best" ideas within a portfolio setting, and we're hoping to get both Apple and Microsoft back near the top when the opportunity presents itself. Apple has advanced +17.6% since the last month's edition.

Aug 13, 2020

Cisco Responds to Near-Term Headwinds with Large Cost Cuts
Image Shown: Cisco Systems Inc’s financial performance held up well, relatively speaking, during the initial stages of the pandemic. Image Source: Cisco Systems Inc – Fourth Quarter of Fiscal 2020 IR Earnings Presentation. On August 12, Cisco Systems reported fourth quarter fiscal 2020 earnings (period ended July 25, 2020) that beat consensus estimates on both the top- and bottom-lines. However, Cisco’s outlook for the current fiscal quarter was weaker than expected which weighed on shares of CSCO during normal trading hours on August 13. Cisco’s near-term performance is facing headwinds due to the ongoing coronavirus (‘COVID-19’) pandemic as many of its customers are delaying projects until after the storm has passed. With that in mind, Cisco remained a free cash flow cow last fiscal year and that is likely to continue going forward, which supports its ability to continue paying meaningful dividends. Cisco’s strong cash flow profile is further supported by its pristine balance sheet, and we continue to like the firm as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Shares of CSCO yield ~3.4% as of this writing. Please note that Cisco recently announced its CFO for the past five years, Kelly Kramer, plans to leave the company once her replacement has been found.