Valuentum Exclusive Analysis for the Discerning Investor

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Mar 10, 2021

Johnson & Johnson’s COVID-19 Vaccine Gets the Green Light
Image Shown: We include Johnson & Johnson as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. The health care giant is home to over two dozen ‘platforms/products’ that generate $1.0+ billion in annual sales, as you can see in the above graphic. Recently, Johnson & Johnson’s COVID-19 vaccine received emergency use authorization from the US CDC, which will provide public health authorities with another arrow in their quiver as it relates to bringing an end to the public health crisis. Image Source: Johnson & Johnson – Fourth Quarter of 2020 IR Earnings Presentation. At the end of February 2021, the US Centers for Disease Control and Prevention (‘CDC’) gave emergency use authorization for the single-shot vaccine developed by Janssen, a subsidiary of Johnson & Johnson, to inoculate patients aged 18 years and older from the coronavirus (‘COVID-19’). We have been covering this story for some time and are delighted to see that Johnson & Johnson’s COVID-19 vaccine crossed the finish line. Having another safe and viable COVID-19 vaccine at their disposal should go a long way in assisting global health authorities in eventually bringing the pandemic under control. We covered the interim safety and efficacy data from Johnson & Johnson’s Phase 3 COVID-19 vaccine clinical trial previously. Johnson & Johnson is included as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios, and we continue to like exposure to the name. The top end of our fair value estimate for JNJ sits at $172 per share, and we are big fans of its promising dividend growth trajectory. Shares of JNJ yield ~2.6% as of this writing.

Feb 21, 2021

Johnson & Johnson’s COVID-19 Vaccine Candidate Nears the Finish Line
Image Source: Johnson & Johnson – Fourth Quarter of Fiscal 2020 IR Earnings Presentation. We appreciate all the hard work Johnson & Johnson and its partners have put towards developing a safe and viable COVID-19 vaccine candidate. Johnson & Johnson issued favorable guidance for fiscal 2021 when it reported its latest earnings aided by expectations that its medical devices business will recover this fiscal year along with sustained strength in its core pharmaceutical sales according to management commentary given during the related earnings call. We continue to like exposure to Johnson & Johnson in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

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!

Feb 3, 2021

Eli Lilly and Vertex Pharma Provide Promising Guidance for 2021
Image Shown: An overview of Vertex Pharmaceuticals Inc’s drug pipeline and commercialized drug portfolio. Image Source: Vertex Pharmaceuticals Inc – Fourth Quarter of 2020 IR Earnings Presentation. There are many attractive opportunities in the healthcare sector. Vertex Pharma is our favorite biotech play, and we are intrigued by the potential upside its strategic partnership with CRISP Therapeutics could generate. Additionally, we like the broad exposure to an attractive sector that the Health Care Select Sector SPDR ETF (XLV) provides the newsletter portfolios. The end of the COVID-19 pandemic will make conducting non-COVID-19-related clinical trials an easier task over the long haul, which supports the outlook for the pharmaceutical and biotech industries. We are also big fans of Johnson & Johnson, which is included in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios, and UnitedHealth Group, which is included in the Dividend Growth Newsletter portfolio.

Jan 29, 2021

Repub from March 5, 2018: The Tragedy of Quantitative Finance
-- Okay – it’s not 2038, but just imagine if this could happen…

Jan 28, 2021

Three Newsletter Portfolio Ideas Post Stellar Earnings Updates: JNJ, LMT, MSFT
Image Source: Johnson & Johnson – Fourth Quarter of Fiscal 2020 Earnings IR Presentation. Earnings season is now underway and so far, we are quite impressed with the performance of the ideas included in the newsletter portfolios. Johnson & Johnson and Lockheed Martin are both on the rebound while Microsoft continues to be an “unstoppable” growth juggernaut. All three of these firms have stellar free cash flow generating abilities and have promising growth outlooks, which underpins why we are big fans of each company.

Jan 27, 2021

ALERT: Raising Cash in the Newsletter Portfolios
Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we're raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. For more conservative investors, the high end of this range may even be larger, especially considering the vast "gains" from the March 2020 bottom and the increased systemic risks arising from price-agnostic trading (read Value Trap). The individual holdings will be reduced in proportion to arrive at the new targeted cash weighting in the respective simulated newsletter portfolios. The High Yield Dividend Newsletter and Dividend Growth Newsletter are scheduled for release February 1. We'll have more to say soon.

Jan 15, 2021

Steris Ties the Knot with Cantel Medical
Image Shown: Cantel Medical Corp is getting bought out by Steris PLC through a cash-and-stock deal. The image up above highlights Cantel Medical’s promising long-term growth outlook, though its performance in 2020 was subdued due to headwinds created by the coronavirus (‘COVID-19’) pandemic. In our view, Steris was attracted to Cantel Medical’s improving outlook (the latter started to stage an impressive rebound in the second half of calendar year 2020) and the ability for the combined firm to generate substantial synergies. Image Source: Cantel Medical Corp – December 2020 IR Presentation. On January 12, Steris PLC announced it had reached an agreement with Cantel Medical to buy the company through a cash-and-stock deal worth ~$3.6 billion (~$4.6 billion when including the assumption of debt and convertible notes) that valued CMD at $84.66 per share based on the closing price of STE on January 11. The deal includes $16.93 in cash and 0.33787 share of STE for each share of CMD. Steris is heavily focused on sterilization products for hospitals and laboratories (it also provides related services). The company intends to fund the cash component of its deal for Cantel Medical with new debt issuance and committed bridge financing, which will also be used to refinance most of Cantel Medical’s existing debt. Shares of Cantel Medical have advanced ~38% (as of the end of normal trading hours January 13) from when we first wrote about the idea back in early December 2020. Even before the acquisition was announced, investors started to warm back up to the company due to expectations that the headwinds that held the firm back last year would start to dissipate this year. In our view, Steris’ acquisition of Cantel Medical is highly complementary. It appears Steris was optimistic that Cantel Medical’s long-term growth outlook remained bright even though the firm had a rough 2020.

Dec 25, 2020

All I Want for Christmas Are Dividend Aristocrats
Image Source: 5 Furlongs. It may not be as catchy as Mariah Carey's Christmas hit, "All I Want For Christmas Is You," but if you ask a dividend growth investor what they might want for Christmas as it relates to an investment, they might start singing about a long list of Dividend Aristocrats--a list of companies that have increased their dividends in each of the past 20-25+ years. Therefore, we wanted to do something special this Christmas for members. We've aggregated a list of every non-financial Dividend Aristocrat in our 16-page stock report coverage universe and made a list conveniently available, including some key data and links directly to their 16-page stock reports (pdf). To access the 16-page stock report of any company on this list, just click on its name, and you'll be prompted to download that particular company's 16-page stock report pdf file. Remember, we provide separate Dividend Reports for stocks, too. For example, the 16-page stock report pdf file that is linked to a company's name in this article is only a portion of the research, commentary, ratings and data on that particular company. Let's take Emerson Electric as an example. Not only does it have a 16-page Stock Report and additional Valuentum commentary via articles and notes, but it also has a Dividend Report. Both pdf reports can be downloaded on its stock web page (the pdf icons are to the right of the stock chart). We hope you enjoy the vast amount of research connected to the download links on this list. Each company's fair value estimate, Dividend Cushion ratio, Economic Castle rating and much more is backed by our three-stage discounted cash flow process with fully populated financial statements, available by request from Gold and Platinum members. Please download away! What's your favorite Dividend Aristocrat? Comments welcome.

Dec 1, 2020

Walking Through the Calculation of the Dividend Cushion Ratio
Image shown: An image found on page 2 of Valuentum's Dividend Report on Kimberly-Clark. The 'Dividend Cushion Ratio Deconstruction,' shown in the image, reveals the numerator and denominator of the Dividend Cushion ratio. At the core, the larger the numerator (or the healthier a company's balance sheet and future free cash flow generation) relative to the denominator (or a company's future expected cash dividend obligations), the more durable the dividend. In the context of the Dividend Cushion ratio, KimberlyClark's numerator is larger than its denominator suggesting strong dividend coverage in the future. The 'Dividend Cushion Ratio Deconstruction' image puts sources of free cash flow in the context of financial obligations next to expected cash dividend payments over the next 5 years on a side-by-side comparison. Because the Dividend Cushion ratio and many of its components are forward-looking, our dividend evaluation may change upon subsequent updates as future forecasts are altered to reflect new information.We believe the Dividend Cushion ratio is one of the most helpful tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based, considers balance sheet health, and is forward looking. Since its development in 2012, we estimate its efficacy at ~90% in helping to forewarn readers of impending dividend cuts. For companies where Valuentum reports are available, the Dividend Cushion ratio can be found in a stock's Dividend Report or in the table on the company's stock landing page. We use Kimberly-Clark as an example of how we calculate the Dividend Cushion ratio and how useful it is for investors of all types.