Valuentum Exclusive Analysis for the Discerning Investor

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Nov 9, 2020

CubeSmart Is One of Our Favorite REITs
Image Source: CubeSmart – October 2020 Deluxe Storage Transaction IR Presentation. We continue to be huge fans of the self-storage industry, and CubeSmart is one of our favorite REITs in the space. The ability for self-storage REITs to generate sizable free cash flows in almost any operating environment highlights the resilience of their business model. Going forward, due to CubeSmart’s apparent ability to tap capital markets at attractive rates, we view the REIT’s forward-looking payout coverage favorably.

Oct 27, 2020

Crown Castle Continues to Shine
Image Shown: Crown Castle International Corp.’s growth trajectory continued in the third quarter of 2020. Image Source: Crown Castle International Corp. – Third Quarter of 2020 IR Earnings Presentation. Crown Castle International Corp--3.3% yield (as of this writing)--is a real estate investment trust (‘REIT’) that owns 40,000+ cell towers, ~70,000 small cell nodes (on air or under contract) and ~80,000 route miles of fiber that support numerous networking operations all across the US. We include shares of Crown Castle as a holding in our High Yield Dividend Newsletter given its ability to generate sizable free cash flows even after investing heavily in expanding its asset base. From 2017 to 2019, Crown Castle generated ~$0.75 billion in annual free cash flows, though the firm had to tap capital markets to cover its annual common dividend obligations which averaged ~$1.75 billion during this period (its annual preferred dividend obligations averaged just under $0.1 billion during this period). While the REIT is capital market dependent, given the importance of its asset base which is primarily made up of essential infrastructure that supports telecommunications services in the US (including 5G services) and its ability to generate consistent free cash flows (rare in the REIT industry), we see Crown Castle maintaining access to both debt and equity markets at attractive rates going forward. When the REIT reported third quarter 2020 earnings on October 21, management had enough confidence in Crown Castle’s outlook to boost the firm’s quarterly dividend by 11% on a sequential basis. Though management has had to adjust Crown Castle’s 2020 guidance several times (including to the downside), largely due to headwinds created by the ongoing coronavirus (‘COVID-19’) pandemic, the REIT still expects to generate meaningful revenue and adjusted funds from operations (‘AFFO’) growth this year.

Oct 19, 2020

Global Net Lease’s Yield Is Flashing Signs of Trouble
Image Shown: An overview of Global Net Lease’s asset base. Image Source: Global Net Lease – Second Quarter of 2020 IR Earnings Presentation. Global Net Lease is a real estate investment trust (‘REIT’) focused on single tenant net-leased commercial properties in the US, Canada, and Europe. Sale and leaseback transactions are a common way the REIT grows its business. At the end of June 2020, a little less than two thirds of its annualized rental income came from properties in the US and Canada. Global Net Lease generated a little less than half of its annualized rental income from both office properties and industrial/distribution properties, with the remainder coming from retail properties. Shares of GNL yield ~10.2% on a forward-looking basis as of this writing after the REIT cut its quarterly payout in early-2020.

Sep 21, 2020

Public Storage Rebounds and Its Financials Remain Strong
Image Shown: Shares of Public Storage have recovered a considerable amount of lost ground since the pandemic-induced drop in March 2020. We continue to like Public Storage as a holding in our High Yield Dividend Newsletter and are big fans of self-storage companies with significant exposure to the US. The self-storage real estate investment trust (‘REIT’) Public Storage is included as a holding in our High Yield Dividend Newsletter portfolio. We strongly appreciate its free cash flows, which are relatively rare in the REIT industry given that the growth-related capital expenditures of most REIT’s tend to be enormous. Shares of PSA have rebounded strongly off their March 2020 lows and yield ~3.6% as of this writing.

Sep 21, 2020

CubeSmart Remains Rock-Solid
Image Shown: An overview of CubeSmart’s core geographical focus. We continue to like CubeSmart as a holding in our High Yield Dividend Newsletter portfolio. Image Source: CubeSmart – September 2020 IR Presentation. One of our favorite industries as it relates to locating high-quality high-yielding companies with promising dividend growth runways is the self-storage real estate investment trust (‘REIT’) space, particularly companies with operations primarily (if not entirely) in the US. Within this industry, CubeSmart is one of our favorites and remains a holding in our High Yield Dividend Newsletter portfolio. Shares of CUBE yield ~4.0% as of this writing. The self-storage REIT continued to make good on its dividend obligations during the coronavirus (‘COVID-19’) pandemic, a task made easier through CubeSmart’s ability to generate meaningful free cash flows. Unlike most other REITs, REITs operating in the self-storage space tend to be able to generate substantial free cash flows, and CubeSmart is no exception as we cover in this note.

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 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.

Jun 16, 2020

Reiterating Our Bullish Long-Term View on Stocks
Image: The NASDAQ 100 Index remains resilient, bouncing off support, after breaking out to new highs recently. Some of our best ideas are included in the NASDAQ 100, and our favorite concentrations include exposure to big cap tech and large cap growth. We continue to be bullish on equities for the long run. In addition to unlimited quantitative easing and "whatever it takes, squared" Fed policy, today, June 16, the Trump administration announced that it is weighing a $1 trillion stimulus bill to help support the economy. While uncertainties remain regarding specifics of the bill (it might include state assistance, extension of unemployment benefits, etc.), the move is consistent with the outsize spending we expect to further bolster the bull case, "ICYMI -- Stay Optimistic. Stay Bullish. I Am." We continue to emphasize that, in light of unlimited QE and runaway fiscal stimulus, the longer-duration components of intrinsic values are expanding considerably, and as a result, fair values, themselves, are actually rising during this recession and pandemic [a good estimate of the value of the S&P 500 today may be between 3,530-3,920, as outlined in the following: "Scribbles and More Newsletter Portfolio Changes.]."

Jun 15, 2020

ICYMI: Survey Coming Later Today, More Market Volatility Expected
Image: The market's levels of volatility so far in 2020 have been among the greatest in history. Expectations for increased volatility in the marketplace as a result of the proliferation of price-agnostic trading (indexing and quantitative trading) is a key theme of Valuentum's text, Value Trap: Theory of Universal Valuation. We continue to emphasize the importance of due diligence, enterprise valuation, behavioral thinking, the information contained in prices, and stock selection across equity portfolios. Page 256. This week is setting up to be yet another volatile week of trading, but nothing too surprising. We've talked extensively about outsize levels of volatility in the book Value Trap, and many of our predictions regarding the magnitude of volatility have come to fruition, as described in this note here. But as we've also noted in Value Trap, we don't think increased volatility is a transient development. The Fed and Treasury have only further emboldened price-agnostic trading (indexing/quant) with recent bailout actions, and volatility and momentum funds, which exacerbate the swings, will only grow as a percentage of trading volumes. The magnitude of market volatility during the COVID-19 crisis has certainly been immense. During March for example, the Dow Jones Industrial Average had 8 consecutive days with a 4% move in either direction (this is the first time in history this happened--not even during the tumultuous times of the Crash of 1929 or Black Monday of 1987 or the Great Financial Crisis did this happen). Intra-day volatility has also been considerable, and it has become commonplace for equity futures to swing wildly before market open. Now, more than ever, investors need a steady hand at the wheel.

Jun 12, 2020

*ALERT* Scribbles and More Newsletter Portfolio Changes
Image: Why are stock prices increasing while the near-term economy and near-term earnings outlook isn't as bright as before...How unlimited quantitative easing, runaway government spending, increased inflation expectations impact equity values...Why this year's earnings expectations or next year's earnings expectations don't matter much...Why Valuentum thinks equity values are rising today, even as the near-term outlook remains unclear. Scribbles on page 76 of Value Trap. "I know it sounds crazy to say so during a global pandemic and during a recession, but the right multiple and the right earnings to use to value this market is an 18-20x multiple on $196 earnings, putting a fair value range on the S&P 500 today of 3,530-3,920. The S&P 500 is trading at about 3,000 today." -- Brian Nelson, CFA