Valuentum Exclusive Analysis for the Discerning Investor

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May 15, 2020

Cisco Systems Remains Resilient During These Challenging Times
Image Source: Cisco Systems Inc – Third Quarter of Fiscal 2020 Earnings IR Presentation. On May 13, Cisco Systems reported earnings for the third quarter of its fiscal 2020 (period ended April 25, 2020) that beat consensus estimates on both the top- and bottom lines. Within the report, management provided guidance for the fiscal fourth quarter that wasn’t as bad as the market had feared. Though the firm’s revenues are still expected to decline by high single-digits to low double-digits on a year-over-year basis in the fiscal fourth quarter, the market was expecting a significantly worse impact from the ongoing coronavirus (‘COVID-19’) pandemic as it relates to Cisco Systems’ financial performance. Shares of CSCO yield ~3.3% as of this writing, and we continue to like the network infrastructure hardware and software company as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

May 15, 2020

Under Armour Potentially Faces a Serious Liquidity Crunch
Image Shown: Under Armour Inc may face a serious liquidity crunch if its creditors don’t extend the maturity length of the borrowings under its revolving credit facility. On May 11, Under Armour reported earnings for the first quarter of 2020 with its GAAP revenues declining by 23% year-over-year, and management attributed ~1500 basis points of that decline to the ongoing coronavirus (‘COVID-19’) pandemic. On the flip side, Under Armour’s GAAP gross margins improved by ~110 basis points year-over-year due to reduced pricing discounts, though COVID-19 weighed against the company’s performance in this area as well. Under Armour reported a GAAP net loss of $590 million in the first quarter of 2020 due to rising operating expenses (with an eye towards marketing spend) and major impairment and restructuring charges. Without the impairment and restructuring charges, Under Armour still reported a non-GAAP adjusted net loss of $152 million. All in all, it was a tough quarter, and it’s only going to get worse (at least in the short-term).

May 15, 2020

Dividend Increases/Decreases for the Week Ending May 15
Let's take a look at companies that raised/lowered their dividend this week.

May 14, 2020

Digital Realty Trust is Holding Up Quite Well
Image Shown: Shares of Digital Realty Trust Inc, a holding in both our Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios, have outperformed the S&P 500 by a wide margin over the past year and that’s before taking dividend considerations into account. On May 7, the data center real estate investment trust (‘REIT’) Digital Realty Trust reported first-quarter 2020 earnings. Though the firm’s near-term guidance disappointed investors, management communicated that the medium- and long-term trajectory of Digital Realty’s financial and operational performance remained strong. Furthermore, its liquidity position and its dividend coverage continued to be rock-solid, particularly after factoring in the data center REIT’s ongoing access to equity markets and lack of near-term debt maturities. Data centers are generally considered “essential” activities around the world given we live in the digital age and these assets have continued to operate during the pandemic. Shares of DLR yield ~3.4% on a forward-looking basis as of this writing.

May 13, 2020

Realty Income Signals Turbulence Ahead, Shores Up Liquidity Position
Image Source: Realty Income Corporation – First Quarter of 2020 Earnings IR Presentation. On May 4, the real estate investment trust (‘REIT’) Realty Income Corp posted first-quarter 2020 earnings that saw its adjusted funds from operations (‘AFFO’) per share jump by over 7% year-over-year, hitting $0.78 last quarter. Realty Income pays out a monthly dividend, and shares of O yield ~5.1% as of this writing. We like the REIT’s business model, which invests in single-tenant commercial properties, and view Realty Income as well-positioned to ride out the ongoing coronavirus (‘COVID-19’) pandemic. However, we caution that its near-term financial performance will come under fire from some of its tenants no longer being able to (or willing to) pay rent due in part to the economic downturn. As roughly half of its tenants carry investment-grade credit ratings, Realty Income is in a better position than some of its peers. Most of Realty Income’s tenants have continued to pay rent during the pandemic, at least during the early stages of the crisis, and the REIT is working with its troubled tenants to find a solution that suites the interests of both parties.

May 11, 2020

Republic Services: “The Worst Is Behind Us…”
The waste industry has a number of cost levers to pull to overcome profit pressures in its residential pick-up operations and reduced volume in its commercial and industrial operations, the latter a higher margin proposition. However, economic activity seems to be picking up, and some are saying the worst may be behind us. Our favorite waste hauler is Republic Services.

May 8, 2020

Disney’s Financials Will Eventually Rebound
Image Source: Marc Levin. On May 5, The Walt Disney Company reported second quarter earnings for fiscal 2020 (period ended March 28, 2020) that beat consensus top-line estimates but missed consensus bottom-line estimates. The firm’s financial and operational performance has taken a hit from the ongoing coronavirus (‘COVID-19’) pandemic; however, in our view the firm will bounce back once considerably a COVID-19 vaccine becomes available (which isn’t a certainty, but a lot of companies are actively pushing forward with human clinical trials as we speak including this firm). We continue to like Disney with a modest weighting in the Best Ideas Newsletter portfolio.

May 8, 2020

Dividend Increases/Decreases for the Week Ending May 8
Let's take a look at companies that raised/lowered their dividend this week.

May 7, 2020

Best Idea PayPal Soars on Very Promising Outlook
Image Shown: Best Ideas Newsletter portfolio idea PayPal is surging after a strong outlook that speaks to underlying strength of the “new” consumer in a post COVID-19 world. On May 6, one of our favorite companies PayPal reported first quarter 2020 earnings. While PayPal missed consensus estimates on both the top- and bottom-line, investors looked towards the future and shares of PYPL rose sharply after the report on May 7. We continue to like PayPal as a near top-weighted holding in our Best Ideas Newsletter portfolio. Please note we increased the weighting of PYPL shares in that newsletter portfolio back on January 13, 2020 (link here) and further increased PayPal’s weighting in our Best Ideas Newsletter portfolio after going “fully invested” in April 29, 2020 (link here). The top end of our fair value estimate range sits at $150 per share, and in our view, shares of PYPL have room to run further from current levels as of this writing (even after their strong performance of late). PayPal is very well-positioned to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic as the world continues to transition towards an era heavily reliant on digital payments.

May 7, 2020

Gold Miner Newmont Continues to Shine
Image Source: Newmont Corporation – First Quarter of 2020 Earnings IR Presentation. On May 5, the gold miner Newmont Corp reported first quarter 2020 earnings that missed both consensus top- and bottom-line estimates which prompted shares to sell off modestly during the normal trading session that day, though shares of NEM have been on an epic bull run since the start of 2020. We continue to like Newmont as an idea in our Dividend Growth Newsletter portfolio with shares of NEM up ~48% as of this writing since joining the portfolio on January 13, 2020, before taking dividend considerations into account, while the S&P 500 is down ~13% during this period before taking dividend considerations into account. At Newmont’s new annualized dividend payout of $1.00 per share, shares of NEM yield ~1.6% as of this writing.