Valuentum Exclusive Analysis for the Discerning Investor

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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 2, 2020

Our Thoughts on Rackspace and Zoom Video Communications
Image Source: Rackspace Technology Inc – Second Quarter of 2020 IR Earnings Presentation. The ongoing coronavirus (‘COVID-19’) pandemic has fundamentally disrupted daily activities for households all over the globe, which has changed the way individuals work and communicate with each other. Now many are working from home, doing schoolwork and attending virtual classes from home, and seeking to stay connected with friends and family while at home. Software-as-a-Service (‘SaaS’) companies that provide solutions to the problems created by COVID-19 are well-positioned to ride out the storm, aided by their asset-light and highly scalable business models.

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 28, 2020

TikTok Up for Grabs
Image Shown: ByteDance may be forced to sell the US operations of TikTok, and there are plenty of potential suitors out there with deep pockets. On August 27, Walmart announced it was in discussions with Microsoft Corp about acquiring the US operations of popular short-video-oriented social firm TikTok from Beijing-based ByteDance. Given that Microsoft noted back on August 2 it was continuing discussions concerning a potential deal for TikTok’s US, Australian, New Zealand and Canadian operations, it is likely Walmart would be interested in acquiring an economic interest in those assets as well. Additionally, a consortium led by Oracle Corp has reportedly made a $20.0 billion bid for TikTok according to The Wrap, with $10.0 billion made up in cash and $10.0 billion of Oracle stock along with a provision that would see Oracle give ByteDance 50% of the annual profits from TikTok over a two-year period. Please note that none of this is for certain, though we are intrigued by the news. Oracle is reportedly joined by General Atlantic and Sequoia Capital, two venture capital firms that are also investors in ByteDance.

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 21, 2020

Just How Good Have We Been?
Image: We have been absolutely pounding the table on big cap tech and large cap growth for many months now. It has been one of the rare buckets to have done well this year. By well, we mean superb. Source: Zerohedge. After capping off one of the best years in the Best Ideas Newsletter portfolio in 2019, we highlighted broad market put option ideas in late February and early March--right before the COVID-19 crash that shocked the markets. Then, just about right near the bottom, we highlighted 17 of 20 outperforming ideas--strong net-cash-rich, free-cash-flow generating powerhouses with strong secular growth tailwinds. We then went all-in in the newsletter portfolios in late April, just in time for the best 100 trading days in the S&P 500 in history. But perhaps the chart above says even more. You know that we have been absolutely pounding the table on large cap growth, big cap tech, and the NASDAQ, and the bucket of large cap growth is up 23% this year, significantly ahead of any other style. Significantly.

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 6, 2020

Alphabet Remains a Cash Flow Juggernaut
Image Shown: Alphabet Inc Class C shares, GOOG, are up 27% over the past year as of this writing on August 4. We continue to like shares of GOOG as a top-weighted holding in our Best Ideas Newsletter portfolio. We include Alphabet Inc Class C shares as a top-weighted holding in the simulated Best Ideas Newsletter portfolio, with shares of GOOG trading near their fair value estimate of $1,436 per share as of this writing. Given its pristine balance sheet, promising long-term growth trajectory and resilient business model, we see room for material capital appreciation upside at Alphabet as the top end of our fair value estimate range sits at $1,795 per share of GOOG. During the initial phase of the ongoing coronavirus (‘COVID-19’) pandemic, Alphabet remained a free cash flow generating juggernaut. On July 30, the digital advertising giant reported second quarter 2020 earnings that beat consensus estimates on both the top- and bottom-lines, though the year-over-year decline in its quarterly revenue highlighted the headwinds facing Alphabet’s near-term performance due to the pandemic.

Aug 6, 2020

Facebook’s Growth Story Continues
Image Shown: Shares of Facebook Inc are up ~23% year-to-date as of the end of normal trading hours on August 3. We continue to like shares of FB as a top-weighted holding in our Best Ideas Newsletter portfolio, and we see room for meaningful capital appreciate upside.We continue to like Facebook as a top-weighted holding in the Best Ideas Newsletter portfolio, and we see ample room for further capital appreciation as our fair value estimate sits at $284 per share, far above where shares of FB are trading at as of this writing. Additionally, the top end of our fair value estimate range sits at $355 per share of Facebook. Recent technical strength seen at shares of FB indicates that investors are starting to really warm up to Facebook’s high-quality business model, promising growth outlook, and pristine balance sheet.