Valuentum Exclusive Analysis for the Discerning Investor

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Jun 11, 2020

Valuentum Research Update
"Hope you all are doing great! I must say I couldn't be more pleased with the research we've been putting out, and thank you very much for your continued interest. In this piece, I wanted to get some of our latest work to you. First, please note that we've done a great job holding the line on many of our fair value estimates (ranges) on our website. Many stocks have been bouncing back, and we're glad we didn't rush through any updates. Updating fair value estimates (ranges) too frequently doesn't make much sense to us. We're after the right answer, not any answer." -- Brian Nelson, CFA

Jun 9, 2020

Macy’s Secures Additional Financing
Image Shown: Shares of Macy’s Inc have started to recover some of their lost ground after the company secured additional financing to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic. Store closures have decimated the company’s bottom-line, but the reopening of the US economy and many of the retailer’s stores has improved Macy’s outlook. Back on April 21, 2020, we published a note on Valuentum (link here) highlighting why it would be hard for Macy’s to unlock the (fair) value of its real estate assets. We are following up on that piece given recent events that we will cover in this article, and we strongly encourage our members to check out that first article.

Jun 9, 2020

Our Thoughts on Warner Music Group Going Public
Image Shown: Shares of Warner Music Group Corp were trading comfortably above their initial public offering (‘IPO’) price of $25 per share at of the end of normal trading hours on June 8, after going public on June 3. Warner Music went public on June 3, though shares were sold by the company’s stockholders in the IPO and not the firm itself, meaning these proceeds are not expected to go to Warner Music Group. The company owns various record labels including Atlantic Records, Warner Records, Elektra Records and Parlophone Records along with its global music publishing business Warner Chappell Music. For some background, please note Warner Music Group counts Ed Sheeran, Bruno Mars, and Cardi B as some of its recording artists and on the music publishing business side of things songwriters including Twenty One Pilots, Lizzo and Katy Perry are part of the firm’s team. In 2011, Access Industries purchased Warner Music Group and took the company private after the firm was previously publicly traded from 2005 to 2011.

Jun 8, 2020

ICYMI -- Stay Optimistic. Stay Bullish. I Am.
Image: My great-grandfather (second from left) and his buddies in the 88th Division of the United States Army during World War I, at the time of the Spanish Flu pandemic of 1918-1919. He would serve under Major General William Weigel, become proficient in the 37mm gun, and take part in the largest offensive in U.S. military history, the Meuse-Argonne Campaign. As a corporal, he would survive the Great War and the Spanish flu pandemic, returning to the U.S. in May 1919 from the port of Saint-Nazaire, France on his way to Omaha, Nebraska. First of all, I wanted to reiterate how bullish I am on equities for the long haul. There are no risk-less investments when it comes to the stock market, of course, but this "win-win" scenario we seem to find ourselves in today appears to be one-of-a-kind in history. Here's what it boils down to. If the U.S. economy re-opens and everything turns out to be "fine," or at least better-than-expected, it's hard not to be bullish on stocks. We can then possibly look to pre-COVID-19 earnings numbers for 2021 and 2022 with some adjustments here and there, and that means the bull market is on (and new heights may be in sight). On the other hand, if the U.S. economy re-opens and economic numbers don't live up to expectations, which could happen, there will likely be even more stimulus--but investors might be bullish in this scenario, too. For starters, there's been more money created during the past few weeks or so than during the entire year following Lehman Brothers' failure (there's even talk of more money creation with another round of stimulus). We cannot forget that, while stock values are calculated on the basis of future free cash flow expectations, they are priced nominally (not inflation-adjusted), and stock investing is one way to combat the risk of inflation as strong companies price goods ever higher to outpace rising costs to reap in ever-higher earnings. Even if this excess money in the economy is not translated into inflation in physical goods and services, however, it may translate into inflating equity prices specifically, as has arguably (or perhaps undeniably) been the case during the period of 2010-2019. But there's more to this line of thinking...

Jun 5, 2020

Campbell Soup Sees Its Sales Surge
Image Source: Campbell Soup Company – Third Quarter of Fiscal 2020 Earnings IR Presentation. On June 3, Campbell Soup reported third-quarter earnings for fiscal 2020 (period ended April 26, 2020) and raised guidance for the full fiscal year to reflect the surge in demand for consumer staples goods due to the ongoing coronavirus (‘COVID-19’) pandemic. The firm beat consensus bottom-line estimates but missed consensus top-line estimates. Campbell’s net organic sales (a non-GAAP figure) jumped up by 17% year-over-year (GAAP revenues were up by 15%) and its adjusted diluted EPS (a non-GAAP figure) climbed higher by 57% year-over-year (GAAP diluted EPS was up 34%).

Jun 5, 2020

Dow Jones Surges Past 27,000; Bull Market Continues!
"What a bull market off the lows we are having. I don't think we're finished, as I have pounded the table time and time and time again about how bullish I am. In the words of Frank Sinatra, "The Best Is Yet to Come," and I truly believe that. Yesterday, I explained to readers why we're seeing this huge rally, "Stay Optimistic. Stay Bullish. I Am." If you understand the duration and composition of equity value (page 74-83 in Value Trap), you can start focusing on what drives share prices and returns. How else could a market rally this much with 13% unemployment, right? How wonderful it would be if everyone understood the duration of stock value composition! What would happen to ambiguous, backward-looking factor investing? Finance could then start talking about things that make sense again." -- Brian Nelson, CFA

Jun 1, 2020

June Dividend Growth Newsletter & Intrinsic Value Investing
"But how, you will ask, does one decide what [stocks are] "attractive"? Most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth,"...We view that as fuzzy thinking...Growth is always a component of value [and] the very term "value investing" is redundant." -- Warren Buffett, Berkshire Hathaway annual report, 1992

May 29, 2020

Dollar General Posts a Tremendous Fiscal First Quarter Earnings Report
Image Source: Dollar General Corporation – Fiscal 2019 Annual Report and Fiscal 2020 Proxy Statement. Dollar General is one of our favorite retail plays given its focus on smaller cities and towns (with populations of 20,000 or less) in the US as that gives it an immense edge over e-commerce giants such as Amazon due to the logistical hurdles involved with expanding into these regions. Shares of DG have run up above the top end of the fair value range as of this writing; however, given its strong technical and fundamental performance of late, we're keeping Dollar General as an idea in the Best Ideas Newsletter portfolio as we like to let our winners run. It isn’t until a company’s technicals turn against it that we consider removing shares from our newsletter portfolios. Shares of DG yield ~0.8% as of this writing, which offers incremental income upside to Dollar General’s capital appreciation upside. In March 2020, Dollar General opened its first store in Wyoming which represented the 45th state the company had a retail presence in. In April 2020, Dollar General opened its first store in Washington state, growing its retail presence to 46 US states. Beyond same-store sales growth, Dollar General sees room for upside by expanding its physical store count.

May 22, 2020

Facebook Augments Its Impressive Growth Trajectory
Image Shown: Shares of Facebook Inc have outperformed the S&P 500 index year-to-date, as of this writing on May 21, by a wide margin. Facebook is a top-weighted holding in the Best Ideas Newsletter portfolio and shares have surged upwards of late, sparked in part by its strong first-quarter 2020 performance, relatively speaking, given the ongoing coronavirus (‘COVID-19’) pandemic. As of this writing on May 21, shares of FB are up ~14% year-to-date while the S&P 500 is down ~8% during the same period (this is before taking dividend considerations into account; however, that doesn’t change this picture by much). We continue to like Facebook as a top-weighted holding in the Best Ideas Newsletter portfolio and please note that the top end of our fair value estimate range sits at $289 per share. Given the company’s strong fundamental and especially technical performance of late, there’s room for shares of FB to march significantly higher from current levels.

May 22, 2020

Earnings Roundup: EXPE and LB
Image Shown: Covering recent earnings reports from Expedia Group Inc and L Brands Inc. In this earnings roundup note, we cover travel company EXPE and specialty retailer LB to get an idea of how various industries are performing during the ongoing coronavirus (‘COVID-19’) pandemic.