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 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

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 27, 2020

Earnings Roundup: Week Ended May 24, 2020
Image Shown: In this article we cover a variety of companies that reported earnings in May 2020. As we get deeper into 2020, more companies have reported earnings that covered how they performed during the early days of the ongoing coronavirus (‘COVID-19’) pandemic on both a financial and operational basis. In alphabetical order by ticker: DE, LOW, NVDA, TGT.

May 20, 2020

ALERT: Important Recap of Valuentum's Research and Market Events
Image: Breaking out to new highs, Facebook is a top weighting in the Best Ideas Newsletter portfolio (which includes our favorite capital appreciation ideas in a portfolio setting). The social media giant is surging on news of a new Shops feature, something we've been expecting and raving about with respect to its potential for years--as we maintain our view that, anti-trust considerations aside, Facebook is poised to become the "new Internet." The high end of our fair value estimate range for Facebook is nearly $290, and we would not be surprised if the company eventually reaches those levels. Note: PayPal, another big weighting in the Best Ideas Newsletter portfolio, has been a huge winner of late, too. The value of our research remains heavily tilted toward proficiency in enterprise valuation and technical/momentum indicators, portfolio construction, idea generation, individual stock selection, and assessing dividend health and resilience, among other things. ALERT: Important Recap of Valuentum's Research and Market Events: Unequivocally Bullish, S&P Target Range Was Withdrawn Last Month, Continued Focus on Individual Stock Selection with "Moaty" Operations, Huge Net Cash Positions, Strong Expected Future Free Cash Flows, Established Recurring Business Models, and Otherwise Attractive Economic Castles. Big Cap Tech and Large Cap "Growth" Remain Our Favorite Allocations.

May 20, 2020

Retail Roundup: Home Depot and Walmart Report Earnings
Image Source: Home Depot Inc – June 2019 IR Presentation. Home improvement stores and retailers with large grocery/consumer staples offerings in the US held up relatively well during the COVID-19 pandemic. E-commerce sales enabled Home Depot and Walmart to continue chugging along as consumers opted for either home delivery or curbside pickup in order to stay away from large crowds. Going forward, consumer spending may come under pressure from elevated levels of unemployment, but for now, major fiscal stimulus measures appear to be helping offset the worst of that particularly in the US and other developed nations that embarked on meaningful fiscal stimulus programs (keeping in mind that the latest quarterly results from Home Depot and Walmart only cover part of the worst of the economic downturn due to COVID-19).

May 18, 2020

Excited By COVID-19 Vaccine Candidates
Image Shown: The race is on to find a cure, or better yet a vaccine, for COVID-19. Image Source: Pfizer Inc – First Quarter 2020 Earnings IR Presentation. The race for a COVID-19 cure and vaccine is rapidly evolving with a lot of exciting press releases being put forth. Gilead has taken the lead with a viable treatment, Sorrento is working toward a cure, and it seems most all of big pharma and biotech is racing to find a vaccine, from Johnson & Johnson to Sanofi/GSK and beyond. Though the evaluation of the full data set from a Phase 2 clinical trial means a lot more than the evaluation of a limited set of data from a Phase 1 clinical trial, we think COVID-19 is on the run as modern medicine pushes forward. We’re reiterating our bullish take on the markets today, as we believe that the Fed will do anything and everything to keep this market moving higher, meaning stocks may remain divorced both from economic data and even virus data for some time as they continue to climb. We continue to point to ideas in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio and Exclusive publication. Our top 10 capital appreciation ideas and dividend growth ideas amid COVID-19, respectively, can be found at the following link, “Valuentum's COVID-19 Ideas Have Outperformed Significantly.” As we walk through a ‘who’s who’ as it relates to COVID-19 vaccine candidates, we maintain our view that investors may be facing a “win-win” situation as we outlined in our piece, “Stay Optimistic. Stay Bullish. I Am.” We remain unequivocally bullish on stocks for the long run.

May 11, 2020

Facebook Is Roaring Higher!
Image Shown: Shares of Facebook (blue line) have roared higher since reaching their March 2020 lows, far outpacing the rebound in the S&P 500 (orange line). We continue to like shares of FB as a top-weighted holding in our Best Ideas Newsletter portfolio. Top-weighted Best Ideas Newsletter portfolio holding Facebook posted first quarter 2020 earnings on April 29 that saw its GAAP revenues jump 18% year-over-year to $17.3 billion while its GAAP diluted EPS grew by 101% year-over-year, hitting $1.71. Please note that Facebook’s bottom-line comparison was made easier due to the firm recording a $3.0 billion legal settlement with the US Federal Trade Commission (‘FTC’) during the first quarter of 2019. While digital advertising spending levels are expected to get crushed in 2020 due to the ongoing coronavirus (‘COVID-19’) pandemic, Facebook communicated to investors that its long-term growth trajectory remained very promising during the firm’s latest quarterly conference call. In our view, digital advertising spending levels will quickly bounce back once economies around the world start to reopen in earnest, though we caution that efforts to reopen the economy and resume “normal” daily activities need to keep in mind the risk another wave of infections imposes.