Valuentum Exclusive Analysis for the Discerning Investor

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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 ALERT: Important Recap of Valuentum's Research and Market Events: Unequivocally Bullish, S&P Target Range Was Withdrawn Last Month, Continued Focus on Individual Stock Selection with "Moaty" Operations, Huge Net Cash Positions, Strong Expected Future Free Cash Flows, Established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 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.

May 6, 2020

Tyson Faces Operational Hurdles
Image Source: Tyson Foods Inc – Second Quarter of Fiscal 2020 Earnings IR Presentation. On May 4, the major meat and prepackaged food provider Tyson Foods reported second-quarter earnings for its fiscal 2020 (period ended March 28, 2020) that missed consensus estimates on both the top- and bottom-line, sending its shares sharply lower during the regular trading session that day. The ongoing coronavirus (‘COVID-19’) is hurting its production capabilities, in particular the operations of its meatpacking plants as numerous confirmed COVID-19 cases (that unfortunately includes fatalities) have emerged at those facilities and the facilities of its peers across the US, prompting many to close or scale back. For instance, Tyson was forced to temporarily close a large pork plant in Waterloo, Iowa, starting in late-April as many workers were calling out sick.

May 4, 2020

Visa Reports That Global Spending Levels May Have Started to Stabilize in April
Image Source: DeclanTM. One of our favorite companies and a top-weighted holding in our Best Ideas Newsletter portfolio, Visa, reported second-quarter earnings for fiscal 2020 (period ended March 31, 2020) which beat both consensus top- and bottom-line estimates. Going forward, while Visa’s very lucrative travel-related businesses (which includes payment processing and foreign currency transaction solutions) will take a hit from reduced travel worldwide due to the ongoing coronavirus (‘COVID-19’) pandemic, management is focused on controlling expenses to offset exogenous headwinds. Specifically, management noted that Visa would pull back on “discretionary spending especially related to personnel, travel, professional services, and marketing” which we appreciate.

Apr 30, 2020

Alphabet Surges Higher
Image Shown: Shares of Alphabet Inc surged higher on April 29 after reporting a stellar earnings report, and we continue to like Alphabet Class C shares as a top-weighted holding in our Best Ideas Newsletter portfolio. After the market close on April 28, Alphabet reported first-quarter earnings for 2020 that beat top-line consensus estimates and missed bottom-line consensus estimates, with sales supported by the strength of its digital advertising business and its growing Google Cloud business. Alphabet’s advertising revenue (comprised of revenue from its Google Search, YouTube, and Google Network Members' properties operations) was up 10% year-over-year to $33.8 billion while Google Cloud reported 52% revenue growth year-over-year, reaching $2.8 billion last quarter. All-in-all, Alphabet’s GAAP revenues climbed higher by 13% year-over-year in the first quarter, hitting $41.2 billion. Shares of Alphabet moved significantly higher on April 29 as the firm’s outlook was better than expected, aided by management communicating that Alphabet was prepared to utilize its fortress-like balance sheet to repurchase stock at a meaningful discount to their intrinsic value.

Apr 29, 2020

ALERT: Going to “Fully Invested” -- The Fed and Treasury Have Your Back
Image Source: BEA. Real GDP fell at an annual pace of 4.8% in the first quarter of 2020, according to the "advance" estimate released by the Bureau of Economic Analysis. We’re taking the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to “fully invested,” scaling up our existing positions to reflect that status. We plan to consider put options to hedge against downside risk, if or when the time comes. Moral hazard continues to run rampant, and the Fed and Treasury may have no choice but to continue artificially propping up this market, even buying stocks through certain vehicles, if necessary. Having warned members about the impending “Great Crash of 2020” and identifying savvy opportunities near the bottom, we are now withdrawing our S&P 500 target range as we move now to focus more on individual ideas through this turbulence. We expect to continue to identify opportunities for relative outperformance. 2019 was one of the best years in the Best Ideas Newsletter portfolio yet. In the Exclusive, we just registered our 25th consecutive monthly short idea in a row that has worked out. The markets may go much lower from here before we go higher again, but the Fed and Treasury won’t let this market go down in the longer run, in our view--even as we navigate a Depression-type economic environment in the near term. Stay the course.

Apr 28, 2020

Good News for Facebook Ahead of Earnings Report
Image Shown: Facebook Inc’s top-line has experienced meaningful growth in recent years. Image Source: Facebook Inc – Fourth Quarter and Full-Year 2019 Earnings IR Presentation. One of our favorite Best Ideas Newsletter portfolio holdings is Facebook, and we appreciate its pristine balance sheet (plenty of cash on hand and no debt on the books as of the end of 2019), promising growth trajectory (short-term headwinds aside, digital advertising is a secular growth market and likely to bounce back strongly once the pandemic subsides), and we would like to highlight that shares of FB trade at a meaningful discount to our fair value estimate (which sits at $234 per share) as of this writing. Recently, several things have happened that supports our thesis as to why Facebook is a stellar company which will cover in this note. The ongoing coronavirus (‘COVID-19’) pandemic will depress Facebook’s near-term performance, but the firm’s medium- and long-term outlook remains very promising.

Apr 25, 2020

Emergency Update on COVID-19
President of Investment Research at Valuentum, Brian Nelson provides an emergency update on COVID-19. He talks about how policymakers have dropped the ball thus far, and why investors should not let their guards down, despite what has been a nice bounce from the March 23 bottom.

Apr 22, 2020

What To Do Now?
Let's get President of Investment Research Brian Nelson's thoughts...