Valuentum Exclusive Analysis for the Discerning Investor

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Nov 16, 2019

Walmart Earnings Report Indicates US Consumer Still Strong
Image Shown: Shares of Walmart Inc have performed quite well so far in 2019. That’s arguably due to the ongoing strength of the US consumer and the significant investments Walmart has made into expanding its domestic grocery e-commerce offerings.  There’s a lot of talk of recession right now, but as Walmart’s latest quarterly results show, the US consumer remains resilient. A combination of historically low unemployment rates and modest wage growth in the US has created a bulwark against exogenous shocks, with an eye towards the economic slowdown currently going on in the Eurozone and East Asia. We’ll see how long this paradigm can last. We aren’t interested in adding Walmart to any of our newsletter portfolios at this time, as shares of WMT already trade near the top end of our fair value estimate range (which sits at $119 per share). Shares of WMT yield 1.8% as of this writing. We continue to like the current holdings in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Oct 14, 2019

Economic Commentary: Robots, Value Trap, and Politics on the Markets
Valuentum sat down for the latest installment of its periodic economic commentary, and the team tackled a wide array of topics, from robots on Wall Street, to President of Investment Research Brian Nelson’s new book Value Trap, to political influence on the markets and boyond. Let’s set the stage with a prompt from a recent Bloomberg article, “The Master of Robots…Coming for Wall Street...

Oct 12, 2019

ICYMI: Interview with Valuentum's President Brian M. Nelson, CFA
Catch up with Valuentum's President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles.

Oct 4, 2019

Economic Commentary: Apple $225+, Brokers Tumble, Auto Sales Look Tired
Image: Shares of TD Ameritrade Holdings have been punished as online trading commissions go to zero. "Though all signs point to increased volatility, we maintain our view that we’re well-positioned in the newsletter portfolios, and the ideas highlighted in the Exclusive publication consider the backdrop economic conditions we closely monitor." -- Brian Nelson, CFA

Sep 23, 2019

Empirical Support for Porter’s “Gospel,” Plus Comments on the “Head Fake” Rotation
“Let’s be very clear: There is strong empirical quantitative evidence that the price-to-fair value equation (“factor”) is predictive of returns, which is what matters for value investors, and in Morningstar’s case, the moat assessment is just part of that overarching conclusion (fair value estimate). Researchers continue to attack the moat “factor” on grounds that don’t make any sense, in my view, and are cherry-picking parameters to assess value investing.” – Brian Nelson, CFA

Sep 16, 2019

Economic Roundtable: Quant Quake, “Quac-cidental Correlation,” and Economic Moats
Image Source: Anders Sandberg. Last week, the markets may have revealed that internals aren’t all that healthy. Major equity markets experienced a “rotation” that reminded many investors of the “quant quake” from August 2007. As Valuentum’s Brian Nelson wrote in Value Trap, “just a few bad days in the market caused a rapid unwinding of many quant long-short strategies (back then). Goldman’s chief financial officer said at the time that the firm was witnessing ‘25-standard deviation moves, several days in a row.’” On the surface, markets last week seemed relatively calm, but as the episode in 2007 revealed the activity last week may just be the calm before the storm. Many are pointing to overcrowded trades in betting against certain factors, while others are saying that many were forced to deleverage. We’re not so sure, and we think it may be the opposite: after years of suffering from lagging “value” returns, we think several quant shops stepped in to take on leverage, betting on a return to “value.” Let's talk about last week's quant quake, spurious correlations (the “guac-cidental correlation, in fact), economic moats and much more.

Sep 13, 2019

Kroger Posts Solid Quarter, Issues Weak Guidance
Image Shown: Kroger Company – IR Presentation. Kroger’s same-store sales growth was a welcome sight as it relates to the current strength of the US consumer, but we are staying away from the retailer for a reason. Its large net debt load puts the company’s payout at risk during adverse economic conditions, and we think management should be battering down the hatches considering how late we are in the business cycle. Management ending Kroger’s incremental operating profit forecast is a troubling sign.

Sep 11, 2019

Economic Roundtable: “Value” Versus “Growth” Rotation
“This kind of trading activity could be setting the stage for a big quant fund blow up, if the kind of leverage it takes to move the markets to this magnitude was applied. All it may take is for the B/M “value” factor to continue to suffer in the coming 12-18 months--it’s possible we could see a few quant firms go belly up. My guess is that market participants are paying very close attention to this activity, and if they “smell blood,” things could get ugly.” – Brian Nelson, CFA

Sep 5, 2019

Valuentum’s Economic Roundtable: Trade War, Factors and Beyond
The markets rallied hard September 5 on relief that the US and China will go back to the negotiations table next month. This back-and-forth news cycle is enough to give any investor whiplash. Let’s catch up with the Valuentum Team on the latest developments, not only with the trade war but also with respect to factor investing, possible bubbles and beyond.

Sep 4, 2019

The "Hierarchy" of Valuentum Idea Generation
Image: The Valuentum Buying Index rating scale.Let's talk about this hierarchy of idea generation in this note.