Valuentum Exclusive Analysis for the Discerning Investor

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Feb 10, 2022

Best Idea Disney Rebounding Nicely; Shares Look Cheap
Image Shown: Shares of The Walt Disney Company strengthened February 9 in the wake of the media and entertainment giant's latest earnings report. We include shares of DIS as an idea in the Best Ideas Newsletter portfolio. On February 9, The Walt Disney Company reported first-quarter fiscal 2022 earnings (period ended January 1, 2022) that smashed past both consensus top- and bottom-line estimates. A sharp rebound at its ‘Disney Parks, Experiences and Products’ unit impressed investors and shares of DIS are strengthening nicely in the wake of its latest earnings report. We are big fans of Disney and include shares of DIS as an idea in the Best Ideas Newsletter portfolio. Our fair value estimate stands at $179 per share of Disney with room for upside as the high end of our fair value estimate range sits at $219 per share. Shares are currently trading at ~$155 each at the time of this writing.

Jan 23, 2022

Netflix’s Subscriber Growth Is Slowing Down, Competition Heating Up
Image Shown: Netflix Inc’s paid subscriber base is expected to grow at a slower pace in the near term compared to the performance seen in recent years. Image Source: Netflix Inc – Shareholder letter covering the fourth quarter of 2021. On January 20, Netflix reported fourth-quarter 2021 earnings after the bell. The video streaming giant met consensus top-line estimates and beat consensus bottom-line estimates last quarter as original content such as the South Korean TV show Squid Game (released September 2021) proved to be quite popular in markets around the globe and helped Netflix retain interest in its service. During Netflix’s latest earnings call, management noted that the violent Squid Game TV show had been renewed for a second season when asked by an analyst about the issue. However, the near-term guidance Netflix provided in conjunction with its latest earnings update signaled that growth in its paid subscriber base was expected to slow down in the first quarter of 2022 on both a year-over-year and sequential basis. During regular trading hours on January 21, shares of NFLX were pummeled.

Nov 30, 2021

We Remain Bullish on Disney’s Capital Appreciation Upside Potential
Image Shown: Shares of The Walt Disney Company have shifted lower over the past month, though are still bullish on its capital appreciation upside. Our fair value estimate sits at $192 per share of Disney. The Walt Disney Company reported fourth-quarter earnings for fiscal 2021 (period ended October 2, 2021) on November 10 that missed consensus top- and bottom-line estimates. While the company’s ‘Disney Parks, Experiences and Products’ segment (includes its theme parks and resorts operations) staged an impressive turnaround last fiscal quarter, its ‘Disney Media and Entertainment Distribution’ segment (includes its video streaming businesses) grew at a slower pace than expected. Shares of Disney sold off after its latest earnings report, though we remain confident that the company’s free cash flow growth outlook remains stellar and continue to view Disney’s capital appreciation upside potential quite favorably. Disney is included as an idea in the Best Ideas Newsletter portfolio.

Nov 16, 2021

The Valuentum Weekly Is a Hit! Only Delivered By Email!
The Valuentum Weekly is a brand-new weekly market commentary from Valuentum Securities, released each weekend in digital form. The Valuentum Weekly offers members a weekly synopsis of the markets and major events. It will be straight and to-the-point. Our goal is to deliver to you the latest information and insights. We welcome your feedback on how we can make the Valuentum Weekly as useful and as relevant for you as ever!

Oct 20, 2021

Quants and High-Frequency Trading the Real Cause of the GameStop Frenzy?
Image: The cause of the GameStop trading frenzy remains largely unclassified as it appears to us that quant and high-frequency trading played a much bigger role in the market disruption than what is being reported. We think the SEC staff put out a fantastic “GameStop Report” with some excellent information. However, the report did not get to the crux of the matter, failing to disclose what actually caused the extreme market volatility in meme stocks, while glossing over the substantial increase in institutional accounts, likely belonging to quant/trend/momentum funds, that contributed to the trading frenzy this year. We think investors and market participants deserve to know more about what caused this threat to market integrity and structure as the continued proliferation of which may only grow larger and larger in the coming decades. If it was quant trading, then we encourage the SEC to take steps to ensure that such trading is curbed effectively as it is clear that such price-agnostic activity is not contributing to market efficiency.

Jul 8, 2021

Still Bullish -- Stocks for the Long Run!
Image shown: The 10-year Treasury rate has fallen quite a bit since March of this year, suggesting that inflation expectations have come down in recent months. Image source: CNBC. The S&P 500, Dow Jones Industrial Average and Nasdaq continue to hover near all-time highs, and all appears well. We maintain our bullish take on the markets and believe that we are in the early innings of a long bull market that started following the washout March 2020 during the depths of the COVID-19 meltdown. Stock bull markets tend to average about 4.4 years in duration, with the last one enduring ~11 years, while bear markets are very abrupt, lasting only 11.3 months on average, the last one a very short 1.1 months, according to data from First Trust. We’re about 15 months into this new stock bull market, and we continue to believe increased equity exposure may better serve investors of all types going forward, through both the best of times and the worst of times.

Jun 8, 2021

News Round Up and Some Answers
Image Shown: Wendy's is the latest stock to be swept away by the meme-stock craze, providing further evidence that 1) markets are inefficient and 2) prices and returns are based on future expectations that may be realized or not. We continue to witness extremely volatile trading in "meme" stocks, including AMC Entertainment and GameStop but the crowd has now moved into restaurants of late, centering on Wendy’s, which soared to an all-time high as a result of positive mentions on the Reddit platform. We think price-agnostic trading--trading that does not pay attention to the underlying value of the security--will create tremendous problems for the financial markets, if not curbed. In the meantime, we continue to watch with a cautious eye. You should, too.

Jun 3, 2021

How to Navigate the Low Return Environment
Image Source: QuoteInspector.com. Investors continue to gamble on meme stocks and cryptocurrencies. There are no shortcuts to success in the markets and focusing on individual security selection within the equity component of the capital structure with a focus on long-term cash-flow-based fundamentals continues to be a prudent strategy, in our view. Success rates within the Exclusive publication, for example, continue to be fantastic. The success rates for capital appreciation ideas (49 of 59) and short idea considerations (53 of 59) in the Exclusive publication are now ~83%% and ~90% from July 2016-May 2021. For investors focused on capital appreciation potential, the Best Ideas Newsletter portfolio may be worth a look. For those with a dividend growth focus, the Dividend Growth Newsletter portfolio has a plethora of ideas. Though AT&T threw us a curve ball with respect to changes in its dividend payout recently, the prudent and diversified nature of the simulated High Yield Dividend Newsletter portfolio continues to deliver, while idea generation remains robust. Many of our options ideas have done quite well, too. We remember when the S&P was trading at about 3,000, and we pegged a fair value range on the S&P 500 of 3,530-3,920, and many thought we were crazy at the time (the S&P 500 now stands at ~4,200 at the time of this writing). You have to understand: Stock prices and returns are based on future expectations and forecasts, a truism that AMC Entertainment’s trading activity has all but proven. AMC defeats efficient markets theory. AMC defeats value versus growth. AMC defeats backward-looking analysis. Finance is dead. The field must evolve. Long live Value Trap.

Apr 12, 2021

How Many Stocks to Achieve Diversification?
Image: GameStop’s shares are falling like a rock after hitting euphoric levels in the mid-$400s earlier this year. Our fair value estimate stands below $10 per share.  Day trading GameStop is gambling. Resist the urge. The 60/40 stock bond portfolio may have cost investors a bundle during the past 30 years relative to active stock managers charging 2% per annum, but that doesn’t mean you shouldn’t diversify appropriately within the equity component of your asset mix. Use common sense, and don’t get too aggressive on your favorite ideas either. We generally like to limit new ideas to 8%-10% of the newsletter portfolios at “cost” and generally don’t like them to run higher than 15% of the newsletter portfolio after appreciation. From my perspective, only ultra-sophisticated investors should ever consider shorting, and please don’t gamble too aggressively on options. Know the unlimited loss potential of selling options contracts. Options is not a fun game to lose. Investing is a long game--and know the difference between diversification across your favorite ideas and “diworsification” by buying overpriced assets. Adding pipeline MLPs to your portfolio in mid-2015 may have smoothed your returns the past five years, but only by hurting them. Leave gambling to the quants. See through the illusion of “factor” investing. Be smart, and don’t get stuck thinking “inside the box.” Markets are inefficient, unless you think GameStop was appropriately priced at both $180 and $350 on the same day (March 10) on no news. Finally, unless you have a few friends that can lend you a few billion in a pinch, don’t ever forget the cardinal rule--and even if you have a few billionaires next store: Always leave yourself outs. Stocks for the long run.

Mar 31, 2021

Why You Need to Hire an Active Stock Manager and Ditch Modern Portfolio Theory
Image: Why You Need to Hire an Active Stock Manager and Ditch Modern Portfolio Theory. An Approximate Hypothetical representation of an active manager that charges a 2% active management fee that mirrors the S&P 500 benchmark versus an advisor that charges a 1% advisor fee that applies a 60/40 stock/bond rebalancing from 1990-2021. Approximate Hypothetical returns are based on the following extrapolation: “Since inception in November 9, 1992, returns after taxes on distributions and sales of fund shares for the [Vanguard Balanced Index Fund Investor Shares] VBINX came in at 6.5% through June 30, 2020, while the same measure since inception in January 22, 1993, for the S&P 500, as measured by the S&P 500 ETF Trust (SPY), came in at 8.12% through June 30, 2020.” The ‘Approximate Hypothetical 60/40 stock/bond portfolio w/ 1% advisor fee (smoothed)’ represents a hypothetical 100,000 compounded at an annual rate of 5.5% [6.5 less 1] over the period 1990-2021. The ‘Approximate Hypothetical S&P 500 (SPY) w/ 2% active management fee (smoothed)’ represents a hypothetical 100,000 compounded at an annual rate of 6.12% [8.12 less 2] over the period 1990-2021. Approximate Hypothetical results are for illustrative purposes only and are based on the data available. Let's get caught up on recent developments at Korn Ferry, Dick's Sporting Goods, Chewy, GameStop, Williams Sonoma, McCormick & Company, and CRISPR Therapeutics.