Valuentum Exclusive Analysis for the Discerning Investor

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Feb 19, 2024

The Price-to-Earnings Ratio Demystified
Let's examine the price-to-earnings (P/E) ratio. The key takeaways are: 1) without using a discounted cash-flow model, the P/E ratio that should be applied to a company's future expected earnings stream can never be appropriately calculated, and by extension, 2) when investors assign an arbitrary price-to-earnings multiple to a company’s earnings (based on historical trends or industry peers or the market multiple), they are essentially making estimates for all of the drivers behind a discounted cash-flow model in one fell swoop (and sometimes hastily). As earnings for next year are often within sight and can be estimated with some confidence (though this certainly varies among firms), calculating the price-to-earnings ratio via a discounted cash-flow process, in our opinion, is of far greater importance than worrying about whether a firm will beat or miss earnings in its next fiscal year. Because the P/E ratio is a discounted cash-flow model that considers the long-term qualitative dynamics of a particular entity, cash-flow analysis remains the first and most important pillar of our Valuentum Buying Index. And finally, investors cannot ignore valuation analysis or the future. Valuation is an important driver behind stock prices, and it is based on future expectations that can only be estimated. This is just a fact of the markets.

Jan 8, 2024

Boeing In Negative Headlines Again; Part of 737 Max Fuselage Blows Out During Commercial Flight
Image: Boeing's shares have been quite volatile the past couple years. On January 6, Boeing received some more bad news. Part of a fuselage installed on one of its new eight-week old 737 Max 9 aircraft blew out on an Alaska Airlines flight. Boeing had been working hard to get back on track with customer perception of the safety of its 737 MAX line-up, and we view the incident as yet another hiccup in the firm’s relations with the public.

Jan 8, 2024

Thinking Slow: 3 Research Blind Spots That Changed the Investment World
Image Source: EpicTop10.com. We have to be on high alert about how our minds work. PBS recently delivered a four-part series examining how easily our minds are being hacked, and why it is so important to "think slow." When it comes to the active versus passive debate, does the analysis suffer from parameter risk? With respect to empirical, evidence-based analysis, does the analysis have the entire construct wrong? When it comes to short-cut multiples, are we falling into the behavioral trap of thinking on autopilot?

Dec 26, 2023

5 Questions Advisors Should Ask When Interviewing Fund Managers
Image Source: Investment Zen. These are not your typical questions. These are the questions advisors should ask to find the most analytical fund managers. The questions don’t cover strategy or market outlook, but instead hit upon the analytical foundation of the fund manager, which could be more important than anything else.

Dec 23, 2023

12 Reasons to Stay Aggressive in 2024
From outperforming simulated newsletter portfolios to fantastic success rates in the Exclusive publication to option ideas and great income-oriented ideas and beyond, we continue to deliver across our simulated newsletter suite as our latest video outlines. It’s hard to know exactly what 2024 will bring in terms of a market return, but the internals of the stock market and the U.S. economy look great to us. The new bull market we’re in could last for years, and as a result, we are staying aggressive with many of our new ideas as we look to benefit from these favorable trends.

Dec 7, 2023

Latest Report Updates
Check out the latest report refreshes on the website.

Oct 23, 2023

Lockheed Martin Represents Key Aerospace & Defense Exposure
On October 17, Dividend Growth Newsletter portfolio holding Lockheed Martin reported decent third-quarter 2023 results with the firm growing revenue roughly 1.8% on a year-over-year basis, and the firm beating the consensus estimate for non-GAAP diluted earnings per share. We like Lockheed as our aerospace and defense exposure more than Boeing, given the latter’s long list of troubles and deteriorated financial health, punctuated in part by troubles during the height of the COVID-19 pandemic and loss of life related to its 737 MAX platform. We think Lockheed offers a much better risk/reward and a healthy dividend to boot. Lockheed Martin yields ~2.8% at the time of this writing.

Oct 22, 2023

There Will Be Volatility
Image: An ETF tracking Russell 1000 "growth" stocks has outperformed an ETF tracking Russell 2000 "value" stocks since the beginning of 2021. To us, the market remains hypersensitive to almost every economic data point that hits the wires, and we’re just not going to play that game. The macro headlines and never-ending news flow are what many quant and algorithmic traders are trading on, and to a very large extent, for investors with a long-term horizon, these macro data points just don’t factor into the equation. When valuing equities, we’re always after mid-cycle expectations, not peak or trough performance, so our valuations implicitly embed a "normal" recession. Warren Buffett didn’t become a billionaire buying and selling on macro data points, and volatility is simply to be expected given the proliferation of price-agnostic trading these days. Instead of panicking over higher interest rates, we think investors should view the Fed’s work thus far as future potential dry powder to stimulate both the economy and the markets. Whenever you feel like stocks are no good, have a read of Warren Buffett’s classic piece written during the Great Financial Crisis, “Buy American. I Am.” To us, we still like stocks for the long run. Happy investing!

Sep 20, 2023

ICYMI: Questions for Valuentum’s Brian Nelson
Valuentum's President Brian Nelson, CFA, answers your questions.

Aug 28, 2023

Stock Report Updates
Check out the latest report updates on the website.