Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Dec 30, 2020

Recent Data Indicates US Consumer Spending Holding Up Well, Online Sales Surging
Image Shown: As of this writing, the S&P 500 (SPY) appears ready to end 2020 on a high note, supported by the resilience of the US consumer. The ongoing coronavirus (‘COVID-19’) pandemic accelerated the shift towards e-commerce, and that change has long legs. Retailers that previously invested in their digital operations and omni-channel sales capabilities were able to capitalize on this shift while those that relied heavily on foot traffic were hurt badly. Numerous retailers went under in 2020 including J.C. Penney and Neiman Marcus. Holiday season shopping data indicates that US consumer spending was frontloaded and grew modestly in 2020, aided by surging e-commerce sales, which advanced nearly 50% on a year-over-year basis. The recent passage of additional fiscal stimulus measures in the US supports the outlook for the domestic economy going forward. Our fair value estimate range for the S&P 500 of 3,530-3,920 based on normalized economic conditions and dovish Fed/Treasury actions, released June 12 when the S&P 500 was trading ~3,000, remains unchanged. We remain bullish on stocks for the long run.

Nov 18, 2020

Kohl’s Dead Cat Bounce May Still Have Legs
Image: Kohl's is breaking out of a month-long base on better-than-expected financial health and expectations that it will reinstate its dividend next year. The department store industry may be as poor as the airline business these days, but Kohl’s is managing to navigate the pandemic fairly well, even as it fights an uphill battle against e-commerce proliferation. The company’s annualized cash flow from operations, for example, is trending sufficiently above what we would consider normalized annual capital expenditures (~$700-$750 million). This suggests Kohl’s can be meaningfully free cash flow positive, even under a scenario where it can invest heavily in its business during “normal” times. Management even plans to start paying a dividend again during the first half of next year, and if existing trends hold and the holiday season is a success, a reinstated payout appears achievable, in our view. That said, however, in light of the poor backdrop of the department store business model and the preponderance of historical bankruptcies across the industry, we don’t view Kohl’s as a long-term investment idea by any stretch. Still, the stock’s technical breakout coupled with a better-than-expected financial position means its “dead cat bounce” could still have legs.

Nov 16, 2020

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process
With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company's revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There's a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Aug 26, 2020

L Brands Beats Low Expectations
Image Shown: Though shares of L Brands Inc are up year-to-date, they remain down significantly over the past five years as of this writing (before taking dividend considerations into account). The owner of the Victoria’s Secret, PINK, and Bath & Body Works retail brands L Brands reported second quarter fiscal 2020 earnings (period ended August 1, 2020) on August 19 that smashed past both consensus top- and bottom-line estimates. However, those estimates were a low bar to beat as analysts had already factored in the significant headwinds the coronavirus (‘COVID-19’) pandemic created for its business. Last fiscal quarter, L Brands reopened most of its stores and leaned on e-commerce sales channels to meet customer demand as best it could. For reference, Victoria’s Secret and PINK (collectively referred to as Victoria’s Secret by L Brands) sell lingerie and similar apparel/accessories while Bath & Body Works sells fragrances, soaps, hygiene products, and similar offerings.

Mar 20, 2020

Dividend Increases/Decreases for the Week Ending March 20
Let's take a look at companies that raised/lowered their dividend this week.