Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Sep 28, 2022

Things Are Bad Out There
The Bank of England’s intervention to stem what might have turned into a “run on the bank” dynamic for pension funds in the country amid a collapsing pound has given rise to the view that the Fed may start to slow its rate of increases amid global uncertainty. We think it’s too early to tell. From our perspective, the Fed remains committed to stomping out inflation, something that it may not truly be able to do, given that interest rate hikes may be too blunt of an instrument to stymie food cost inflation, which remains one of the the biggest inflationary headwinds that is hurting consumer budgets. What is happening on the global stage is quite concerning, and we remain bearish on the equity markets. The bull case may very well be a deep recession in the U.S., where dollar cost averaging in the U.S. markets could be had, followed by sharp interest rate cuts by the Fed, and a return to all-time highs. This is not a time to lose interest, but a time to pay even closer attention to your investments. What you do over the next couple years will have implications on your portfolio 5, 10, and 20 years forward. Let’s keep focused on preserving and building long-term wealth!

Sep 11, 2022

U.S. Housing Market Showing Signs of Weakness
Image Shown: The U.S. housing market is starting to show signs of weakness. Companies involved in the home building business in the U.S. are starting to feel the heat, with the iShares US Home Construction ETF down ~30% year-to-date as of early September 2022 on a price-only basis. The national U.S. housing market has been on fire during the past few years. Sharp increases in U.S. housing prices are now contending with rising mortgage rates, which is prompting the question, are U.S. housing prices heading for a crash? Affordability issues are rampant, with many households now priced out of the market, and signs of weakness are emerging in the U.S. housing market. We think the prospect for rising mortgage interest rates could send housing prices spiraling lower, but nothing like that of the housing crisis of 2007-2009.

Aug 19, 2022

Nelson: The 16 Most Important Steps To Understand The Stock Market
Image Source: Tim Green. We outline the '16 Most Important Steps to Understand the Stock Market.' We think it's important to take a read of these key stock market tenets when things are going great -- and perhaps even more important when things aren't going your way. This continues to be a working document.

Aug 19, 2022

Dividend Growth Idea Home Depot Beats Estimates, Maintains Guidance
Image Shown: Dividend growth idea Home Depot is a stellar free cash flow generator in almost any operating environment. Historically, the home improvement retailer’s free cash flows have fully covered its dividend obligations, and we forecast that will continue to be the case going forward. However, we caution that its sizable share repurchases are being funded in part by its balance sheet. The firm has a large net debt load on the books. Image Source: Home Depot Inc – Second Quarter of Fiscal 2022 IR Earnings Presentation. On August 16, Home Depot reported second-quarter earnings for fiscal 2022 (period ended July 31, 2022) that beat both consensus top- and bottom-line estimates. The home improvement retailer also reaffirmed its guidance for fiscal 2022 in conjunction with its latest earnings update. We like Home Depot as an idea in the Dividend Growth Newsletter portfolio. Shares of HD yield ~2.4% as of this writing, and our fair value estimate sits at $345 per share of Home Depot, well above where the company’s shares are trading at as of this writing. Home Depot’s free cash flow generating abilities and pricing power are impressive, and its growth runway remains largely intact, even in the face of sizable exogenous shocks.

May 19, 2022

Dividend Growth Idea Home Depot Beats Estimates and Boosts Guidance
Image Shown: Dividend growth idea Home Depot Inc is a tremendous generator of shareholder value due to its stellar return on invested capital performance. Image Source: Home Depot Inc – First Quarter of Fiscal 2022 Non-GAAP Reconciliation Financial Package. On May 17, Home Depot reported first quarter earnings for fiscal 2022 (period ended May 1, 2022) that beat both consensus top- and bottom-line estimates. Demand from professionals remains robust, offsetting waning demand from do-it-yourself (‘DIY’) customers. In the wake of its strong fiscal first quarter performance, Home Depot boosted its fiscal 2022 guidance in conjunction with its latest earnings report. We are big fans of Home Depot’s income growth potential and include shares of HD as an idea in the Dividend Growth Newsletter portfolio. Shares of HD yield ~2.6% as of this writing.

Mar 22, 2022

Dividend Growth Idea Home Depot Raises Payout as Its Growth Story Continues
Image Shown: Dividend growth idea Home Depot Inc has put up strong financial performance of late. Image Source: Home Depot Inc – Fourth Quarter of Fiscal 2021 Supplemental Material. Demand for home improvement and construction activities remains strong according to Home Depot Inc, an idea in the Dividend Growth Newsletter portfolio. When Home Depot reported its fourth quarter earnings for fiscal 2021 (period ended January 30, 2022) in February 2022, the company beat both consensus top- and bottom-line estimates. Home Depot also announced a 15% sequential increase in its dividend and issued out favorable guidance for fiscal 2022 in conjunction with its latest earnings report. The company’s new quarterly payout sits at $1.90 per share or $7.60 per share on an annualized basis. Shares of HD yield ~2.3% as of this writing.

Jan 23, 2022

RH’s Financials, Long-Term Potential Great But Housing Market and Deteriorating Wealth Effect Pose Risks
Image Shown: Shares of RH have exploded higher since the news broke that Berkshire Hathaway Inc had taken a stake in the firm’s equity back in 2019, though shares of RH have shifted lower in recent months. RH is an innovative home furnishing company that pairs its products with interior/exterior design services to offer a comprehensive package. The company primarily targets affluent households in the U.S., Canada, and the U.K. RH has tremendous pricing power and its margins have increased significantly in recent fiscal years, even during the COVID-19 pandemic, and its net revenues are trending higher as well. The firm is expanding into the high-end hospitality industry and has several projects that are set to come online in 2022 and beyond. RH is a stellar free cash flow generator with a manageable net debt load. Though the company has been executing nicely of late, as witnessed by its stellar financial performance and recent guidance increases, shares of RH have sold off in recent months. In our view, the recent selloff is a function of broad based market weakness, but it also may be due to investors growing more concerned about the impact higher interest rates and a deteriorating wealth effect may have on housing and home furnishing demand and on its push into the hospitality space, respectively. We continue to view RH’s long-term capital appreciation upside potential favorably, however.

Nov 18, 2021

Shares of Dividend Growth Idea Home Depot Roar Higher After Latest Earnings Update
Image Shown: Shares of dividend growth idea Home Depot Inc have surged higher year-to-date on the back of the home improvement retailer’s stellar operational performance and impressive free cash flow generating abilities. We liked what we saw in Home Depot’s latest earnings report published on November 16. Demand for home improvement activities appears to be holding up well, even as lockdown measures related to the COVID-19 pandemic ease up across North America. The outlook for housing activity and construction demand more broadly is quite bullish for several reasons including the need for US housing supply to catch up with new household formation and the large $1+ trillion US infrastructure fiscal stimulus bill that was recently signed into law. Home Depot has exposure to this upside via the Pro side of its home improvement retailing operations and its recently enlarged MRO business. We view Home Depot’s dividend growth trajectory quite favorably and continue to like shares of HD as an idea in the Dividend Growth Newsletter portfolio. In light of better-than-expected fundamental performance of late, we may tweak our cash flow valuation model of the firm. As of this writing, shares of HD are trading near the top end of our fair value estimate range (which currently sits at $397 per share).

Oct 14, 2021

Home Depot Teams Up with Walmart
Image Source: Home Depot Inc – Fiscal 2020 Annual Report. On October 6, Home Depot announced a partnership with Walmart, becoming the first retail giant to join Walmart’s GoLocal delivery program which was launched back in August 2021. The delivery program utilizes Walmart’s vast distribution and fulfillment network to provide same-day and next-day delivery services. We like Home Depot as an idea in the Dividend Growth Newsletter portfolio as the firm’s stellar cash flow generating abilities and promising growth outlook underpin our forecasts that the company will grow its payout at a robust pace in the coming years. As of this writing, shares of HD yield ~2.0%.

Aug 18, 2021

Dividend Growth Idea Home Depot Remains Rock-Solid
Image Shown: Shares of Home Depot Inc have moved significantly higher year-to-date and are up approximately 21% through the end of normal trading hours on August 17. On August 17, Home Depot reported second quarter earnings for fiscal 2021 (period ended August 1, 2021) that beat both consensus top- and bottom-line estimates. Comparable sales were up 4.5% year-over-year last fiscal quarter though shares of HD slid lower during the trading session that day as investors were expecting even stronger performance. Shares of HD are up roughly 21% year-to-date as of the end of the normal trading session on August 17 (that includes the impact of the ~4% drop in shares of HD after its earnings report), and in our view, investors were locking in some profits. We liked what we saw in Home Depot’s latest earnings report and includes shares of HD as an idea in the Dividend Growth Newsletter portfolio.