Valuentum Exclusive Analysis for the Discerning Investor

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Feb 22, 2023

Intel Cuts Dividend, As Expected
Image Source: Aaron Fulkerson. The Dividend Cushion ratio caught another dividend cut. This time it was Intel’s. With a Dividend Cushion ratio of 0.4, Intel announced February 22 that it has slashed its dividend by nearly two thirds, to $0.125 on a quarterly basis, down from its prior quarterly dividend of $0.365. The company’s estimated forward yield now stands at ~1.9%, and we can’t say that the dividend cut was unexpected given its massive net debt position and significantly weakened free cash flow generation--the two most important components behind an assessment of its cash-based intrinsic value and dividend health.

Jan 28, 2023

We Don’t Think Intel Will Spoil the Tech Rally
Image Shown: The Invesco QQQ ETF has broken through its technical downtrend, and we don’t think Intel’s poor outlook will derail this tech rally. Image Source: TradingView. Intel no longer is the bellwether it once was. Its market capitalization has dwindled significantly in recent years and now stands at ~116.5 billion, lower than Advanced Micro Devices' market capitalization of ~$121.6 billion, Texas Instruments' market capitalization of ~$158.8 billion, and Nvidia’s market capitalization of ~$501 billion. Taiwan Semiconductor has a market capitalization of ~$431 billion, while ASML Holding has a market capitalization of ~$268 billion. Intel no longer is what it once was, and as such, we don’t think its poor and borderline shocking outlook will derail a tech rally that could have significant legs. We still like these markets, and we don’t think Intel will spoil the party.

Jan 26, 2023

Market-Cap Weighted S&P 500 Breaks Out; Have We Already Seen the Bottom?
Image: The market-cap weighted S&P 500 (SPY) has broken through its downtrend. The markets could be headed meaningfully higher. Image Source: TradingView. The market-cap weighted S&P 500 has broken out of the technical downtrend that defined 2022 following the equal-weight breakout that preceded it. The pace of inflation looks like it peaked in June 2022, and while myriad risks to both the economy and stock market remain, fourth-quarter 2022 earnings season is shaping up better than feared. We maintain our view that the markets remain at critical technical levels, and we continue to monitor earnings season and technical developments closely.

Jan 12, 2023

Taiwan Semiconductor’s Shares May Have Bottomed
Image: We’re liking the technical bottom forming in Taiwan Semiconductor’s shares. Image Source: TradingView. Everyone has their eyes on Taiwan Semiconductor these days. The firm is the center of attention with respect to Sino-American relations, and the risk that China may invade Taiwan has added a degree of uncertainty to shares that is almost impossible to quantify within general valuation frameworks. Headquartered in Hsinchu, Taiwan, the world’s largest pure-play semiconductor foundry is a key bellwether for an area within technology that has faced considerable pressure during the past year. However, from our perspective, shares of Taiwan Semiconductor look to have carved out what we believe to be a technical bottom, and the high end of our fair value estimate range of $90 speaks to more upside potential.

Nov 13, 2022

ASML Launches Big Buyback; Lithography Systems Well Positioned for Demand Growth
Image: ASML has been one of the most successful semiconductor companies thanks in part to the firm’s advanced lithography systems that continue to meet customer demands for size and cost efficiencies. Image Source: ASML. We think ASML Holding is in a sweet spot in the semiconductor space as its lithography systems position the industry well along the path of Moore’s Law. Strong past investments have given it a leadership position, and we expect ASML to capture a significant amount of its addressable market from smartphones to personal computing and beyond, all the while it pays a dividend and buys back stock along the way. A continued focus on research & development and capital spending, while maintaining a strong and flexible balance sheet should be expected. The firm’s recent Investor Day was a positive catalyst for shares and eased the worst of the concerns regarding the intermediate-term impact of Sino-American tensions on the semiconductor space. We continue to like shares of ASML Holding.

Nov 3, 2022

ALERT: Replacing Qualcomm with McDonald’s in Dividend Growth Newsletter Portfolio
Image: The semiconductor space is experiencing a number of headwinds, and while we still like Qualcomm’s long-term prospects, we’re replacing it with McDonald’s in the simulated Dividend Growth Newsletter portfolio. Image Source: Qualcomm. We’re huge fans of Qualcomm’s business model over the long haul, but risks continue to add up. First, the adjustment in the pace of Qualcomm’s expectations for handset volumes for calendar 2022 is rather concerning, given the delta from its commentary in July and over a period of what is only a couple months remaining this year. In light of U.S.-China geopolitical tensions, new export restrictions on chip technology to China (announced October 7) that are further complicating industry matters, and Qualcomm customers retrenching by drawing down on their inventory, we’re going to remove the small “position” in Qualcomm in the simulated Dividend Growth Newsletter portfolio. McDonald’s will be taking its place in the portfolio. This change will be reflected in the next edition of the Dividend Growth Newsletter.

Oct 24, 2022

Chip Stocks -- Geopolitical Uncertainty Heightens in China; ASML, QCOM Still Strong Long-Term Considerations, But Expect Near-Term Fundamental Weakness
Image Source: The U.S. Department of Commerce. The global economic environment continues to reel from heightened inflation, which is pressuring consumer discretionary spending, but geopolitical uncertainty remains at a fever pitch. Russia’s invasion of Ukraine has unsettled investors, but the back-and-forth between the U.S. and China has chipmakers in the crosshairs. On October 7, 2022, the U.S. Department of Commerce released a report aimed to restrict China’s ability to attain advanced computer chip technology. We expect a downward revision to our fair value estimates across the chip space, but many of their refreshed fair value estimates will remain within their existing fair value estimate ranges. We expect a downward revision to our fair value estimates across the chip space, but many of their refreshed fair value estimates will remain within their existing fair value estimate ranges. Qualcomm will report fourth-quarter results November 2, 2022, and we’ll have more to say after the report. We recently dove into ASML’s quarterly report for the period ending October 3, which wasn’t too bad. Of note, ASML indicated that the export restrictions won’t be as punitive for them as many believe given its headquarters in the Netherlands. Though our newsletter portfolio "exposure" to the chip space is small, we'll be watching fundamental performance across the group closely.

Aug 11, 2022

ASML Holding Retains Dominant Position in High-End Semiconductor Equipment Space
Image Shown: ASML Holding NV effectively has a monopoly on the high-end space of the semiconductor equipment industry as the Dutch company sells the only lithography systems that can produce the most advanced cutting edge “chips.” We are huge fans of the company’s business model. Image Source: ASML Holding NV – Second Quarter of Fiscal 2022 IR Earnings Presentation. ASML Holding is a tremendous enterprise with a bright growth outlook, a healthy balance sheet, and an impressive business model. The company’s management team is incredibly shareholder friendly. We view both ASML Holding’s dividend growth and capital appreciation upside quite favorably, and think the market is “getting it wrong” on this company considering shares of ASML have sold off heavily year-to-date, even though its longer term free cash flow growth trajectory is as strong as ever.

Jul 22, 2022

Dividend Increases/Decreases for the Week of July 22
Let's take a look at firms raising/lowering their dividends this week.

Jun 10, 2022

Taiwan Semi Firing on All Cylinders
Image Source: Taiwan Semiconductor Manufacturing Company – First Quarter of 2022 IR Earnings Presentation. We are huge fans of Taiwan Semi which offers investors a combination of capital appreciation and income growth upside. Shares of TSM yield ~2.1% as of this writing. Taiwan Semi is included as an idea in our ESG Newsletter portfoliio. The firm is incredibly shareholder friendly with good governance practices, focuses on sustainable manufacturing practices where feasible (placing a great emphasis on effective resource management, limiting pollution, and utilizing green energy), and has a management team that comes from diverse backgrounds (keeping in mind Taiwan Semi is headquartered in Hsinchu, Taiwan).