Valuentum Exclusive Analysis for the Discerning Investor

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Sep 8, 2020

General Motors Makes a Deal with Nikola
Image Shown: On September 8, shares of General Motors Corporation (in orange) and Nikola Corporation (in blue) jumped higher during normal trading hours after announcing their strategic partnership. On September 8, General Motors and Nikola Corp announced a strategic partnership that saw shares of GM and NKLA leap up 8% and 41% during regular trading hours that day, respectively. General Motors will receive an 11% equity stake in Nikola (via common stock issuance) worth ~$2 billion in return for agreeing to provide Nikola in-kind services as “General Motors will engineer, homologate, validate and manufacture the Nikola Badger battery electric and fuel cell versions” which involves utilizing General Motors’ “Ultium battery system and Hydrotec fuel cell technology.” General Motors expects the agreement will close by the end of this month. There will be a lock-up provision concerning General Motors’ pro forma equity stake in Nikola that is set to run through June 2025. Nikola expects this agreement will save the firm ~$5 billion in battery, powertrain, engineering, and validation costs combined over the next decade as the company gains “access to General Motors' global safety-tested and validated parts and components” along with General Motors’ hydrogen fuel cell and electric battery technology.

Sep 1, 2020

Valuentum Website Overview
Overview of the key features of www.valuentum.com (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information.

Jul 7, 2020

Tesla Surges on Promising Production Report
Image Shown: Shares of Tesla Inc have more than tripled year-to-date, as of this writing, due to growing optimism about the electric vehicle and battery maker’s long-term growth outlook. On July 2, Tesla Inc provided an update on the number of electric vehicles it produced and delivered during the second quarter of 2020, when its domestic manufacturing capabilities were hit the hardest by the ongoing coronavirus (‘COVID-19’) pandemic. This report likely acted as the catalyst for the latest run up in shares of TSLA as its technicals have "gone parabolic" of late.

Jun 16, 2020

Reiterating Our Bullish Long-Term View on Stocks
Image: The NASDAQ 100 Index remains resilient, bouncing off support, after breaking out to new highs recently. Some of our best ideas are included in the NASDAQ 100, and our favorite concentrations include exposure to big cap tech and large cap growth. We continue to be bullish on equities for the long run. In addition to unlimited quantitative easing and "whatever it takes, squared" Fed policy, today, June 16, the Trump administration announced that it is weighing a $1 trillion stimulus bill to help support the economy. While uncertainties remain regarding specifics of the bill (it might include state assistance, extension of unemployment benefits, etc.), the move is consistent with the outsize spending we expect to further bolster the bull case, "ICYMI -- Stay Optimistic. Stay Bullish. I Am." We continue to emphasize that, in light of unlimited QE and runaway fiscal stimulus, the longer-duration components of intrinsic values are expanding considerably, and as a result, fair values, themselves, are actually rising during this recession and pandemic [a good estimate of the value of the S&P 500 today may be between 3,530-3,920, as outlined in the following: "Scribbles and More Newsletter Portfolio Changes.]."

Jun 15, 2020

ICYMI: Survey Coming Later Today, More Market Volatility Expected
Image: The market's levels of volatility so far in 2020 have been among the greatest in history. Expectations for increased volatility in the marketplace as a result of the proliferation of price-agnostic trading (indexing and quantitative trading) is a key theme of Valuentum's text, Value Trap: Theory of Universal Valuation. We continue to emphasize the importance of due diligence, enterprise valuation, behavioral thinking, the information contained in prices, and stock selection across equity portfolios. Page 256. This week is setting up to be yet another volatile week of trading, but nothing too surprising. We've talked extensively about outsize levels of volatility in the book Value Trap, and many of our predictions regarding the magnitude of volatility have come to fruition, as described in this note here. But as we've also noted in Value Trap, we don't think increased volatility is a transient development. The Fed and Treasury have only further emboldened price-agnostic trading (indexing/quant) with recent bailout actions, and volatility and momentum funds, which exacerbate the swings, will only grow as a percentage of trading volumes. The magnitude of market volatility during the COVID-19 crisis has certainly been immense. During March for example, the Dow Jones Industrial Average had 8 consecutive days with a 4% move in either direction (this is the first time in history this happened--not even during the tumultuous times of the Crash of 1929 or Black Monday of 1987 or the Great Financial Crisis did this happen). Intra-day volatility has also been considerable, and it has become commonplace for equity futures to swing wildly before market open. Now, more than ever, investors need a steady hand at the wheel.

Jun 12, 2020

*ALERT* Scribbles and More Newsletter Portfolio Changes
Image: Why are stock prices increasing while the near-term economy and near-term earnings outlook isn't as bright as before...How unlimited quantitative easing, runaway government spending, increased inflation expectations impact equity values...Why this year's earnings expectations or next year's earnings expectations don't matter much...Why Valuentum thinks equity values are rising today, even as the near-term outlook remains unclear. Scribbles on page 76 of Value Trap. "I know it sounds crazy to say so during a global pandemic and during a recession, but the right multiple and the right earnings to use to value this market is an 18-20x multiple on $196 earnings, putting a fair value range on the S&P 500 today of 3,530-3,920. The S&P 500 is trading at about 3,000 today." -- Brian Nelson, CFA

Jun 11, 2020

Data from Visa Indicates the Economic Outlook is Improving
Image Shown: Visa Inc reports that US processed transactions volumes across its payment processing network improved materially on a year-over-year basis in May, relatively speaking, versus the downturn seen in the second half of March and the first half of April. Image Source: Visa Inc – 8-K SEC Filing. One of our favorite secular growth industry tailwinds is happening the payment processing, payment solutions, and financial technology space. The world is shifting toward a “cashless” society and that has accelerated due to the ongoing coronavirus (‘COVID-19’) pandemic, in part due to the rise of e-commerce and in part due to the preference of many consumers to use contactless payment options when in physical stores. Visa has been a top-weighted holding in the Best Ideas Newsletter portfolio for some time, and shares of V are up 5% year-to-date while the S&P 500 is down 1% year-to-date as of this writing. The top end of our fair value estimate range for Visa sits at $214 per share indicating there is plenty of room for shares of V to climb higher; please note we like to let our winners run. Additionally, shares of V yield a modest ~0.6% as of this writing, offering incremental upside to its capital appreciation potential.

Jun 11, 2020

Valuentum Research Update
"Hope you all are doing great! I must say I couldn't be more pleased with the research we've been putting out, and thank you very much for your continued interest. In this piece, I wanted to get some of our latest work to you. First, please note that we've done a great job holding the line on many of our fair value estimates (ranges) on our website. Many stocks have been bouncing back, and we're glad we didn't rush through any updates. Updating fair value estimates (ranges) too frequently doesn't make much sense to us. We're after the right answer, not any answer." -- Brian Nelson, CFA

Jun 9, 2020

Nikola Corp Shares Skyrocket After Getting Listed
Image Shown: Shares of Nikola Corporation have skyrocketed since completing a business combination with a special purpose acquisition company in early-June 2020. Nikola Corp completed its business combination with VectoIQ Acquisition Corp (a special purpose acquisition company or ‘SPAC’) on June 3, 2020, and a day later shares started trading under the NKLA ticker (VectolQ Acquisition previously traded under the ticker VTIQ). Effectively, this allowed Nikola Corp to become publicly traded without undergoing a “conventional” initial public offering (‘IPO’) and furthermore, the combination raised over $700 million to fund Nikola Corp’s ambitions. VectolQ Acquisition was sponsored by VectoIQ Holdings LLC, P. Schoenfeld Asset Management LP, and Cowen. Nikola Corp is run by CEO Mark Russell and Executive Chairman and founder Trevor Milton. Stephen Girsky, Managing Partner of VectolIQ, joined Nikola Corp’s board of directors, bringing with him a ton of experience in the automotive space as he was formerly Vice Chairman of General Motors (GM) from November 2009 until July 2014.

Jun 8, 2020

ICYMI -- Stay Optimistic. Stay Bullish. I Am.
Image: My great-grandfather (second from left) and his buddies in the 88th Division of the United States Army during World War I, at the time of the Spanish Flu pandemic of 1918-1919. He would serve under Major General William Weigel, become proficient in the 37mm gun, and take part in the largest offensive in U.S. military history, the Meuse-Argonne Campaign. As a corporal, he would survive the Great War and the Spanish flu pandemic, returning to the U.S. in May 1919 from the port of Saint-Nazaire, France on his way to Omaha, Nebraska. First of all, I wanted to reiterate how bullish I am on equities for the long haul. There are no risk-less investments when it comes to the stock market, of course, but this "win-win" scenario we seem to find ourselves in today appears to be one-of-a-kind in history. Here's what it boils down to. If the U.S. economy re-opens and everything turns out to be "fine," or at least better-than-expected, it's hard not to be bullish on stocks. We can then possibly look to pre-COVID-19 earnings numbers for 2021 and 2022 with some adjustments here and there, and that means the bull market is on (and new heights may be in sight). On the other hand, if the U.S. economy re-opens and economic numbers don't live up to expectations, which could happen, there will likely be even more stimulus--but investors might be bullish in this scenario, too. For starters, there's been more money created during the past few weeks or so than during the entire year following Lehman Brothers' failure (there's even talk of more money creation with another round of stimulus). We cannot forget that, while stock values are calculated on the basis of future free cash flow expectations, they are priced nominally (not inflation-adjusted), and stock investing is one way to combat the risk of inflation as strong companies price goods ever higher to outpace rising costs to reap in ever-higher earnings. Even if this excess money in the economy is not translated into inflation in physical goods and services, however, it may translate into inflating equity prices specifically, as has arguably (or perhaps undeniably) been the case during the period of 2010-2019. But there's more to this line of thinking...