Valuentum Exclusive Analysis for the Discerning Investor

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Feb 23, 2021

Korn Ferry Leaps Higher Toward Our Fair Value Estimate
Image Shown: Korn Ferry's stock has surged since it registered a 9 on the Valuentum Buying Index. The company is also included as a holding in the Best Ideas Newsletter portfolio. On December 11, 2020, we raised our fair value estimate of Korn Ferry to $66 per share and assigned it a 9 on the Valuentum Buying Index, one of the highest ratings on our system. Shares at the time were trading at ~$41 each. The company’s equity has surged in the past few weeks, with shares now changing hands at $60+ each. We still believe Korn Ferry’s stock has room to run higher, and the company will remain a holding in the Best Ideas Newsletter portfolio.

Feb 21, 2021

Johnson & Johnson’s COVID-19 Vaccine Candidate Nears the Finish Line
Image Source: Johnson & Johnson – Fourth Quarter of Fiscal 2020 IR Earnings Presentation. We appreciate all the hard work Johnson & Johnson and its partners have put towards developing a safe and viable COVID-19 vaccine candidate. Johnson & Johnson issued favorable guidance for fiscal 2021 when it reported its latest earnings aided by expectations that its medical devices business will recover this fiscal year along with sustained strength in its core pharmaceutical sales according to management commentary given during the related earnings call. We continue to like exposure to Johnson & Johnson in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Feb 21, 2021

Xpel Is an Intriguing Play on the Auto Industry
Image Shown: Most of Xpel Inc’s business is built around its paint protection film products for automobiles. Image Source: Xpel Inc - November 2020 IR Presentation. Xpel has a pristine balance sheet (nice net cash position), strong cash flow profile, ample growth opportunities, and a plan to boost its margins. The company primarily sells paint protection film products for automobiles, and its outlook appears quite promising as the firm is moving into adjacent areas while putting up rock-solid performance of late. We are highlighting Xpel given its potential for additional capital appreciation upside, though we caution shares of XPEL are up almost four-fold over the past year as of the middle of February 2021.

Feb 14, 2021

Earnings from Our Two Favorite Midstream MLPs: EPD and MMP
Image Source: Enterprise Products Partners L.P. – Fourth Quarter of 2020 IR Earnings Presentation. The distribution yields on the units of both Enterprise Products and Magellan Midstream are quite lofty, and while we caution that these midstream MLP’s have hefty net debt positions, they may be best-in-class. Still, both entities need to retain constant access to capital markets to refinance their debt burdens, ideally at attractive rates. Declining capital expenditures and rising utilization rates, if realized, should go a long way in improving both firm’s abilities to generate free cash flows this year and beyond. In our view, we see Enterprise Products and Magellan Midstream being able to maintain their hefty payout obligations going forward. We continue to like exposure to both Enterprise Products and Magellan Midstream in the High Yield Dividend Newsletter portfolio.

Feb 14, 2021

Earnings Roundup: DIS, GM, PEP, TWTR, UA
Image Shown: A look at the 2022 GM HUMMER EV pickup truck that is due to launch by the end of this year. Image Source: General Motors Company – Fourth Quarter of 2020 IR Earnings Presentation. Earnings season is roaring along, and we cover the reports of five more companies across different sectors in this article (Disney, General Motors, Pepsi, Twitter, and Under Armour). The coronavirus (‘COVID-19’) pandemic continues to loom large, though we are encouraged by reports from Moderna that its existing COVID-19 vaccine approved for emergency use is at least somewhat effective at treating variants of the virus according to initial clinical trials (a lot more work needs to be done on the subject). Global health authorities are working to put an end to the public health crisis, though COVID-19 virus variants have created additional obstacles on that front. However, we still expect the COVID-19 pandemic will be brought under control sooner than many expect as global vaccine distribution efforts become more widespread and efficient. A common theme across earnings reports is that (most) of the companies in this article view their outlooks favorably, though serious short-term headwinds remain in some instances. Video streaming services continue to be in high demand, major automakers are stepping up their EV investments, demand for consumer staples products remains healthy, the digital advertising market is resilient, and retailers are leaning heavily on their omni-channel selling capabilities to ride out the storm caused by the COVID-19 pandemic.

Feb 14, 2021

Philip Morris International Issues Favorable Guidance
Image Shown: Philip Morris International Inc’s growth outlook rests heavily on its ability to grow its non-traditional cigarette sales volumes, and so far, the tobacco giant has put up tremendous performance on this front. Additionally, pricing power at its conventional cigarette business is also key, as that helps offset headwinds arising from secular declines in its annual cigarette shipment volumes. Image Source: Philip Morris International Inc – 2021 Investor Day Presentation. Philip Morris International did a solid job navigating major exogenous headwinds during 2020 and was still able to churn out gobs of free cash flow. We appreciate management’s promising guidance and continue to like exposure to Philip Morris International and its lofty yield in the High Yield Dividend Newsletter portfolio.

Feb 12, 2021

Biofuel Producer Renewable Energy Group Is Worth a Look
Image Shown: A geographical overview of Renewable Energy Group’s operational “biorefineries” in the US and Germany. Image Source: Renewable Energy Group Inc – October 2020 IR Presentation. Renewable Energy Group is an intriguing biofuel maker with operational “biorefineries” located across the US and in Europe (specifically Germany). The company’s operations are supported by an extensive distribution network that is primarily built upon supply agreements with third parties, though Renewable Energy Group opened its own branded fuel location in 2019 for the first time. Shares of REGI have been on an upward tear of late, likely due to growing investor optimism towards green energy firms, in our view, as the new Biden administration in the US has made it clear that it would push for greater federal incentives to stimulate investment in domestic renewable energy industries. In Europe, the EU has imposed mandates and created incentives to stimulate investment in the biofuel space and non-EU members states, like Norway and the UK, have also implemented aggressive policies to support the biofuel industry. During the first nine months of 2020, Renewable Energy Group’s financial performance posted a tremendous turnaround as the company focused on higher-margin products. The company’s balance sheet is pristine, though we caution that historically, Renewable Energy Group has leaned on equity issuances to fund its growth ambitions though more recently, the firm has started to focus on reducing its outstanding diluted share count (or at the very least, limiting its shareholder dilution). We are impressed with Renewable Energy Group’s recent financial performance and are intrigued by its long-term outlook. However, we caution that the firm is highly exposed to exogenous forces. Government incentives, or lack thereof, from national government bodies (and to a lesser extent, from certain US state governments) will have an outsized impact on the trajectory of Renewable Energy Group’s growth story going forward. Investors are clearly optimistic, as shares of REGI have more than tripled over the past year. Please note Renewable Energy Group does not pay out a common dividend at this time.

Feb 10, 2021

Energy Earnings Roundup: CVX and XOM
Image Source: Exxon Mobil Corporation – 2020 IR Presentation. Several integrated oil and gas companies reported earnings for the final quarter of 2020, and as expected, these were brutal reports. The coronavirus (‘COVID-19’) pandemic weighed negatively on global demand for raw energy resources (crude oil, natural gas, natural gas liquids), refined petroleum products (gasoline, diesel, kerosene), and certain petrochemicals last year, which created massive headwinds for the oil and gas industry across the board. Subdued raw energy resource pricing and lackluster refined petroleum product demand were the two big obstacles for the industry as those dynamics severely weakened the economics of upstream (involved in the extraction of raw energy resources from the ground) and downstream (refineries and petrochemical plants) operations. However, things are starting to look up as raw energy resources pricing is now recovering.

Feb 9, 2021

Free Cash Flow Machine Visa Remains One of Our Best Ideas
Image Shown: Visa’s ability to generate sizable free cash flows continues to impress. We are big fans of the payment processing giant. Image Source: Visa Inc – First Quarter of Fiscal 2021 IR Earnings Presentation. We're huge fans of Visa's business model. The credit card network’s free cash flow generating abilities are impressive, aided by its low capital-expenditure requirements. We view Visa’s long-term outlook quite favorably and include the company in the Best Ideas Newsletter portfolio as a top-weighted idea. The top end of our fair value estimate sits at $263 per share of Visa, materially above where V is trading as of this writing.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!