Valuentum Exclusive Analysis for the Discerning Investor

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Nov 27, 2023

How Do We Use the Valuentum Buying Index?
Image: We highlighted Exxon Mobil to start 2022, and the stock was one of the best performers in the S&P 500 last year. Exxon Mobil became a “Valuentum” stock last year, with shares being undervalued, exhibiting a strong technical breakout, and sporting an attractive dividend yield to boot. The stock became a huge winner. Note: Exxon is no longer included in the simulated newsletter portfolios. The image is an excerpt from an email sent to members January 5, 2022.We answer one of the most frequently asked questions about the Valuentum Buying Index.

Nov 27, 2023

Nvidia’s Shares Could Run Higher Even More!
Image: Nvidia has been a market darling, and the firm's equity looks to have further upside potential on the basis of our valuation. On November 21, market darling Nvidia Corp. reported excellent fiscal third quarter results for the period ending October 29 that showcased the power behind the revolution in artificial intelligence. The company’s revenue hit a record, advancing more than three-fold on a year over year basis thanks to strength in its Data Center business. Its non-GAAP earnings were up six-fold from the year-ago period, and the firm continues to haul in tremendous free cash flow. We’ve raised our fair value estimate of Nvidia to $606 per share, and we think the company’s shares could continue to run higher.

Oct 30, 2023

The Dividend Growth Newsletter Portfolio’s Outperformance
Image: The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. Large cap growth names in the likes of Apple, Microsoft, Oracle, and Cisco form a solid foundation for continued dividend growth across the portfolio thanks in part to their fantastic Dividend Cushion ratios. Not only this, but we like the defensive characteristics of garbage hauler Republic Services and McDonald’s, and the tried-and-true dynamics of Home Depot, Honeywell and UnitedHealth, which can handle just about any economic environment that is thrown at them. Today, the 10-year Treasury rate stands at close to 5%, so while many dividend growth stocks don’t yield as much, we still like their cash-based sources of intrinsic value, as such dynamics offer substantial support to their equity prices, despite competing sources of income.

Oct 30, 2023

3 Net-Cash-Rich, Free-Cash-Flow Generating, Secular Growth Powerhouses
Image: Shares of Microsoft, Alphabet, and Meta Platforms have trounced the market return so far in 2023. We think a holistic view to a company's fundamentals provides an upper hand when it comes to outperforming the market, but we also feel that the discounted cash-flow model is an indispensable tool to help investors collect all of their thoughts and quantitatively put them together within valuation to arrive at what a company is worth. After all, the stock market is an expectations game, where expectations of free cash flow form the baseline for value, and changes in them heavily influence the direction of share prices. We like stocks that have strong net cash positions on the books and have a high probability of achieving better-than-expected free-cash-flow generation in coming years. In this article, we'll talk about the cash-based sources of intrinsic value at three large cap growth names.

Oct 24, 2023

Brief Take: Microsoft Blows Past Expectations in Q1 Fiscal 2024
Image: Mike Mozart. Microsoft hasn’t been a tech dinosaur for many years now, and its first-quarter fiscal 2024 (calendar third quarter 2023) results continued to show just how well the tech giant has adapted to the new economy--from the cloud to gaming to personal computing and, of course, to getting a lead in artificial intelligence [AI] with its investment in OpenAI (ChatGPT). During its fiscal first quarter, Microsoft’s revenue advanced 12% in constant currency, while operating income leapt 24% holding foreign exchange constant—breakneck levels of expansion. Azure and other cloud services sales advanced 28% on a year-over-year basis holding currency constant. The high end of our fair value estimate for shares stands at $368, and we wouldn’t be surprised if Microsoft’s equity returns to those levels in the near term.

Oct 22, 2023

There Will Be Volatility
Image: An ETF tracking Russell 1000 "growth" stocks has outperformed an ETF tracking Russell 2000 "value" stocks since the beginning of 2021. To us, the market remains hypersensitive to almost every economic data point that hits the wires, and we’re just not going to play that game. The macro headlines and never-ending news flow are what many quant and algorithmic traders are trading on, and to a very large extent, for investors with a long-term horizon, these macro data points just don’t factor into the equation. When valuing equities, we’re always after mid-cycle expectations, not peak or trough performance, so our valuations implicitly embed a "normal" recession. Warren Buffett didn’t become a billionaire buying and selling on macro data points, and volatility is simply to be expected given the proliferation of price-agnostic trading these days. Instead of panicking over higher interest rates, we think investors should view the Fed’s work thus far as future potential dry powder to stimulate both the economy and the markets. Whenever you feel like stocks are no good, have a read of Warren Buffett’s classic piece written during the Great Financial Crisis, “Buy American. I Am.” To us, we still like stocks for the long run. Happy investing!

Sep 22, 2023

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

Sep 20, 2023

ICYMI: Questions for Valuentum’s Brian Nelson
Valuentum's President Brian Nelson, CFA, answers your questions.

Sep 20, 2023

Fed Rate Decision, UAW Strike Continues, Microsoft Ups Payout
Image Source: Mike Mozart. If you’re thinking like us about the ongoing Fed rate-hiking cycle, you’re probably thinking that perhaps we’ll see another rate hike or two down the road, even if the Fed pauses at today’s September 20 meeting. However, whether the Fed pauses from here on out or executes a couple more hikes, it really shouldn’t matter much to long-term investors. From where we stand, the conversation about interest rates should now be shifting away from worries about elevated inflation to the future positive prospects that correspond to the work that the Fed has already done. With the market-cap weighted S&P 500 just a stone’s throw away from all-time highs, despite aggressive contractionary monetary policy, we believe the market may start to view the existing levels of “high” near-term interest rates as dry powder for the Fed to stimulate the economy in the future, if or when it’s needed. The Fed has now built up a very nice insurance policy with little damage done to the U.S. stock market, and we think equities, particularly the stylistic area of large cap growth, may continue to reward investors as such a positive view is eventually factored in. New highs may once again be in the cards, and we remain bullish on the equity markets today, despite the ominous volatility experienced the past 20+ months.

Sep 18, 2023

The Role of Luck in Investing and How To Think About It
Image: EpicTop10.com.  For every Amazon that made it, there are hundreds, maybe thousands, from the dot-com era that didn't. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla, there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. For every streaming enterprise like Netflix, there is a Napster that failed. Most of us probably don't even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet, there's an AltaVista or Netscape. For every Apple, there is a Palm or Blackberry. Who remembers how popular the Palm Pilot and Blackberry were? How about the Motorola Razr? For every Facebook and Instagram, there is a Myspace or Friendster. As investors, we underestimate the role of luck in a company's long-term success. In February 2000, a month before the dot-com market crash, a fledgling Amazon raised $672 million in convertible notes to European investors. If the company hadn't done so, there'd likely be no Amazon today, and one of the wealthiest men in the world, Jeff Bezos, might have just been a mere footnote in stock market history. Amazon would have been insolvent in 2001-2002 just like many of its other dot-com peers.