Valuentum Exclusive Analysis for the Discerning Investor

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Nov 5, 2020

General Motors Playing Catch Up
Image: Hummer EV. According to General Motors’ website, the Hummer EV will be a “zero emissions, zero limits all-electric supertruck.” Today’s GM is in much better shape than it was during the Great Financial Crisis when it succumbed to legacy issues as evidenced by its resilience during the COVID-19 meltdown, but the reality is that operationally-leveraged cyclicals with sticky costs, messy financials, and encroaching rivals don’t tend to command a large multiple. Throw in the opaqueness of its financing arm, which adds $88.9 billion in long-term debt to the balance sheet as of the end of last year, and GM becomes too difficult a stock to own, in our view. At $36 each, GM’s shares may have bounced back a bit too much based on our fair value estimate.

Oct 30, 2020

Newmont Posts a Stellar Earnings Report, Raises Dividend
Image Shown: An overview of Newmont Corporation’s recent accomplishments. Image Source: Newmont Corporation – Third Quarter of 2020 IR Earnings Presentation. Shares of Newmont Corp are included in the Dividend Growth Newsletter portfolio because we view its long-term dividend growth trajectory quite favorably, and the gold miner has not disappointed. At the start of 2020, Newmont significantly increased its quarterly dividend. Due to a combination of its enlarged dividend, very promising growth outlook, sizable expected synergies from its 2019 acquisition of Goldcorp, and its stellar cash flow profile, we added shares of NEM as a holding to our Dividend Growth Newsletter portfolio on January 13, 2020.

Sep 11, 2020

Our Thoughts on Newmont’s Bright Outlook
Image Shown: Newmont Corporation’s gold reserves are extensive and should support the gold miner’s ability to generate meaningful cash flows over the years and decades to come. Image Source: Newmont Corporation – August 2020 IR Presentation. As of this writing, shares of NEM yield ~1.5% on a forward-looking basis, and we view its forward-looking dividend coverage as rock-solid given Newmont has a Dividend Cushion ratio of 3.2, earning the firm an “EXCELLENT” Dividend Safety rating. In our view, Newmont offers investors a combination of income growth and capital appreciation upside, and we continue to like Newmont as a holding with a modest weighting in our Dividend Growth Newsletter portfolio. Our Dividend Cushion ratio and Dividend Safety rating factors in our expectations that Newmont will steadily grow its per share dividend over the coming years.

Aug 31, 2020

Alibaba Mirrors the Performance of Its Western Peers
Image Shown: Alibaba Group Holding Limited posted strong results for the fiscal quarter ended June 30, 2020, mirroring the performance of its large-cap tech peers based in Western countries (particularly the US). Image Source: Alibaba Group Holding Limited – June Quarter 2020 Earnings Presentation. At a time when US-China geopolitical tensions are rising and the Trump Administration is pushing the Chinese tech firm ByteDance to divest (at least) the US-based operations of TikTok, many Chinese tech firms are still thriving. The ongoing coronavirus (‘COVID-19’) pandemic has fundamentally altered daily life for most households around the world. Social distancing practices have aggressively driven up e-commerce demand along with demand for cloud computing offerings (as more employees work from home and as households stay indoors for significantly longer periods).

Aug 7, 2020

Newmont Surges Higher, Posts Solid Earnings Report
Image Shown: Newmont Corporation’s operational and financial performance has held up well in the face of the pandemic, relatively speaking. Image Source: Newmont Corporation – Second Quarter of 2020 IR Earnings Presentation. We continue to like shares of Newmont as a holding in the Dividend Growth Newsletter portfolio, and given the impressive strength seen with gold prices this year, the company’s outlook is quite bright. If Newmont continues to allow cash to build up on its balance sheet, its ability to push through meaningful per-share dividend increases would improve significantly. Newmont remains our favorite miner.

Jul 30, 2020

Excerpt from ‘Value Trap’ 2nd Edition: MPT Sounds a Lot Like "Empty"
The second edition of President of Investment Research Brian Nelson's book 'Value Trap' will be released in the coming weeks. Here is a short excerpt to whet your appetite.

Jul 8, 2020

Freeport-McMoRan’s Outlook Improves Considerably
Image Source: Freeport-McMoRan Inc – February 2020 IR Presentation. Global copper, gold, and molybdenum miner Freeport-McMoRan Inc suspended its quarterly common dividend in March 2020 and provided a revised outlook for the full-year in April 2020 due to the coronavirus (‘COVID-19’) pandemic hampering both commodity prices and its operational performance. One of those hurdles involved the Peruvian government imposing restrictions on its Cerro Verde mine in March 2020 (as part of COVID-19 containment efforts), a copper mine that Freeport-McMoRan owns a ~54% stake in. Another hurdle involved the collapse in commodity prices earlier this year (though gold prices have held up quite well in 2020). First, let us provide some background before highlighting why Freeport-McMoRan’s outlook has recently improved considerably.

Jun 4, 2020

BHP Benefiting from an Industrial Rebound in China
Image Source: BHP Group – Fiscal 2019 Annual Report. In recent months, iron ore futures prices have surged higher due to an ongoing recovery in China’s industrial sector and supply concerns in Brazil, which has culminated into the Dalian Commodity Exchange’s September 2020 iron ore deliveries hitting a record high since the futures contract was first launched in 2013. Pivoting to copper, three-month copper futures prices based on trading activity on the London Metals Exchange have also perked up on the back of an apparent recovery in Chinese economic activity. Rising metals prices bodes well for major and minor miners around the globe, including BHP Group.

May 21, 2020

Southern Copper’s Payout Is Not That Healthy
Image Shown: An overview of Southern Copper’s core operations in Mexico and Peru. Image Source: Southern Copper Corporation – May 2019 IR Presentation. Copper (symbol Cu, atomic number 29) is an essential building block of modern civilization as it is used as a conductor for heat and electricity. Electrical components, utility-scale electrical transmission systems, residential and commercial heating appliances, electric vehicles, and much more all rely on copper products (electromagnets, heat exchangers, heat sinks, integrated circuits, printed circuits, copper wiring, and copper fittings are all examples of products that contain copper). The largest consumer of copper is China, accounting for roughly half of global demand making the Middle Kingdom an essential part of the copper supply chain. On the other end of the supply chain, it’s companies like Southern Copper Corp that develop and operate the copper mines in major producing regions that enable global supply to meet demand. Copper plays an essential role in the transportation, industrial, consumer goods, utilities, and construction industries/sectors. The pace of construction activity in China has an outsize impact on global copper prices.

Mar 27, 2020

Lululemon’s Pristine Balance Sheet and Digital Sales Channels Provides Support During These Harrowing Times
Image Source: Lululemon Athletica Inc – Fourth Quarter of Fiscal 2019 Earnings Infographic. On March 26, Lululemon Athletica reported fourth quarter and full-year earnings for fiscal 2019 (period ended February 2, 2020) that had some bright spots, though shares of LULU initially traded down on March 27. While the company beat on both the top- and bottom-lines, investors are growing increasingly worried about the performance of discretionary consumer goods companies in the face of the ongoing novel coronavirus (‘COVID-19’) pandemic. In fiscal 2019, Lululemon’s GAAP revenues rose 21% year-over-year and its GAAP gross margin climbed by ~65 basis points, with its financial performance supported by rising direct-to-consumer sales (up 35% year-over-year) which tend to command higher gross margins. Adjusted comparable sales rose by 9% year-over-year in fiscal 2019 (keeping in mind there was an extra week of sales in fiscal 2018), a growth rate that rises to 10% on a constant-currency basis.