Valuentum Exclusive Analysis for the Discerning Investor

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Mar 24, 2021

ViacomCBS Makes Big Bet on Streaming
Image Source: ViacomCBS Inc – Fourth Quarter of 2020 IR Earnings Presentation. After Viacom and CBS were reunited in December 2019, the new entity ViacomCBS Inc has finally started to gain some traction on the video streaming front. The service CBS All Access, which has since been rebranded as Paramount+, was largely a dud and did not gain the level of attention that Walt Disney Company’s Disney+ service, AT&T Inc’s HBO Max service, or Netflix's namesake service were able to generate. For background, ViacomCBS’s operations include various TV network and cable TV assets, TV and movie studios, various streaming services, and a book publisher. That includes various CBS networks (CBS, CBS Sports, CBS News), CBS studios, MTV, Comedy Central, Paramount, Nickelodeon, Pluto TV (another video streaming service that is free and ad-supported), BET, CMT, POP TV, half of CW (AT&T owns the remaining 50%), COLORS (focused on India), telefe (focused on Spanish-speaking content), SHOWTIME, and the book publisher Simon & Schuster. However, with ViacomCBS launching Paramount+ this month in the US and various Latin American markets, the service now has a larger slate of content than CBS All Access and is supported by ViacomCBS’ vast library (and most importantly, ViacomCBS has plans to produce dozens of original series for Paramount+ going forward). Paramount+ is leaning on properties such as Star Trek and SpongeBob SquarePants along with reboots of shows like iCarly to create engaging original content. Content is king. The combination of Viacom and CBS helped address that issue and provided the new entity with the scale required to be competitive in this business.

Mar 15, 2021

AT&T’s Video Streaming Growth Story Is Starting to Take Flight
Image Source: AT&T Inc – 2021 Investor & Analyst Day Presentation. On March 12, AT&T hosted its 2021 Analyst & Investor Day event. In conjunction with the event, AT&T issued long-term financial and operational guidance which included a substantial upward revision in its expected HBO/HBO Max subscriber growth over the coming years. We continue to be big fans of AT&T as a high yielding opportunity and include AT&T as an idea in the High Yield Dividend Newsletter portfolio. As of this writing, shares of AT&T yield ~7.0%.

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!

Jan 22, 2021

We Expect Netflix to Turn Into a Free Cash Flow Generating Machine
Image Shown: Netflix Inc’s global paid subscriber base is expected to keep growing at a decent clip going forward, though at a slower pace than in the recent past. Image Source: Netflix Inc – Shareholder Letter covering its fourth quarter and full-year earnings in 2020. The video streaming services industry will continue to experience strong subscriber growth in 2021, and we see room for a number of winners in the space. Original content and scale are essential to remaining relevant, and competitive headwinds are growing as companies seek to replicate the success of Netflix. We think Netflix will eventually turn into a free-cash-flow generating machine, but at the moment, we're big fans of "new" streaming rival Disney and include the latter in the Best Ideas Newsletter portfolio. Disney is the top competitive threat to Netflix, in our view.

Dec 12, 2020

Best Ideas Newsletter Portfolio Holding Disney Surges to All-Time Highs
Image Shown: The reach of the Disney+ video streaming service continues to grow as The Walt Disney Company keeps expanding the service into new markets. Image Source: The Walt Disney Company – December 2020 Investor Day Presentation. We continue to be big fans of The Walt Disney Company and include shares of DIS in the Best Ideas Newsletter portfolio. Back when Disney’s stock price plummeted this past March, we stuck with our capital appreciation thesis and did not panic. Since then, shares of DIS have staged an impressive comeback and are currently trading near all-time highs. Shares of Disney are up ~22% year-to-date as of this writing, significantly outperforming the S&P 500 (SPY) which is up ~14% during this period (before taking dividend considerations into account, which does not change this picture much). Our optimistic view towards Disney is underpinned by the company’s bright long-term growth outlook. Though it will take a few years for Disney’s video streaming business to become a profit generating machine, the market is clearly excited about how this segment could potentially drive Disney’s future free cash flows meaningful higher over the long haul. The high end of our updated fair value estimate range is $184 per share.

Dec 11, 2020

AT&T’s Outlook Is Getting Brighter
Image Shown: An overview of AT&T Inc’s capital allocation priorities over the coming years and a snapshot of its financial position at the end of September 2020. Image Source: AT&T Inc – Third Quarter of 2020 IR Earnings Presentation. The rollout of 5G wireless packages in the US combined with expected growth at its video streaming business has significantly improved AT&T’s outlook during the past few months. We include shares of AT&T in the High Yield Dividend Newsletter portfolio, and as of this writing, shares of T yield ~6.6%. Headwinds caused by the ongoing coronavirus (‘COVID-19’) pandemic weighed negatively on AT&T’s financial and operational performance in 2020, though the company remains on track to generate enormous amounts of free cash flow this year. AT&T currently expects to generate $26.0 billion or more in free cash flow in 2020, a forecast that the firm reiterated on December 8. The company has guided its dividend cash-flow payout ratio (dividend obligations divided by free cash flow) to come in near the high 50s% area this year. Please note that back in April 2020, AT&T expected its dividend cash-flow payout ratio in 2020 would be in the 60s% range, but its outlook was negatively impacted by the COVID-19 pandemic. Things are starting to turn around in part due to the recent successes AT&T has had at its video streaming business after things got off to a slow start.

Nov 13, 2020

Shares of Disney are Now Surging Towards the Top End of Our Fair Value Estimate Range
Image Shown: Shares of The Walt Disney Company are steadily climbing towards the top end of our fair value estimate range, which sits at $153 per share of DIS. After the market closed on November 12, The Walt Disney Company reported its fourth quarter and full-year earnings for fiscal 2020 (period ended October 3, 2020). Its latest results beat both consensus top- and bottom-line estimates. Though Disney’s financials took a big hit from the coronavirus (‘COVID-19’) pandemic, as expected (with an eye towards the enormous headwinds facing its ‘Parks, Experiences and Products’ business segment), the company’s outlook has improved considerably as its various video streaming services continue to outperform. We include shares of Disney in our Best Ideas Newsletter portfolio with a modest weighting. As the top end of our fair value estimate range sits at $153 per share of Disney, there could be room for shares to run higher even after recent share price gains.

Oct 29, 2020

Disney Is One Of Our Favorite Streaming Companies
Image Shown: Shares of The Walt Disney Company continue to recover from the pandemic-induced crash in March 2020. One of our favorite companies with significant exposure to the video streaming arena is the entertainment behemoth The Walt Disney Company. The company’s various streaming services include ESPN+, Disney+, Hulu, among others. On October 12, Disney announced a major restructuring which effectively reorganized several of its business operating segments around supporting its video streaming ambitions, with an eye towards ensuring sizable investments in original content would be put towards good use.

Oct 22, 2020

Our Thoughts on Netflix’s Latest Earnings
Image Shown: An overview of Netflix Inc’s historical financial and operational performance and a snapshot of its outlook for the fourth quarter of 2020. Image Source: Netflix Inc – Letter to shareholders covering the third quarter of 2020. On October 20, the video streaming giant Netflix reported third-quarter 2020 earnings after the market close that underwhelmed lofty investor expectations and saw shares of NFLX move lower the next day. We recently updated our cash flow models for the Discretionary Spending industry, and our current fair value estimate for NFLX sits at $488 per share, near where Netflix is trading as of this writing. The recent selloff in Netflix’s stock price is largely about investors scaling back their expectations for Netflix’s net paid subscriber growth figures, in our view, and is not a sign of underlying weakness in the company’s business model.

Jun 1, 2020

June Dividend Growth Newsletter & Intrinsic Value Investing
"But how, you will ask, does one decide what [stocks are] "attractive"? Most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth,"...We view that as fuzzy thinking...Growth is always a component of value [and] the very term "value investing" is redundant." -- Warren Buffett, Berkshire Hathaway annual report, 1992