Valuentum Exclusive Analysis for the Discerning Investor

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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 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...

Jun 6, 2020

Earnings Roundup for the Week Ended June 6
Image Shown: We highlight the operational and financial performance of four companies that recently reported earnings, which included periods of time where the ongoing coronavirus (‘COVID-19’) pandemic was present. US equity markets are melting upwards, and we remain “fully invested” in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. We continue to prefer companies with high-quality cash flow profiles and net cash balances as the best way to navigate the COVID-19 pandemic.

Jun 5, 2020

Dow Jones Surges Past 27,000; Bull Market Continues!
"What a bull market off the lows we are having. I don't think we're finished, as I have pounded the table time and time and time again about how bullish I am. In the words of Frank Sinatra, "The Best Is Yet to Come," and I truly believe that. Yesterday, I explained to readers why we're seeing this huge rally, "Stay Optimistic. Stay Bullish. I Am." If you understand the duration and composition of equity value (page 74-83 in Value Trap), you can start focusing on what drives share prices and returns. How else could a market rally this much with 13% unemployment, right? How wonderful it would be if everyone understood the duration of stock value composition! What would happen to ambiguous, backward-looking factor investing? Finance could then start talking about things that make sense again." -- Brian Nelson, CFA

May 20, 2020

ALERT: Important Recap of Valuentum's Research and Market Events
Image: Breaking out to new highs, Facebook is a top weighting in the Best Ideas Newsletter portfolio (which includes our favorite capital appreciation ideas in a portfolio setting). The social media giant is surging on news of a new Shops feature, something we've been expecting and raving about with respect to its potential for years--as we maintain our view that, anti-trust considerations aside, Facebook is poised to become the "new Internet." The high end of our fair value estimate range for Facebook is nearly $290, and we would not be surprised if the company eventually reaches those levels. Note: PayPal, another big weighting in the Best Ideas Newsletter portfolio, has been a huge winner of late, too. The value of our research remains heavily tilted toward proficiency in enterprise valuation and technical/momentum indicators, portfolio construction, idea generation, individual stock selection, and assessing dividend health and resilience, among other things. ALERT: Important Recap of Valuentum's Research and Market Events: Unequivocally Bullish, S&P Target Range Was Withdrawn Last Month, Continued Focus on Individual Stock Selection with "Moaty" Operations, Huge Net Cash Positions, Strong Expected Future Free Cash Flows, Established Recurring Business Models, and Otherwise Attractive Economic Castles. Big Cap Tech and Large Cap "Growth" Remain Our Favorite Allocations.

May 15, 2020

Under Armour Potentially Faces a Serious Liquidity Crunch
Image Shown: Under Armour Inc may face a serious liquidity crunch if its creditors don’t extend the maturity length of the borrowings under its revolving credit facility. On May 11, Under Armour reported earnings for the first quarter of 2020 with its GAAP revenues declining by 23% year-over-year, and management attributed ~1500 basis points of that decline to the ongoing coronavirus (‘COVID-19’) pandemic. On the flip side, Under Armour’s GAAP gross margins improved by ~110 basis points year-over-year due to reduced pricing discounts, though COVID-19 weighed against the company’s performance in this area as well. Under Armour reported a GAAP net loss of $590 million in the first quarter of 2020 due to rising operating expenses (with an eye towards marketing spend) and major impairment and restructuring charges. Without the impairment and restructuring charges, Under Armour still reported a non-GAAP adjusted net loss of $152 million. All in all, it was a tough quarter, and it’s only going to get worse (at least in the short-term).

Apr 29, 2020

ALERT: Going to “Fully Invested” -- The Fed and Treasury Have Your Back
Image Source: BEA. Real GDP fell at an annual pace of 4.8% in the first quarter of 2020, according to the "advance" estimate released by the Bureau of Economic Analysis. We’re taking the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to “fully invested,” scaling up our existing positions to reflect that status. We plan to consider put options to hedge against downside risk, if or when the time comes. Moral hazard continues to run rampant, and the Fed and Treasury may have no choice but to continue artificially propping up this market, even buying stocks through certain vehicles, if necessary. Having warned members about the impending “Great Crash of 2020” and identifying savvy opportunities near the bottom, we are now withdrawing our S&P 500 target range as we move now to focus more on individual ideas through this turbulence. We expect to continue to identify opportunities for relative outperformance. 2019 was one of the best years in the Best Ideas Newsletter portfolio yet. In the Exclusive, we just registered our 25th consecutive monthly short idea in a row that has worked out. The markets may go much lower from here before we go higher again, but the Fed and Treasury won’t let this market go down in the longer run, in our view--even as we navigate a Depression-type economic environment in the near term. Stay the course.

Apr 25, 2020

Emergency Update on COVID-19
President of Investment Research at Valuentum, Brian Nelson provides an emergency update on COVID-19. He talks about how policymakers have dropped the ball thus far, and why investors should not let their guards down, despite what has been a nice bounce from the March 23 bottom.

Apr 22, 2020

What To Do Now?
Let's get President of Investment Research Brian Nelson's thoughts...

Apr 19, 2020

ICYMI -- Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?
President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report.