Valuentum Exclusive Analysis for the Discerning Investor

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Jan 5, 2021

The Electric Vehicle (EV) Market Is Hot and Getting Hotter
Image Shown: A look at Tesla Inc’s new Gigafactory factory (Model Y body shop) in Shanghai, China. Image Source: Tesla Inc – Third Quarter of 2020 IR Earnings Presentation. The electric vehicle (‘EV’) market is hot and getting hotter. Aided by a combination of supportive government policies such as subsides for EVs (purchase tax credits, manufacturing tax credits), plans to ban the sale of automobiles powered by internal combustion engines (‘ICE’) in the coming years, and shifting consumer preferences (households preferring to appear “green”), the long-term outlook for EV sales is quite bright. Tesla is the posterchild of the EV boom given its first-mover advantage, though competitive headwinds are rising. Legacy auto manufacturers are looking to bulk up their EV offerings while new market entrants such as Lordstown Motors and privately-held Rivian, are set to further disrupt the industry. Ford Motor invested in Rivian back in 2019 to bulk up its presence in the EV market. By the middle of 2021, Rivian aims to begin deliveries of its EV pickup truck in the US, the R1T. Lordstown Motors also aims to bring an EV pickup truck to market, named the Endurance, with deliveries set to begin in early-2021. However, as global EV sales appear set to grow immensely, there is room for a number of winners in this space. Back in July 2020, privately-held Deloitte estimated that global EV sales will grow from an estimated 2.5 million in 2020 to 11.2 million in 2025 and then to 31.1 million by 2030, good for annual compound growth of about 29% in the coming decade, according to the research firm. EV sales in China are expected to represent about half of global EV sales in 2030, according to Deloitte, followed by the European market representing just over one quarter of global EV sales in 2030.

Dec 28, 2020

Qualcomm’s Growth Trajectory Is Impressive and Supported by Numerous Secular Trends
Image Source: Qualcomm Inc – 2019 Analyst Day Presentation. Qualcomm offers dividend growth investors a way to play the rollout of 5G technologies and other nascent technologies worldwide, along with technologies that do not exist yet but could be made viable by the ongoing rollout of 5G wireless networks. We like Qualcomm’s business model, and we view the company as well-positioned to capitalize on numerous secular growth tailwinds. Beyond the recent launch of several 5G-capable smartphones by various companies, its automotive business offers Qualcomm ample upside potential. Additionally, we are intrigued by the opportunities created by the IoT trend and the firm’s AI-related investments. Concerns over competitive threats to Qualcomm’s modem business are not to be viewed lightly, though the company has many technical competitive advantages (know-how) derived from years of development and remains a leader in its field. As long as Qualcomm continues to innovate, made possible through its meaningful R&D investments, its product offerings and expansive IP portfolio should continue to remain in high demand. The company’s dividend growth trajectory is supported by its stellar cash flow profile and relatively strong balance sheet. Shares of QCOM yield ~1.8% as of this writing.

Dec 25, 2020

All I Want for Christmas Are Dividend Aristocrats
Image Source: 5 Furlongs. It may not be as catchy as Mariah Carey's Christmas hit, "All I Want For Christmas Is You," but if you ask a dividend growth investor what they might want for Christmas as it relates to an investment, they might start singing about a long list of Dividend Aristocrats--a list of companies that have increased their dividends in each of the past 20-25+ years. Therefore, we wanted to do something special this Christmas for members. We've aggregated a list of every non-financial Dividend Aristocrat in our 16-page stock report coverage universe and made a list conveniently available, including some key data and links directly to their 16-page stock reports (pdf). To access the 16-page stock report of any company on this list, just click on its name, and you'll be prompted to download that particular company's 16-page stock report pdf file. Remember, we provide separate Dividend Reports for stocks, too. For example, the 16-page stock report pdf file that is linked to a company's name in this article is only a portion of the research, commentary, ratings and data on that particular company. Let's take Emerson Electric as an example. Not only does it have a 16-page Stock Report and additional Valuentum commentary via articles and notes, but it also has a Dividend Report. Both pdf reports can be downloaded on its stock web page (the pdf icons are to the right of the stock chart). We hope you enjoy the vast amount of research connected to the download links on this list. Each company's fair value estimate, Dividend Cushion ratio, Economic Castle rating and much more is backed by our three-stage discounted cash flow process with fully populated financial statements, available by request from Gold and Platinum members. Please download away! What's your favorite Dividend Aristocrat? Comments welcome.

Dec 23, 2020

Korn Ferry Is Ridiculously Underpriced, A Huge Market Inefficiency Exposed
Image Shown: Korn Ferry has meaningful global reach and caters to a wide variety of end industries. Image Source: Korn Ferry – Second Quarter of Fiscal 2021 IR Earnings Presentation. Korn Ferry is a global organizational consulting firm that provides recruiting solutions, research offerings, various consulting services and other solutions to a wide array of industries. The firm has meaningful global reach. By investing in its digital capabilities and talent acquisition (growing its highly-skilled workforce) while expanding its worldwide footprint, Korn Ferry aims to differentiate itself from its peers including Ernst & Young, McKinsey, Willis Towers Watson PLC and Deloitte. We see Korn Ferry as having substantial capital appreciation upside as our fair value estimate of $66 per share of KFY is well above where shares are trading as of this writing (currently KFY is trading in the mid-$40s). Additionally, shares of KFY yield ~0.9%, and the firm offers incremental dividend growth upside as well. The company is highly-rated on the Valuentum Buying Index, with a rating of 9 (as of December 23, 2020).

Dec 18, 2020

Omni-Channel Strategy at Dick’s Sporting Goods Makes It a Long-Term Dividend Growth Idea
Image Source: Dick’s Sporting Goods Inc – Third Quarter of 2020 Earnings Infographic. The ongoing coronavirus (‘COVID-19’) pandemic, due to the desire of households to socially distance, has seen a meaningful amount of consumer spending shift to e-commerce platforms. Retailers that invested heavily in their online operations, while also bulking up their omni-channel sales capabilities, were in a much better position when the pandemic hit than those that had to rely largely on their physical footprint. Over the past year, “contactless” delivery options have become much more popular. That includes fulfillment options such as curbside pickup and in-store pickup (usually in specially designated areas), where consumers purchase goods online and then travel to the relevant physical store location to acquire those products. Demand for home delivery services has surged as well. On November 27, we added Dick’s Sporting Goods to the Dividend Growth Newsletter portfolio to gain exposure to a high-quality retailer with strong omni-channel sales operations, and the rise of e-commerce more broadly. In this note, let's focus on Dick’s Sporting Goods’ operational improvements and e-commerce strategy.

Dec 16, 2020

The December Edition of the Best Ideas Newsletter
Download the December edition of the Best Ideas Newsletter in this article.

Dec 15, 2020

Honeywell Is a Tremendously Resilient Enterprise and a Rock-Solid Dividend Payer
Image Shown: Honeywell International Inc expects its financial performance will post a significant rebound in 2021. Please note this guidance assumed a safe and viable COVID-19 vaccine would get distributed by early-2021, though distribution activities started before then in December 2020, which supports Honeywell’s near-term outlook. Image Source: Honeywell International Inc – Third Quarter of 2020 IR Earnings Presentation. We added one of our favorite industrial stocks Honeywell to the Dividend Growth Newsletter portfolio on November 27 as the firm’s operational and financial performance has proven to be incredibly resilient in the face of the ongoing coronavirus (‘COVID-19’) pandemic. As global health authorities begin to put an end to the pandemic, aided by recent COVID-19 vaccine developments, Honeywell is well-positioned to capitalize on a global economic recovery. Shares of HON yield ~1.8% as of this writing and its Dividend Cushion ratio sits at 2.3, earning the firm a “GOOD” Dividend Safety rating. Please note that the forward-looking Dividend Cushion ratio and Dividend Safety rating incorporates our forecast that Honeywell will push through meaningful dividend increases in the coming years, too, so Honeywell's foundation of dividend health is quite strong even considering future growth in the payout.

Dec 15, 2020

Oracle Posts Solid Earnings and Provides Favorable Near-Term Guidance
Image Source: Oracle Corporation – September 2019 IR Presentation. On December 10, Oracle Corp reported second-quarter earnings for fiscal 2021 (period ended November 30, 2020) that beat both consensus top- and bottom-line estimates. In the fiscal second quarter, Oracle’s GAAP revenues advanced 2% year-over-year on the back of its ‘Cloud services and license support’ segment posting 4% sales growth. The company’s GAAP operating income rose 13% year-over-year last fiscal quarter, as operating expenses shifted lower 3% thanks to the efforts of Oracle’s management team to make cost containment efforts a priority. The firm’s diluted GAAP EPS came in at $0.80 during the second quarter of fiscal 2021, up 16% year-over-year thanks in part to its weighted-average outstanding diluted share count falling almost 9% during this period. We are maintaining our $67 per share fair value estimate for Oracle and continue to include shares of ORCL in the Dividend Growth Newsletter portfolio. Shares of ORCL yield ~1.6% as of this writing with room for ample payout growth going forward, in our view.

Dec 13, 2020

7 Hidden Dividend Aristocrats in Industrials
In the world of dividend growth investing, when a company hits the mark of raising its dividend for more than 25 consecutive years, it garners the coveted title of a Dividend Aristocrat. The accomplishment is so rare that only 65 companies in the S&P 500 have achieved this commendable feat--just 13%. Our strategic focus in the Dividend Growth Newsletter portfolio is to identify companies with attractive valuations, respectable dividend yields and strong expected dividend growth prospects for the next 25 years. This perspective is embedded within the construct of our proprietary and forward-looking Dividend Cushion ratio that can be found in each company’s Dividend Report. In this article, however, let’s cover seven hidden and relatively overlooked Dividend Aristocrats from our Industrials coverage that have promising prospects to continue raising their dividends for many more years to come (three on the list have already raised their dividends for more than 60 consecutive years). The valuations of these seven companies may be a little stretched for our taste (at the time of this writing), but we think these stocks are worth keeping on your radar given their resilient business models, shareholder-friendly management teams, notable competitive advantages, and praiseworthy status as Dividend Aristocrats. Each of the companies’ 16-page Stock Report and Dividend Report can be downloaded following their respective profiles.

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.