Valuentum Exclusive Analysis for the Discerning Investor

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Feb 22, 2020

Is a Stock Market Crash Coming? -- Coronavirus Update and P/E Ratios
Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report -- 32. We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates--estimates that are likely too high given the evidence we are seeing with respect to a slowdown due to COVID-19--and corporate debt levels more elevated than ever before (note, a high net debt level should depress the P/E in enterprise valuation--US corporate debt has advanced 50% over the past decade, to $10 trillion), it is our contention that the current market reflects a “situation-equivalent” forward P/E (i.e. rightsizing for new net debt relative to the dot-com peak and adjusting for lower forward earnings expectations compared with current forecasts) perhaps greater than 24.4, which was recorded at the peak of the dot-com bubble. Though interest rates are lower than they were at the time of the dot-com crash, suggesting a modest reasonable bump to normalized forward P/E ratios of ~15 times to reflect “fair valuations,” we could seriously be in for fundamental-driven crash soon, as both the earnings multiple and earnings estimates contract aggressively. Hypothetically, a contraction to a 16x forward multiple on earnings estimates just 10% lower than currently forecast implies an S&P 500 of 2,566, or a swoon of about 20%-30% from current levels--and that would just get us down to 16x still-respectable forward numbers. How quantitative-driven price-agnostic trading may impact this scenario is not known either, and all of this could be setting up for a wild ride in the coming weeks and months. Fasten your seatbelts. We’ll have a few newsletter portfolio alerts coming Monday.

Jan 23, 2020

Resetting Your Mental Model
Image Source: affen ajlfe. Having the right mental model and using the right information can be the reason why you win or lose in investing.

Dec 18, 2019

FedEx’s Earnings Miss
Image Source: FedEx Corporation – 2019 Annual Stockholders Meeting September 2019 IR Presentation. In the days leading up to FedEx Corp latest earnings report where the firm missed by a mile, news broke that Amazon is now blocking third-party sellers that use its marketplace platform from using the FedEx Ground delivery service (which handles North American volumes) to ship to Prime customers. This comes on the heels of FedEx and Amazon ending two significant shipping contracts earlier this year, including the arrangement where FedEx Ground would handle some of Amazon’s packages, a deal that expired at the end of August. Please note that FedEx Ground is a small-package delivery service that caters to America and Canada, and that other FedEx options for certain packages bought through or sold by Amazon are still available. We are still staying away from FedEx as its ability to generate free cash flows remains pressured by its need to invest heavily in the business to keep up with the likes of Amazon and others. FedEx’s dividend payout could be at risk should exogenous shocks (i.e. a breakdown in the partial US-China trade war truce) continue weakening its financial performance.

Nov 19, 2019

Improving Our Coverage
Valuentum continues to scour the stock market for new ideas. We’ll be following the set of companies in this list via commentary on our website and a data sheet updated periodically.

Sep 4, 2019

A Tale of Two Package Delivery Companies
Shares of both FedEx Corporation (indicated by the orange line above) and United Parcel Service Inc (indicated by the blue line above) have come under a tremendous amount of pressure over the past year as the industry navigates the fallout from the US-China trade war. Both companies are investing heavily to improve their offerings to stay ahead of the game as large tech companies increasingly encroach on the shipping industry’s traditional turf. The S&P 500 index is indicted by the purple line above.

Aug 28, 2019

Our Reports on Stocks in the Air Freight & Logistics Industry
We've optimized our industrials coverage.

Mar 21, 2019

In the News: Dividend Growth Still on Hold at General Mills After Strong Quarter, Avoiding FedEx and BMW After Warnings on Bottom-Line Weakness, and a Biogen as a Prime Example of Risks to Avoid in Biotech
General Mills raised bottom-line and free cash flow conversion expectations for fiscal 2019, but we’re not interested in shares as it continues to prioritize deleveraging over dividend growth in a slow growth environment. International corporations continue to weigh the impact of slowing macroeconomic activity and global trade tensions, as evidenced by FedEx and BMW slashing bottom-line expectations, and shares of Biogen have been rocked by news that it terminated two late-stage studies of a key Alzheimer’s treatment.

Dec 31, 2018

Valuentum Stock Screeners
Brian Nelson provides members with an update on Valuentum's stock screeners and the significant number of forward-looking data we provide. This article was sent to members via email December 29.

Dec 20, 2018

Market Mayhem -- Alerts for Members
Dear members -- we released a number of emails today. Please read and let us know if you have any questions. We're here for you.

Nov 23, 2018

Dividend Increases/Decreases for the Week Ending November 23
Let's take a look at companies that raised/lowered their dividend this week.