Valuentum Exclusive Analysis for the Discerning Investor

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Mar 5, 2020

Buffett Makes Another “Unforced Error” in Airlines
“Buffett said once that he had an 800 number that he would call anytime that he wanted to buy an airline stock again. Maybe that number has been disconnected after all these years, as Berkshire Hathaway is once again an owner of airline equities. Though the structural characteristics of an industry can and do change over time, I’m very skeptical the airline business has changed permanently for the better. Today’s airline business may be more oligopolistic in nature and much more profitable thanks to consolidation and the right-sizing of capacity, but it retains a notoriously cyclical passenger-demand profile, ties to the level and volatility of energy resource prices, considerable operating leverage, all the while barriers to entry remain low, exit barriers remain high, and fare pressure endures. The next downturn may not see as many bankruptcies as prior economic cycles due to lower unit-cost profiles, but it may turn out to only be modestly “less bad” for equity holders." – Value Trap, published December 2018

Feb 7, 2020

Update on Wuhan 2019 Novel Coronavirus Outbreak: 31,000+ Infections, 630+ Deaths
Image Source: 2019-nCoV, Centers for Disease Control and Prevention. The number of infections and deaths related to the Wuhan 2019 Novel Coronavirus has surged since our last update, but we maintain our view that investors should keep a level head. We continue to wait to add protection to the newsletter portfolios as the market absorbs a massive liquidity injection from the PBOC.

Jan 31, 2020

Coronavirus May Trigger Long-Anticipated Global Recession
Image: Wuhan New Coronavirus. This was the catalyst that nobody was expecting, a novel coronavirus that nobody had in their economic models. We think global economic activity is slowing as we speak, and the spread of the virus may only accelerate in mainland China and elsewhere. Investors should keep a level head and perhaps think about adding protection to their portfolios before it becomes too expensive.

Jan 23, 2020

Why *NOW* Do You Care About Boeing’s Stock?
Image Source: Robert Sullivan. In no, way shape or form should you *now* be interested in Boeing’s stock. Let’s explain.

Mar 17, 2019

Our Reports on Stocks in the Major Airlines Industry
Image Source: Cory Hatchel. We have dropped coverage of the Airline (major) industry: AAL, ALK, DAL, HA, JBLU, LUV, SAVE, UAL.

Mar 12, 2019

FB/FIZZ Methodologically Speaking and CMG, AAPL, BA!
Let’s talk about the importance of having CFA charterholder research at your advisory practice and some recent notable stock price movements within the context of our methodology.

Feb 15, 2018

Cisco Rallies Big Time!
Image shown: Performance of the S&P 500 (SPY) since August 2017. As US equities continue their newly-found volatility, let’s take a look at some recent earnings reports and other developments around the markets. Cisco, the workhorse of both simulated newsletter portfolios, put up a fantastic report and upped its dividend. Berkshire continues to love Apple, and we maintain the view that the 10-year Treasury rate may be the greatest determinant of how well stocks perform in the coming decades. Airlines, garbage stocks, the “gas tax,” and more.

Apr 18, 2017

United’s Passenger Debacle An Immaterial Investment Consideration
Image Source: Tomás Del Coro. The major airlines in the US have done a fantastic job capitalizing on the ongoing upswing in air travel demand, but their economically-sensitive business models remain the most operationally-leveraged out of any industry group in our coverage. This should be investors' biggest concern: A downturn in the global economy and competitive pricing pressures are far greater worries for investors than United’s recent passenger debacle. However, as with many news-oriented items (as opposed to materially-relevant, investment-related items), United's misstep is making headlines in a big way. Though the footage in this article is appalling, investors in airline stocks have much more important things to worry about, in our view.

Feb 27, 2017

Recent Material Fair Value Estimate Changes
Fair value estimates are never static. Let's walk through some of the more material ones we've made during the past month or so.

Nov 19, 2016

Warren Buffett Is Back Into Airlines, Should You?
Warren Buffett has changed his mind about airline stocks... In this 10-minute podcast, the Valuentum analyst team talks all about the hazards of the airline business model from substantial operating leverage to the risks of volatile jet fuel costs to bankruptcies and beyond. The team also highlights the long-term passenger growth prospects of the sector, and recent consolidation that has brewed a more optimistic tone from industry observers.