Valuentum Exclusive Analysis for the Discerning Investor

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Mar 13, 2023

ICYMI: How Big Is Your "Too Hard" Bucket?
Image Source: Christian Schnettelker. In investing, it's okay to admit that there are some things that investors can't know. It's not a poor reflection of one's analytical ability or a possible shortcoming of one's experience, but rather quite the contrary: Understanding and accepting that some things are "unknowable" is a sign of the quality of one's judgment. Quite simply, certain critical components of the equity evaluation process are more "unknowable" than others. The intelligent investor recognizes the variance (fair value estimate ranges) and the magnitude of the "unknowable" between companies and generally tries to identify entities that have the least "unknowable" characteristics as possible or situations where the "unknowable" might actually be weighted in their favor (an asymmetric fair value distribution).

Feb 22, 2023

ICYMI: As Expected, Stock Pickers Trounce the Indexes When It Matters
Image: Charles Dickens. Image Source: Public Domain. “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” -- Charles Dickens, A Tale of Two Cities. We are big believers in prudent and diversified stock selection more than we ever have before, and we have little confidence in applying correlations, as in traditional asset allocation, to try to achieve financial goals and manage risks. In this age of wisdom, we like to follow the data, and the data keeps pointing to prudent and diversified stock selection as one of the best risk-adjusted ways to achieve long-term financial goals. To each, their own, but we continue to like stocks for the long run, and 2022 was yet another example why!

Feb 2, 2023

Meta’s Free Cash Flow Generation Has Returned, But TikTok Has Permanently Changed the Competitive Landscape
Image: Meta Platforms’ free cash flow has bounced back a bit, but the firm’s top-line growth remains challenged as it transitions away from a secular growth powerhouse into a cyclical story with encroaching competition. Image Source: Meta Platforms. We’re loving this nice move higher in the stylistic area of large cap growth, and for those investors seeking broad-based exposure, we think this area is the place to be in the long run. Tesla’s strong financial performance coupled with Meta Platforms’ return to financial discipline are propelling large cap growth higher, but risks to the broader equity markets and economy remain. In any case, with inflation likely peaking in June 2022, fourth-quarter 2022 earnings season coming in better-than-feared, and technical breakouts of key indices across the board from the equal-weighted and market-cap weighted S&P 500 to the NASDAQ-100, equity investors have a lot to cheer about.

Jan 25, 2023

Microsoft Is Betting Big on Artificial Intelligence (AI); Fiscal Q2 Shows Meager Revenue Growth, Weaker Cash Flow Generation
Image: Microsoft believes artificial intelligence (AI) will be the next platform wave, and the company is going full steam ahead to incorporate AI across its business systems. Image Source: Microsoft. “The age of AI is upon us and Microsoft is powering it. We are witnessing non-linear improvements in capability of foundation models, which we are making available as platforms. And as customers select their cloud providers and invest in new workloads, we are well positioned to capture that opportunity as a leader in AI. We have the most powerful AI supercomputing infrastructure in the cloud. It’s being used by customers and partners like OpenAI to train state-of-the-art models and services, including ChatGPT.” – Microsoft CEO Satya Nadella (January 24, 2023)

Jan 11, 2023

We’re Glad Microsoft Sees Promise in ChatGPT
Image Source: Mike Mozart. We’re going to be hearing a lot more about artificial intelligence chatbot technologies in the coming years, and our initial interaction with ChatGPT a month ago indicates to us that it will be a gamechanger for a lot of industries. Microsoft’s continued backing in OpenAI, the owner of ChatGPT, will likely accelerate the technology’s development, and we expect it to eventually augment Microsoft’s own search technology and ad-driven revenue opportunities. Alphabet may have a few AI tricks up its own sleeve in its ‘Other Bets’ segment, so we’re not ruling out a highly competitive environment in this area in the coming years. We like that we include both Microsoft and Alphabet in the simulated newsletter portfolios and that we’re not forced to make a decision on whether a new upstart is worthy of inclusion. Our fair value estimate for both Microsoft and Alphabet remain unchanged at this time.

Jan 6, 2023

These Things Sometimes Take Time
Image: The QQQ, which tracks the Nasdaq-100 Index, including Apple, Alphabet, and Microsoft has been a tremendous generator of wealth. Image Source: TradingView. For those that understand dollar cost averaging and the benefits of compounding, the next few years may be among the most important years for building and preserving long-term wealth. Even if markets retrace to the pre-COVID-19 highs, which we expect they will, it may just be setting up long-term investors for more attractive entry points with respect to dollar cost averaging to further compound returns. The next few years may be boring and somewhat stressful with lots of ups and downs, but we continue to like stocks for the long run!

Jan 5, 2023

The Fed ‘Can’t Stop, Won’t Stop’ Until Labor Market Feels More Pain
Image: Prices for private label brands at Aldi are considerably lower than those of branded products. The consumer staples sector, however, remains fully-priced with a 21+ forward earnings multiple, and many constituents hold large net debt positions. We believe the sticking point for the Fed is not groceries or gasoline prices, but rather the labor markets, which remain very strong, despite layoffs. Image Source: Valuentum. We maintain our view that markets will remain challenged for at least the first quarter of 2023, and we expect the S&P 500 to bottom around 3,400 based purely on a technical evaluation of the ongoing downtrend. The labor market remains too strong for the Fed to stop rate hikes, as the primary concern for the Fed is not what inflation will do this year, but rather whether it will spike again in 2024. To truly stomp out inflation, the Fed needs to witness further weakening in the labor markets, as consumers have found ways to trade down to offset grocery inflation and as gas prices at the pump ease. We’re never happy to hear of layoffs, but an unemployment rate of 4.5%-5% may be the range required for the Fed to stop hiking, in our view. The last thing the Fed wants is to stop hiking too early, only for inflation to come roaring back in the quarters that follow the pause. The Fed is not thinking about year-over-year inflation numbers for 2023, in our view, but rather policies that will ensure that inflation rates of the past 12-18 months do not return in 2024-2025. They are playing the long-term game.

Jan 3, 2023

Our Reports on Stocks in the Technology Giants Industry
Our reports on stocks in the Technology Giants industry can be found in this article. Reports include META, AAPL, GOOG, AMZN, MSFT, CSCO, V, MA, PYPL, INTC, ORCL, QCOM, ADI, IBM, ADBE, NVDA, CRM, AMD, AVGO, BABA, BKNG, BIDU, TSM, TXN, EBAY, ADP, MU, KFY, MAN, KLAC, LRCX, AMAT.

Dec 30, 2022

5 Top Stock Ideas for 2023!
With 2022 almost in the rear-view mirror, investors are expecting continued weakness into 2023. Millionaires are as bearish as they have been since the beginning of 2008, and we all know what happened during that year. Inflationary pressures coupled with substantially weakened consumer spending as a result of the collapse in the price of cryptocurrencies, traditional asset allocation models such as the 60/40 stock/bond portfolio, and ultra-high yielding stocks with payouts north of 9%-10% have most investors worried about what might be ahead in 2023. Still, investors have reason to be hopeful, in our view. The labor markets continue to hold up well, and the rate hikes that have pummeled equity, bond and real estate prices also act as future dry powder for the Fed to stimulate markets. At any time, the Fed can reverse its contractionary course. In 2023, we should start to see year-over-year increases in inflation slow, too. In this article, let’s talk our top 5 stock ideas for 2023!

Dec 27, 2022

Exclusive Call: What To Expect From Valuentum in 2023
Video: 2022 was a successful year by almost every measure from the simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio to the simulated High Yield Dividend Newsletter portfolio and Exclusive publication and beyond. There were some disappointments in 2022, of course, but the year showed the value of a Valuentum membership. Join President of Investment Research Brian Nelson on this year's Exclusive conference call to learn what to expect from Valuentum in 2023. Cheers!