Valuentum Exclusive Analysis for the Discerning Investor

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Aug 6, 2021

ExxonMobil’s Great Earnings Report and Promising Growth Outlook
Image Shown: An overview of ExxonMobil Corporation’s strategy to generate shareholder value going forward. Image Source: ExxonMobil Corporation – Second Quarter of 2021 Earnings IR Presentation. ExxonMobil’s financial performance is on the upswing, and its operational performance has been firing on all cylinders of late. We continue to be big fans of both ExxonMobil’s capital appreciation upside and dividend growth potential. Our fair value estimate for ExxonMobil under our “base” case scenario sits at $83 per share, well above where shares of XOM are trading as of this writing. The company’s Dividend Cushion ratio sits near parity at 0.9, and we rate both ExxonMobil’s Dividend Growth and Dividend Safety ratings as “GOOD” given its impressive cash flow generating potential. Shares of XOM yield a nice ~6.0% as of this writing.

Aug 3, 2021

Chevron Posts a Great Earnings Update, Share Repurchases to Resume
Image Shown: An overview of Chevron Corporation’s performance in the second quarter of 2021. We include shares of Chevron as an idea in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios and continue to be huge fans of the name as the global energy complex continues to recover from the worst of the coronavirus (‘COVID-19 pandemic). Image Source: Chevron Corporation – Second Quarter of 2021 IR Earnings Presentation. The global energy complex continues to recover from the worst of the COVID-19 pandemic, and that speaks quite favorably to Chevron’s outlook. Management is committed to improving the company’s balance sheet strength going forward, which we really appreciate. Chevron’s free cash flow performance in the second quarter highlights the incredibly powerful positive effect the recovery is having on its financial performance. Share buybacks, in moderation, represent a good use of capital in our view (based on where shares of CVX are trading at as of this writing). With all of this in mind, we would like to stress that Chevron remains committed to its dividend (the firm moderately boosted its quarterly dividend during the second quarter of 2021 by ~4% sequentially). We continue to like Chevron as an idea in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.

Jul 13, 2021

Chevron’s Promising Cash Flow Growth Outlook
Image Source: Chevron Corporation – May 2021 IR Presentation. The outlook for the global energy complex is bright and getting brighter as public health authorities utilize widespread coronavirus (‘COVID-19’) vaccine distribution efforts to put an end to the pandemic. We added shares of Chevron Corporation to the Best Ideas Newsletter and Dividend Growth Newsletter portfolios on June 27 in order to gain exposure to the ongoing recovery in the global energy complex via a high-quality integrated oil major. Shares of CVX yield ~5.1% as of this writing.

Jul 7, 2021

ExxonMobil’s Immense Upside in Guyana
Image Source: ExxonMobil Corporation – 2021 Investor Day Presentation. ExxonMobil generated $6.9 billion in free cash flow during the first quarter of 2021, up from just $0.3 billion in the same period the prior year when the coronavirus (‘COVID-19’) pandemic began to slow the global economy to a crawl. Please note that working capital movements and the timing of capital expenditures often have an outsized influence on an energy firm’s quarterly financials, though the trajectory is crystal clear, ExxonMobil is well on its way to recovering from the COVID-19 pandemic. ExxonMobil spent $3.8 billion covering its total dividend obligations in the first quarter of 2021 and spent a negligible amount buying back its stock during this period. Both of these activities were fully covered by its free cash flows with room to spare, highlighting the company’s potential dividend growth upside going forward.

Jun 1, 2021

ICYMI -- Video: Exclusive 2020 -- Furthering the Financial Discipline
In this 40+ minute video jam-packed with must-watch content, Valuentum's President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He'll talk about what companies Valuentum likes and why, and which areas he's avoiding. This and more in Valuentum's 2020 Exclusive conference call.

May 3, 2021

The Real Reasons Why Buffett Wants You in Index Funds
Image Shown: Since mid-June 2015, on a price-only basis, the S&P 500 (SPY) has nearly doubled, while shares of Kinder Morgan have nearly halved. In Morgan Housel’s book The Psychology of Money, chapter 16 leads in with “Beware taking financial cues from people playing a different game than you are.” The people on CNBC are playing a different game than you, and so is Warren Buffett. Buffett’s principles on stock selection are golden, but you must understand that he is near the top of the Forbes’ Billionaires List. He absolutely should be taking his own advice and indexing! With the threat of long-term inflation and price-agnostic trading, the average American, even with a few million in the bank, is not so lucky. Keep your game sharp.

Feb 14, 2021

Earnings from Our Two Favorite Midstream MLPs: EPD and MMP
Image Source: Enterprise Products Partners L.P. – Fourth Quarter of 2020 IR Earnings Presentation. The distribution yields on the units of both Enterprise Products and Magellan Midstream are quite lofty, and while we caution that these midstream MLP’s have hefty net debt positions, they may be best-in-class. Still, both entities need to retain constant access to capital markets to refinance their debt burdens, ideally at attractive rates. Declining capital expenditures and rising utilization rates, if realized, should go a long way in improving both firm’s abilities to generate free cash flows this year and beyond. In our view, we see Enterprise Products and Magellan Midstream being able to maintain their hefty payout obligations going forward. We continue to like exposure to both Enterprise Products and Magellan Midstream in the High Yield Dividend Newsletter portfolio.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Jan 11, 2021

Energy Sector In Shambles, Looks to Recover But Headwinds Persist
Image Source: ConocoPhillips – November 2019 Analyst and Investor Meeting IR Presentation. Though raw energy resource pricing is on the rebound, the outlook for the oil and gas industry remains stressed. Global demand for oil and related refined petroleum products remains subdued due to headwinds generated by the ongoing coronavirus (‘COVID-19’) pandemic. The OPEC+ oil cartel has responded by pledging to keep a significant amount of oil output off the market for an extended time. However, raw energy resource prices need to go much higher and be sustained at elevated levels before the space could become attractive from a longer-term perspective. In our view, the US upstream industry (specifically those in the shale patch) need WTI to move and stay north of $60 per barrel to be in a position to generate meaningful free cash flow while also investing enough to maintain their production bases. We think the dividends at the oil majors may be at risk, even Exxon’s, and we include two high-risk midstream stocks in the High Yield Dividend Newsletter portfolio to capture a relatively benign risk-reward scenario when it comes to their respective yields. We maintain a cautious view on the MLP business model, more generally, however. For now, we are keeping a close eye on the energy sector considering things are slowly moving in the right direction. However, given the collapse in raw energy resources pricing witnessed during the first half of 2020, the industry still has a long way to go before it is out of the woods, so to speak.

Nov 17, 2020

Chevron’s Forward-Looking Dividend Coverage is Becoming Stressed
Image Shown: Chevron Corporation reduced its capital expenditure expectations a couple of times this year, though that still has not enabled the firm to generate meaningful free cash flows given the various headwinds facing its businesses. Image Source: Chevron Corporation – November 2020 IR Presentation. On October 30, Chevron Corp reported third quarter earnings for 2020. As expected, it was a brutal report from Chevron. The ongoing coronavirus (‘COVID-19’) pandemic decimated global energy demand and severely weakened raw energy resources pricing at a time when refining margins are quite weak. This double whammy saw Chevron post a $0.2 billion GAAP net loss in the third quarter of 2020 as its revenues tanked.