Valuentum Exclusive Analysis for the Discerning Investor

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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 27, 2021

ALERT: Raising Cash in the Newsletter Portfolios
Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we're raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. For more conservative investors, the high end of this range may even be larger, especially considering the vast "gains" from the March 2020 bottom and the increased systemic risks arising from price-agnostic trading (read Value Trap). The individual holdings will be reduced in proportion to arrive at the new targeted cash weighting in the respective simulated newsletter portfolios. The High Yield Dividend Newsletter and Dividend Growth Newsletter are scheduled for release February 1. We'll have more to say soon.

Jan 13, 2021

Surveying the Clean Energy Landscape for Ideas
Image Source: American Electric Power Company Inc (AEP) – January 2021 IR Presentation.  There’s a lot of interest in clean energy these days! Though our favorite ideas within a portfolio context are always the ideas within the Best Ideas Newsletter portfolio, the Dividend Growth Newsletter portfolio, the High Yield Dividend Newsletter portfolio, and the Exclusive publication, we also highlight interesting ideas via our articles that we publish on our website. In this article, let’s dig deep into the clean energy space. We’ll talk more about 1) Ameresco (AMRC), one of the green energy ideas we highlighted in the past that has performed incredibly well, 2) NextEra (NEE), a large utility “family” to keep an eye on (a utility firm and a merchant power spinoff), 3) First Solar (FSLR), a US-based manufacturer of solar panels, and 4) various alternative fuel and power storage companies, including Clean Energy Fuels Corp (CLNE) and Gevo Inc (GEVO). The recently-passed omnibus spending package in the US included significant funds to support various alternative and renewable energy activities. For example, the production tax credit for wind farms was extended for one year while the investment tax credit for solar plants was extended by two years. This is a major benefit for both manufacturers of solar modules and wind turbines along with the utility firms (XLU) that would own/operate such assets. Looking ahead, we expect that the US federal government will be very accommodative toward the green energy space as President-elect Biden and the incoming US Congress (which will be controlled by the Democratic Party) will likely step up federal investments in the space (such as subsidies, low or no interest loans, favorable procurement contracts, and other considerations). The share prices of various solar companies are on the rise as witnessed through the performance of funds such as Invesco Solar ETF (TAN) surging higher of late, while the impressive price performance of iShares Global Clean Energy ETF (ICLN) showcases the widespread nature of investor excitement toward almost all green energy oriented firms. Other securities in this realm include ALPS Clean Energy ETF (ACES) and SPDR S&P Kensho Clean Power ETF (CNRG).

Sep 3, 2020

3 Lessons in Portfolio Management Over 10 Years
Image Source: http://www.epictop10.com/. "When I left as director in the equity and credit department at Morningstar in 2011, I thought I knew a whole heck of a lot about investing. I felt like I was one in the top 5-10 in the world as it relates to the category of practical knowledge of enterprise valuation (maybe include Koller at McKinsey, Mauboussin at Counterpoint, and Damadoran at Stern on this list). After all, I oversaw the valuation infrastructure of a department that used the process extensively, and the firm was among just a few that used enterprise valuation systematically. Then, at Valuentum, our small team would go on to build/update 20,000+ more enterprise valuation models. There can always be someone else out there, of course, but I don't think anybody has worked within the DCF model as much as I have across so many different companies. That said, through the past near-10 years managing Valuentum's simulated newsletter portfolios, I've also learned a number of things to become an even better portfolio manager." -- Brian Nelson, CFA

Sep 1, 2020

Valuentum Website Overview
Overview of the key features of www.valuentum.com (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information.

Aug 31, 2020

Berkshire Hathaway Is Finally Putting Its Enormous Cash Pile to Use
Image Shown: Shares of Berkshire Hathaway Inc Class B are recovering from the steep pandemic-induced fall as the company has started to put its enormous cash-pile to work. On August 31, Berkshire Hathaway announced it had  “acquired slightly more than 5% of the outstanding shares in five of the leading Japanese trading companies” and that the firm considered these to be “passive stakes.” Those positions were acquired over approximately the past year through purchases made on the Tokyo Stock Exchange. Here are the five companies in alphabetical order (by ticker): Itochu Corporation, Marubeni Corporation, Mitsui & Co. Ltd., Mitsubishi Corporation, and Sumitomo Corporation.

Aug 13, 2020

Berkshire Hathaway Recovering Lost Ground
Image Shown: Shares of Berkshire Hathaway Inc Class B started to recover some of their lost ground in early-July, and the company’s second quarter earnings report has kept the momentum going in the right direction. On August 8, Berkshire Hathaway reported second quarter 2020 earnings that beat consensus top- and bottom-line estimates. Due to the impressive recovery in US equity markets since bottoming in late-March, Berkshire Hathaway’s investment portfolio put up tremendous performance last quarter, though its first quarter performance was harrowing. We include Berkshire Hathaway Class B as a holding in our Best Ideas Newsletter portfolio.

Jul 6, 2020

Berkshire Hathaway Expands Its Bet on North American Natural Gas
Image Shown: A look at the Cove Point LNG export facility in Maryland, one of half a dozen that are currently operational in the US. Image Source: Dominion Energy Inc – February/March 2018 Fixed Income Investor Meetings Presentation. On July 5, Berkshire Hathaway Energy, a majority-owned subsidiary of Berkshire Hathaway Inc, announced it was acquiring natural gas pipeline and storage assets along with an equity stake in a liquified natural gas (‘LNG’) export facility in Maryland from Dominion Energy Inc. This deal is valued at $9.7 billion by enterprise value and is expected to close by the fourth quarter of 2020. We continue to like Berkshire Hathaway in the Best Ideas Newsletter portfolio.

Jun 16, 2020

Reiterating Our Bullish Long-Term View on Stocks
Image: The NASDAQ 100 Index remains resilient, bouncing off support, after breaking out to new highs recently. Some of our best ideas are included in the NASDAQ 100, and our favorite concentrations include exposure to big cap tech and large cap growth. We continue to be bullish on equities for the long run. In addition to unlimited quantitative easing and "whatever it takes, squared" Fed policy, today, June 16, the Trump administration announced that it is weighing a $1 trillion stimulus bill to help support the economy. While uncertainties remain regarding specifics of the bill (it might include state assistance, extension of unemployment benefits, etc.), the move is consistent with the outsize spending we expect to further bolster the bull case, "ICYMI -- Stay Optimistic. Stay Bullish. I Am." We continue to emphasize that, in light of unlimited QE and runaway fiscal stimulus, the longer-duration components of intrinsic values are expanding considerably, and as a result, fair values, themselves, are actually rising during this recession and pandemic [a good estimate of the value of the S&P 500 today may be between 3,530-3,920, as outlined in the following: "Scribbles and More Newsletter Portfolio Changes.]."

Jun 15, 2020

ICYMI: Survey Coming Later Today, More Market Volatility Expected
Image: The market's levels of volatility so far in 2020 have been among the greatest in history. Expectations for increased volatility in the marketplace as a result of the proliferation of price-agnostic trading (indexing and quantitative trading) is a key theme of Valuentum's text, Value Trap: Theory of Universal Valuation. We continue to emphasize the importance of due diligence, enterprise valuation, behavioral thinking, the information contained in prices, and stock selection across equity portfolios. Page 256. This week is setting up to be yet another volatile week of trading, but nothing too surprising. We've talked extensively about outsize levels of volatility in the book Value Trap, and many of our predictions regarding the magnitude of volatility have come to fruition, as described in this note here. But as we've also noted in Value Trap, we don't think increased volatility is a transient development. The Fed and Treasury have only further emboldened price-agnostic trading (indexing/quant) with recent bailout actions, and volatility and momentum funds, which exacerbate the swings, will only grow as a percentage of trading volumes. The magnitude of market volatility during the COVID-19 crisis has certainly been immense. During March for example, the Dow Jones Industrial Average had 8 consecutive days with a 4% move in either direction (this is the first time in history this happened--not even during the tumultuous times of the Crash of 1929 or Black Monday of 1987 or the Great Financial Crisis did this happen). Intra-day volatility has also been considerable, and it has become commonplace for equity futures to swing wildly before market open. Now, more than ever, investors need a steady hand at the wheel.