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 31, 2020

Dividend Increases/Decreases for the Week Ending January 31
Let's take a look at companies that raised/lowered their dividend this week.

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.

Oct 22, 2019

We Like Union Pacific But Shares Aren’t Cheap
Image Source: 3rd Quarter Earnings Slides. Though Union Pacific continues to navigate a tumultuous demand environment, particularly as it relates to the energy end market, the rails remain a key and indispensable part of North American infrastructure. Union Pacific offers a nice yield relative to peers, and its free cash flow generation remains solid thanks to brilliant execution on the operating line, as evidenced by an all-time best quarterly operating ratio. The only issue holding us back on Union Pacific remains its valuation. We’d have to see shares come in considerably for us to get interested. Our fair value estimate of Union Pacific stands at $142, while shares trade hands north of $170 these days.

Sep 12, 2019

Our Reports on Stocks in the Railroad Industry
Image Source: Dan O'Brien. We've optimized our industrials coverage.

Jul 17, 2019

In the News: Second-Quarter Earnings Season Begins
Second-quarter earnings season is upon us. The markets aren’t expecting much growth. Core industrial names may not fare well, but thus far, big pharma is solid. We’re not making any changes to the newsletter portfolios.

Apr 25, 2019

Norfolk Southern Impresses But Sustained Dividend Growth is Doubtful
While Norfolk Southern posted a solid first quarter earnings report and continued to showcase real operational improvement, an onerous net debt load combined with the long-term decline of coal in America puts its dividend growth trajectory in doubt.

Feb 1, 2019

Dividend Increases/Decreases for the Week Ending February 1
Let's take a look at companies that raised/lowered their dividend this week.

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.