Valuentum Exclusive Analysis for the Discerning Investor

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Dec 13, 2020

7 Hidden Dividend Aristocrats in Industrials
In the world of dividend growth investing, when a company hits the mark of raising its dividend for more than 25 consecutive years, it garners the coveted title of a Dividend Aristocrat. The accomplishment is so rare that only 65 companies in the S&P 500 have achieved this commendable feat--just 13%. Our strategic focus in the Dividend Growth Newsletter portfolio is to identify companies with attractive valuations, respectable dividend yields and strong expected dividend growth prospects for the next 25 years. This perspective is embedded within the construct of our proprietary and forward-looking Dividend Cushion ratio that can be found in each company’s Dividend Report. In this article, however, let’s cover seven hidden and relatively overlooked Dividend Aristocrats from our Industrials coverage that have promising prospects to continue raising their dividends for many more years to come (three on the list have already raised their dividends for more than 60 consecutive years). The valuations of these seven companies may be a little stretched for our taste (at the time of this writing), but we think these stocks are worth keeping on your radar given their resilient business models, shareholder-friendly management teams, notable competitive advantages, and praiseworthy status as Dividend Aristocrats. Each of the companies’ 16-page Stock Report and Dividend Report can be downloaded following their respective profiles.

Nov 20, 2020

Home Depot and Lowe’s Post Tremendous Comparable Store Sales Growth
Image Source: Home Depot Inc – Third Quarter of Fiscal 2020 IR Earnings Infographic. Home Depot and Lowe’s Companies have experienced incredibly strong comparable store sales growth during the initial phases of the ongoing coronavirus (‘COVID-19’) pandemic. Past digital investments enabled both companies to better meet surging demand during these turbulent times, and demand growth is coming from both professional (i.e. contractors, home builders) and non-professional (i.e. more affluent households in the suburbs) consumers. The biggest thing holding both companies back is their large net debt loads and sizable operating lease liabilities, in our view, though please note that their cash flow profiles are stellar. It appears the North American home improvement and construction business is holding up quite well, all things considered, highlighting the industry’s resilience.

Nov 15, 2020

Zillow Continues to Disrupt Real Estate Market
Image Source: Zillow Group Inc – May 2020 IR Presentation. Record low interest rates for mortgages in the US, largely a product of the Fed’s monetary stimulus measures (quantitative easing and near-zero interest rates), has gone a long way in stimulating demand for homes. According to the US Census Bureau, the national homeownership rate stood at 67.4% in the second quarter of 2020, up ~260 basis points from the same period the prior year. For reference, the domestic homeownership rate has been steadily climbing higher since 2015-2016 (when homeownership rates were in the low-60s% range) according to data provided by the US Census Bureau. Homeownership rates peaked in 2005-2006 at the high-60s% level before sliding significantly lower over the next decade due in part due to the ramifications of the Great Financial Crisis (‘GFC’) and the tightening of mortgage lending standards (in large part due to Dodd–Frank Wall Street Reform and Consumer Protection Act that was passed in 2010).

Sep 18, 2020

Dividend Increases/Decreases for the Week September 18
Let's take a look at companies that raised/lowered their dividend this week.

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.

Jun 24, 2020

Steel Dynamics Bets Big on North America’s Industrial Economy
Image Source: Steel Dynamics Inc – June 2020 IR Presentation. Investor sentiment towards the steel industry is rebounding as the medium- and long-term outlook for global industrial activity has improved markedly since March 2020. The ongoing coronavirus (‘COVID-19’) pandemic has significantly hampered near-term industrial activity, though major fiscal stimulus packages (made feasible through major monetary stimulus programs) launched in various developed nations could provide some relief. Shares of Steel Dynamics have recovered meaningfully since their March 2020 lows and are trading a tad below our fair value estimate as of this writing. Shares of STLD yield ~3.6% on an annualized forward-looking basis as of this writing and we give the steel maker a Dividend Cushion ratio of 1.3x providing for a “GOOD” Dividend Safety rating. The company has made great strides in improving its financial position over the past several years. We will first provide some background on the fiscal stimulus measures that have either been approved and or proposed in key economies across the world, before digging deeper into Steel Dynamics.

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.

Jun 12, 2020

*ALERT* Scribbles and More Newsletter Portfolio Changes
Image: Why are stock prices increasing while the near-term economy and near-term earnings outlook isn't as bright as before...How unlimited quantitative easing, runaway government spending, increased inflation expectations impact equity values...Why this year's earnings expectations or next year's earnings expectations don't matter much...Why Valuentum thinks equity values are rising today, even as the near-term outlook remains unclear. Scribbles on page 76 of Value Trap. "I know it sounds crazy to say so during a global pandemic and during a recession, but the right multiple and the right earnings to use to value this market is an 18-20x multiple on $196 earnings, putting a fair value range on the S&P 500 today of 3,530-3,920. The S&P 500 is trading at about 3,000 today." -- Brian Nelson, CFA