Valuentum Exclusive Analysis for the Discerning Investor

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May 13, 2021

Markets Back on Track – Seeking Net-Cash-Rich, Free Cash Flow Generators with Pricing Power!
Image Shown: The pricing action of ideas in the Dividend Growth Newsletter portfolio May 13. Image Source: Seeking Alpha.  We remain intensely focused on the cash-based sources of intrinsic value—net cash on the balance sheet and future expected free cash flow—when it comes to identifying price-to-fair-value-estimate mis-pricings as well as in assessing long-term dividend health. We think it may be tempting to rotate into some names where fair value estimate revisions have occurred, but the margin of safety around many energy/commodity producers and banking entities may be too large even for conservative investors. We expect most energy/commodity producers to continue to endure boom-and-bust cycles, and banking entities to do the same, as the latter act more like utilities this day and age. Once implicitly nationalized during the Great Financial Crisis, and used as an extension of government programs such as the Paycheck Protection Program during the COVID-19 crisis, outsize economic profit spreads may remain limited for banks/financials given the punitive regulatory environment. Facebook, of course, remains our top idea for long-term capital appreciation potential. Newmont Mining remains our favorite dividend growth-oriented “inflation hedge” followed by garbage hauler Republic Services and its CPI-indexed contracts. AT&T remains our favorite high yield dividend idea, boasting a free-cash-flow covered ~6.5% dividend yield, and we prefer only diversified exposure to the energy and banking sectors through the Energy Select Sector SPDR (XLE) and Financials Select Sector SPDR (XLF). We’ll be looking to deploy the ~10%-20% cash “positions” in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio in the coming months. The High Yield Dividend Newsletter remains “fully invested,” and Exclusive idea generation remains robust. If you haven’t already, please be sure to have a look at the video in this article to see how we assess the cash flow statement and balance sheet to uncover stocks with strong net cash positions and solid future free cash flows that handily cover expected cash dividend payments. We apply this laser-focus on financial statement analysis across our idea-generation suite of publishing products.

Apr 27, 2021

Trash Is Cash
Image Source: Clyde Robinson. Increasingly valuable disposal capacity that is only becoming scarcer and pricing power across collection and disposal operations that keep inflationary pressures at bay are just two of the reasons why we like the municipal solid waste space. Waste Management’s first-quarter performance showed that the U.S. municipal solid waste industry remains very healthy while free cash flow generation across the group will remain robust and perhaps grow stronger as the U.S. economy continues its recovery. We include Waste Management's peer Republic Services as one of our favorite ideas in the Dividend Growth Newsletter portfolio.

Apr 8, 2021

The Best Years Are Ahead
The wind is at our backs. The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets to remain overpriced for some time). Bond yields are paltry and will likely stay that way for some time, requiring advisors to rethink their asset mixes. The stock market looks to be the place to be long term, as it has always been. With all the tools at the disposal of government officials, economic collapse (as in the Great Depression) may no longer be even a minor probability in the decades to come--unlike in the past with the capitalistic mindset that governed the Federal Reserve before the “Lehman collapse."

Feb 26, 2021

Dividend Increases/Decreases for the Week February 26
Let's take a look at companies that raised/lowered their dividend this week.

Feb 24, 2021

Garbage Hauler Republic Services Expects Record Year in 2021
Image Source: Republic Services. There are few things as certain as death and taxes, but garbage may be one of them. One of our favorite ideas within the municipal solid waste coverage is Republic Services, a holding in the Dividend Growth Newsletter portfolio. We love its free cash flow generating ability, visibility into future revenue, enviable position with respect to disposal capacity, CPI-based book of business, and exposure to fast-growing economic areas in the US.

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.

Dec 18, 2020

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

Nov 27, 2020

Republic Services Is a Great Company
Image Shown: Shares of Republic Services Inc have been on an upward march over the past six months as investors warmed back up to the waste management company. We appreciate the company’s stable cash flow profile and high quality earnings, and we continue to include shares of RSG at a modest weighting in the Dividend Growth Newsletter portfolio. The waste management company Republic Services has proven to be incredibly resilient during the ongoing coronavirus (‘COVID-19’) pandemic. We are big fans of its stable cash flow profile and high quality earnings. According to Republic Services’ 2019 Annual Report the firm “is the second largest provider of non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States, as measured by revenue.” The firm operated in over 40 US states and Puerto Rico as of the end of 2019. We include Republic Services in our Dividend Growth Newsletter portfolio at a modest weighting. Pricing strength (assisted by industry consolidation), revenue growth (assisted by M&A activity), and the potential for meaningful margin expansion (assisted by economies of scale) underpins Republic Services’ cash flow growth trajectory. Shares of RSG yield ~1.7% as of this writing.

Nov 6, 2020

Garbage Hauler Republic Services Doesn’t Disappoint in Third Quarter
Image: Republic Services. We love companies with strong future expected free cash flow generation, especially ones that have strong net cash positions. Republic Services doesn’t have the strongest balance sheet, with a rather large net debt position emanating from rolling up a number of independent garbage haulers in the past, including Allied Waste, but it’s not something we’re worried about, given its strong and predictable free cash flow, contractual revenue visibility in its collection operations, and pricing power at its disposal facilities. We’re reiterating the high end of our fair value estimate range of $96 per share.