Valuentum Exclusive Analysis for the Discerning Investor

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Jul 29, 2021

Microsoft’s Dividend Is Rock Solid But Why?
Image Shown: Valuentum’s Dividend Report on Microsoft. The Dividend Cushion Ratio Deconstruction reveals the numerator and denominator of the Dividend Cushion ratio for Microsoft. At the core, the larger the numerator, or the healthier a company's balance sheet and future free cash flow generation, relative to the denominator, or a company's cash dividend obligations, the more durable the dividend. In the context of the Dividend Cushion ratio, Microsoft's numerator is larger than its denominator suggesting strong dividend coverage in the future. The Dividend Cushion Ratio Deconstruction image puts sources of free cash in the context of financial obligations next to expected cash dividend payments over the next 5 years on a side-by-side comparison. Because the Dividend Cushion ratio and many of its components are forward-looking, our dividend evaluation may change upon subsequent updates as future forecasts are altered to reflect new information. We estimate the efficacy of the Dividend Cushion ratio in warning against dividend cuts at about 90%. We measure this efficacy by looking at the Dividend Cushion ratios of companies that have cut their payouts in our coverage. If the company had a Dividend Cushion ratio below 1, we’d view the Dividend Cushion ratio as doing its job. Not all companies with high Dividend Cushion ratios are insulated from dividend cuts, and not all companies with low Dividend Cushion ratios will cut their dividend, but the Dividend Cushion ratio is yet another Valuentum-driven tool for your investor tool kit.

Jul 22, 2021

Johnson & Johnson Beats Estimates, Raises Guidance Once Again
Image Source: Johnson & Johnson – Second Quarter of 2021 IR Earnings Presentation. On July 21, Johnson & Johnson reported second-quarter 2021 earnings that beat both consensus top- and bottom-line estimates. The company (once again) boosted its full-year guidance in conjunction with its latest earnings update as Johnson & Johnson’s business is steadily rebounding from the worst of the coronavirus (‘COVID-19’) pandemic, with an eye towards the ongoing recovery in the sales of its medical devices and related offerings. We include shares of JNJ as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Its latest earnings report and guidance boost reinforced our favorable view towards the name. Shares of JNJ yield ~2.5% as of this writing, and the top end of our recently updated fair value estimate range sits at $206 per share of Johnson & Johnson, well above where shares are trading at as of this writing.

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.

Apr 21, 2021

Abbott Expects Strong Earnings Expansion in 2021
Image: We use a discounted cash flow model to derive a fair value estimate range for companies in our coverage. The high end of our fair value estimate range for Abbott is $125 per share. We're maintaining this range after its first-quarter 2021 report. Image Source: Valuentum's 16-page stock report of Abbott. On April 20, Abbott Laboratories reported first quarter 2021 earnings that missed consensus top-line estimates but beat consensus bottom-line estimates. Last quarter, Abbott Laboratories’ ‘Diagnostics’ revenues more than doubled year-over-year due primarily to its COVID-19 pandemic-related offerings, while its ‘Medical Device’ and ‘Nutrition’ revenues were up 9% and 6% year-over-year on an organic basis, respectively. Additionally, its internationally-oriented ‘Established Pharmaceuticals’ unit posted 6% year-over-year organic sales growth last quarter. We're maintaining our fair value estimate range.

Apr 21, 2021

Vertex and CRISPR Therapeutics Partnership Update
Image: Vertex Pharma is co-developing gene-based therapy for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT). CTX001 may offer a potential cure for people that have SCD and TDT.On April 20, Vertex Pharma and CRISPR Therapeutics issued a press release that noted “the companies have amended their collaboration agreement to develop, manufacture and commercialize CTX001, an investigational CRISPR/Cas9-based gene editing therapy that is being developed as a potentially curative therapy for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT).” The development is a win-win for both Vertex Pharma and CRISPR Therapeutics and reinforces our positive view towards both company’s capital appreciation upside. We prefer Vertex Pharma as our speculative biotech play in the Best Ideas Newsletter portfolio given its more resilient financials and established commercial portfolio. Note that with early stage biotech companies such as CRISPR Therapeutics, investors are taking outsized risks and could lose all their capital should future endeavors not pan out as expected.

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 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!

Feb 5, 2021

Dividend Increases/Decreases for the Week February 5
Let's take a look at companies that raised/lowered their dividend this week.

Feb 3, 2021

Eli Lilly and Vertex Pharma Provide Promising Guidance for 2021
Image Shown: An overview of Vertex Pharmaceuticals Inc’s drug pipeline and commercialized drug portfolio. Image Source: Vertex Pharmaceuticals Inc – Fourth Quarter of 2020 IR Earnings Presentation. There are many attractive opportunities in the healthcare sector. Vertex Pharma is our favorite biotech play, and we are intrigued by the potential upside its strategic partnership with CRISP Therapeutics could generate. Additionally, we like the broad exposure to an attractive sector that the Health Care Select Sector SPDR ETF (XLV) provides the newsletter portfolios. The end of the COVID-19 pandemic will make conducting non-COVID-19-related clinical trials an easier task over the long haul, which supports the outlook for the pharmaceutical and biotech industries. We are also big fans of Johnson & Johnson, which is included in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios, and UnitedHealth Group, which is included in the Dividend Growth Newsletter portfolio.

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.