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.

Feb 18, 2020

Our Reports on Stocks in the Gaming & Hotels Industry
Image Source: Erin Pettigrew. We've dropped coverage of stocks in the Gaming & Hotels industry.

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.

Jan 4, 2020

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds
Image: President of Investment Research Brian Nelson, CFA. A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception.

Nov 12, 2019

Asset Light, Free-Cash-Flow Generating Powerhouse Bookings Holding (Priceline) Remains One of Our Favorite Ideas
Image shown: Booking Holdings' equity has been a strong performer the past few years.Booking Holdings fills an important void in our Best Ideas Newsletter portfolio as it provides exposure to the broader global economy, while albeit cyclical, continues to hold up despite myriad threats. Bookings Holdings’ asset-light business model translates to tremendous free cash flow generation, and its balance sheet is net-cash rich, two considerations that provide a very strong foundation for our estimate of its intrinsic value, which stands at ~$2,150 (shares are trading at ~$1,900 at the time of this writing). The company does not pay a dividend.

Oct 12, 2019

ICYMI: Interview with Valuentum's President Brian M. Nelson, CFA
Catch up with Valuentum's President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles.

May 14, 2019

Markets Swooning, Expect Extreme Volatility, Finger on Put-Option Trigger
Image shown: We notified members December 26 that we had moved  the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to a "fully invested" position, from a 30% and 20% cash "weighting" at the high end of the range, respectively.

Apr 9, 2019

Top Research and Ideas You May Have Missed
Is Quant Value Giving Intrinsic Value Investors a Bad Name? Surely, you don't believe Warren Buffett's "style" is out of favor?

Mar 29, 2019

ATTN: Advisors and Planners -- Disruption Is Looming
"With the commoditization of investment advice and intense competition from robos and other more cost-efficient solutions, growth-minded advisors want to create bespoke experiences for clients." -- WealthManagement.com

Mar 29, 2019

8 Announcements and Top Research You May Have Missed
8 Announcements. This article was sent to members via email March 27.