Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Apr 28, 2021

Best Idea Alphabet Flying Higher
Image Shown: Shares of Alphabet Inc Class C stock are on a nice upward climb of late as investors continue to warm up to the company’s fortress-like balance sheet, stellar free cash flow generating abilities, and promising growth outlook. We continue to like Alphabet Inc Class C shares (ticker GOOG) as a top-weighted idea in the Best Ideas Newsletter portfolio. We are huge fans of Alphabet, and the digital advertising giant delivered again April 27 when it reported a stellar first quarter 2021 earnings report that saw the firm fly by both consensus top- and bottom-line estimates. Shares of Alphabet Class C are included as a top-weighted idea in the Best Ideas Newsletter portfolio. As of this writing, even after the post-earnings bounce, shares of GOOG are trading well below our fair value estimate of $2,792 (the top end of our fair value estimate range sits at $3,490) indicating there is room for substantial capital appreciation upside going forward.

Apr 28, 2021

Microsoft Churns Out Gobs of Free Cash Flow
Image Shown: An overview of Microsoft Corporation’s performance last fiscal quarter. Image Source: Microsoft Corporation – Third Quarter of Fiscal 2021 IR PowerPoint Presentation. On April 27, Microsoft Corp reported third quarter fiscal 2021 earnings (period ended March 31, 2021) that smashed past both consensus top- and bottom-line estimates. Revenue growth came in strong across the board. Its cloud computing Azure segment posted 50% revenue growth, its business-facing Dynamics 365 segment posted 45% revenue growth, and its consumer-facing Xbox content and services segment posted 34% revenue growth on a year-over-year basis last fiscal quarter. Though not a large part of its business, Microsoft’s digital advertising revenues also grew nicely in the fiscal third quarter. Foreign currency tailwinds supported the sales performance at most of Microsoft’s reporting segments last fiscal quarter, and recent acquisition activity helped grow its video game business.

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 27, 2021

Tesla Scaling Up Nicely
Image Shown: Tesla is steadily working towards bringing another manufacturing facility online in the US, this time near Austin, Texas. Image Source: Tesla Inc – Shareholder Letter Covering the First Quarter of 2021. Electric vehicle (‘EV’) giant Tesla continues to impress as it smashed past consensus top- and bottom-line estimates when it reported first quarter 2021 earnings on April 26. The company delivered 184,800 vehicles (182,780 Model 3/Y variants and 2,020 Model S/X variants) and produced 180,338 vehicles in the first quarter of this year, though we note that Tesla only produced Model 3/Y variants last quarter and Model S/X vehicle deliveries were met via its inventory. In the first quarter of 2021, Tesla’s ‘automotive revenues’ of $9.0 billion were up 75% year-over-year, its GAAP revenues of $10.4 billion were up 74% year-over-year, and its GAAP net income came in north of $0.4 billion (up sharply from year-ago levels).

Apr 26, 2021

Competition Is Heating Up for Intel
Image Shown: Intel's shares have outpaced the S&P 500 SPDR (SPY) since we removed them October 2020.Intel has had a terrific run, but we think bad news may be on the horizon. The chip giant is juggling too many balls at the moment, and competition from the likes of AMD and Nvidia could result in some tough sledding in coming years. We don’t see much risk to the dividend payout, but the lower end of our fair value range may be a reasonable target for shares. We feel that a big miss is coming that may take the market by surprise later this year or in 2022. Execution will be key, and Intel has its work cut out for it. We expect to make some tweaks to our valuation model given the report, but we don’t expect a material fair value estimate change at this time. The company’s Dividend Cushion ratio stands at 1.4.

Apr 26, 2021

Chipotle Could Double the Number of Restaurants in the Long Run
Image Source: Valuentum. Chipotle’s first-quarter results were solid, and we’re sticking with the idea in the simulated Best Ideas Newsletter portfolio. The company’s long-term total restaurant opportunity is tremendous, and we view its digital initiatives as top-notch as it continues to grow comparable store sales nicely. With one of the most innovative CEOs at the helm, Chipotle’s shares continue to be enticing, in our view.

Apr 23, 2021

P&G and Kimberly-Clark Tell Two Different Stories
Image Shown: Since the beginning of 2019, on a price-only basis, Procter & Gamble (orange) has handily outpaced the Vanguard Consumer Staples ETF while Kimberly-Clark (turquoise) has stumbled. Procter & Gamble’s shares have been on an incredible run the past couple years, with the company driving strong organic revenue and earnings per share growth. Kimberly-Clark, on the other hand, has been executing poorly in a market environment where one might think it should be excelling. Both of these stocks are dividend growth giants, with P&G boasting a 65-year dividend growth track record and Kimberly-Clark stringing together 49 consecutive annual dividend increases. Both also have strong Dividend Cushion ratios of 1.8 at this time, suggesting resilient dividend coverage on a go-forward basis. That said, investors will have to pay up for P&G’s dividend strength and operational tailwinds, as shares are a bit pricey based on our fair value estimate range, and even Kimberly-Clark’s valuation is only slightly more reasonable after its sharp drop following the 2021 earnings guidance cut. We expect to make a few tweaks to our valuation models following their respective calendar first-quarter 2021 reports, but if we had to pick between these two dividend growth behemoths, P&G looks like the better relative play. Shares of P&G yield ~2.6%, while shares of Kimberly-Clark yield 3.3%.

Apr 23, 2021

Lockheed Martin Boosts Guidance
Image Source: Lockheed Martin Corporation – First Quarter of Fiscal 2021 IR Earnings Presentation. Lockheed Martin Corp, maker of missile systems, space offerings, radar systems, jet fighters (including the F-35), and other advanced weaponry, will play a leading role in keeping Western armed forces (and the militaries of Western allies) ahead of rising geopolitical tensions. We include the defense contractor as an idea in the Dividend Growth Newsletter portfolio, and shares of LMT yield ~2.7% as of this writing. Lockheed Martin’s dividend growth trajectory is impressive, its free cash flow generating abilities are stellar, and it has an enormous backlog which provides a high degree of visibility as it concerns its future cash flow generating abilities.

Apr 22, 2021

Good News from High Yielding AT&T
Image Source: AT&T. We liked AT&T’s first-quarter results and outlook for 2021 that calls for free cash flow generation to be well in excess of expected cash dividends paid for the year. Investors should be aware of its hefty net debt position, but with a ~7% dividend yield, the company may be hard to pass up for high yield dividend focused investors. We plan to make some tweaks to our valuation model following this report, but our fair value estimate of $34 per share remains unchanged at this time.

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.