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Valuentum Commentary
Oct 23, 2020
Our Thoughts on Philip Morris International’s Latest Earnings Report
Image Shown: Philip Morris International Inc has been able to maintain its global market share in the tobacco industry while pushing through price increases as indicated by its relatively strong ‘Combustible Tobacco Pricing’ performance seen through the first nine months of 2020. Image Source: Philip Morris International Inc – Third Quarter of 2020 IR Earnings Presentation. Tobacco giant Philip Morris reported third quarter 2020 earnings on October 20 which saw the company beat both consensus top- and bottom-line estimates. Philip Morris International also raised its full-year guidance for 2020 in part due to industry volumes holding up better than expected in Indonesia, which raised the minimum selling price for cigarettes while also increasing cigarette taxes at the start of 2020. For the full-year, the company now expects to generate $5.03 - $5.08 in GAAP diluted EPS (up from $4.84 - $4.99 previously) and $5.37 - $5.42 in non-GAAP adjusted diluted EPS (up from $5.23 - $5.38 previously). Philip Morris International continued to maintain its ~28-29% market share (excluding China and the US) of the global tobacco industry in the third quarter. Additionally, the firm has been able to also push through price increases versus year-ago levels. We continue to like shares of Philip Morris International as a holding in our High Yield Dividend Newsletter portfolio. Shares of PM yield ~6.4% as of this writing on a forward-looking basis after the firm raised its quarterly dividend by roughly 3% in September. Sep 11, 2020
Dividend Increases/Decreases for the Week September 11
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. Jul 31, 2020
Philip Morris International Posts Solid Guidance, Cuts Costs
Image Shown: Excluding foreign currency headwinds, Philip Morris International Inc’s financials held up relatively well during the first half of 2020, all things considered with an eye towards the pandemic. Image Source: Philip Morris International Inc – Second Quarter of 2020 IR Earnings Presentation. The ongoing coronavirus (‘COVID-19’) pandemic has severely stressed consumer spending in countries all over the globe, and that includes spending on cigarettes and other tobacco products. For a major tobacco company like Philip Morris International, this dynamic weighs negatively on its near-term outlook, though the company is well-positioned to ride out the storm for several reasons. We continue to like Philip Morris International as a holding in the High Yield Dividend Newsletter portfolio, and shares of PM yield ~6.0% as of this writing. Philip Morris International’s dividend coverage on a forward-looking basis is decent and supported by its optimistic guidance (a rebound is expected during the second half of 2020), growing demand for its heated tobacco offerings (such as IQOS, which is not an acronym), high quality cash flow profile, ongoing access to capital markets at attractive rates (particularly debt markets), pricing power at its traditional cigarette brands (such as Marlboro), and its ample liquidity position at the end of June 2020. However, we caution that Philip Morris International’s large net debt load, while manageable, weighs negatively against its dividend coverage strength. We give Philip Morris International a “GOOD” Dividend Safety rating which factors in modest per share payout growth and expected future free cash flows over the next five full fiscal years, along with its large net debt load. Jul 23, 2020
Earnings Update: LMT, ISRG, KO, PM
Image Source: As with many companies these days, Coca-Cola pulled its 2020 outlook due to uncertainties surrounding COVID-19. Second Quarter 2020 Earnings Call. We released a few preliminary thoughts on second quarter earnings in our note here, but we wanted to elaborate on a few new reports, too. Lockheed Martin is included in the Dividend Growth Newsletter portfolio, while Intuitive Surgical was highlighted as a COVID-19 play during the March swoon. Coca-Cola remains an excellent bellwether on the global economy, while Philip Morris remains a holding in the High Yield Dividend Newsletter portfolio (subscribe). Let’s cover the second quarter reports from these companies in this note. 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 Jun 11, 2020
Valuentum Research Update
"Hope you all are doing great! I must say I couldn't be more pleased with the research we've been putting out, and thank you very much for your continued interest. In this piece, I wanted to get some of our latest work to you. First, please note that we've done a great job holding the line on many of our fair value estimates (ranges) on our website. Many stocks have been bouncing back, and we're glad we didn't rush through any updates. Updating fair value estimates (ranges) too frequently doesn't make much sense to us. We're after the right answer, not any answer." -- Brian Nelson, CFA Latest News and Media The High Yield Dividend Newsletter, Best Ideas
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accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or
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no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a
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and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.
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