Valuentum Exclusive Analysis for the Discerning Investor

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Jul 3, 2024

High Yield Dividend Income Investing Is Not as Easy as Chasing the Highest Yield
Image: EpicTop10.com. The skills to successfully invest for long-term capital gains or long-term dividend growth are much different than those required for generating high yield dividend income. Income investing is a much different proposition. However, the skills do center on a similar equity evaluation process, but one that requires an acknowledgement and heightened awareness of considerably greater downside risks. Income investing, or high yield dividend income investing, should at times be considered among the riskiest forms of investing, as many high dividend-yielding securities tend to trade closer to the characteristics of junk-rated bonds than they do most net cash rich and free cash flow generating powerhouses that we like so much in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.

Feb 25, 2024

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?
Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key long-term earnings growth, cash flow dynamics, and balance sheet health considerations. We remain bullish on equities for the long haul, and we think the next couple years will be incredibly strong. Our best ideas can be found in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio, ESG Newsletter portfolio, and via the Exclusive publication as well as options idea generation.

Jan 8, 2024

Thinking Slow: 3 Research Blind Spots That Changed the Investment World
Image Source: EpicTop10.com. We have to be on high alert about how our minds work. PBS recently delivered a four-part series examining how easily our minds are being hacked, and why it is so important to "think slow." When it comes to the active versus passive debate, does the analysis suffer from parameter risk? With respect to empirical, evidence-based analysis, does the analysis have the entire construct wrong? When it comes to short-cut multiples, are we falling into the behavioral trap of thinking on autopilot?

Dec 23, 2023

12 Reasons to Stay Aggressive in 2024
From outperforming simulated newsletter portfolios to fantastic success rates in the Exclusive publication to option ideas and great income-oriented ideas and beyond, we continue to deliver across our simulated newsletter suite as our latest video outlines. It’s hard to know exactly what 2024 will bring in terms of a market return, but the internals of the stock market and the U.S. economy look great to us. The new bull market we’re in could last for years, and as a result, we are staying aggressive with many of our new ideas as we look to benefit from these favorable trends.

Dec 13, 2023

Latest Report Updates
Check out the latest report refreshes on the website.

Dec 1, 2023

A Note on Valuation -- Low P/E Stocks with High Dividend Yields
Image: Stocks with low valuation multiples have trailed the broader S&P 500 (orange) considerably since the depths of the Great Financial Crisis. Today, with all the readily available information and data out there, it is far more likely the case that a company with a low P/E ratio actually deserves it, and a firm with an outsized dividend yield just holds a lot of net debt on their books. Investing in low P/E stocks or stocks with low valuation multiples without considering their intrinsic values (i.e. fair value estimates) may result in owning a basket of value traps. Investors may be attracted to these types of stocks for their low P/E ratios and hefty dividend yields, but just having a low P/E ratio and a high dividend yield doesn’t a good stock make. If investing were this easy, so-called “value stocks” wouldn’t have underperformed the market significantly for more than a decade and a half now.

Nov 17, 2023

REITs Will Likely Continue To Underperform
Image: REITs have not performed as well as some may have thought. This article clearly explains that REIT dividends are risky and showcases that REIT investors have missed out on a lot of total return during the past decade or so. One has to go back a long time to see any real return from REITs, and changing working and shopping habits will likely continue to punish the broader REIT sector. We view REITs as a game of financial leverage tied to the vicissitudes of the commercial real estate cycle, all for a dividend yield that approximates that of risk-free assets these days. REITs seem to have a large following these days and many will come to the defense of REITs in their own way, but from a bird's eye view of this market, we remain puzzled by the love affair some have for them. We can only posit that some have a myopic focus on REIT-specific metrics, are not getting the best information when it comes to capital-market dependence risk, and perhaps don't truly understand the structural dynamics of the dividend payment with respect to the free dividends fallacy (i.e. that a REIT's share price is adjusted downward by the amount of the dividend on the ex-dividend date). In our view, the structural dynamics that have hurt REITs for the past decade won't be going away anytime soon, and for investors looking to maximize their returns and the longevity of their retirement savings, there are much better options than REITs.

Nov 10, 2023

Use Both the Dividend Cushion Ratio (Probability of a Dividend Cut) and the Qualitative Dividend Ratings in Your Assessment of the Payout
The Dividend Cushion ratio ranks companies on the probability of a dividend cut in the longer run, while the qualitative ratings in part assess the outlook for the health of the payout in the near term in the context of management’s willingness to preserve and raise the payout. Since the systematic application of the Dividend Cushion ratio across our coverage in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90% at identifying the risks of a dividend cut in advance of the event.

Sep 20, 2023

ICYMI: Questions for Valuentum’s Brian Nelson
Valuentum's President Brian Nelson, CFA, answers your questions.

Aug 2, 2023

ICYMI: Let’s Play Devil’s Advocate: What’s the Bear Case for Realty Income?
Image Source: Realty Income. It’s helpful to challenge one’s thesis on a favorite idea every now and then, and we’ve done just that with Realty Income in this article. We see three areas of weakness at Realty Income that could challenge our bullish take on the name: 1) its retail exposure, 2) its financial leverage and arguably unwarranted investment-grade credit rating, and 3) the current rising interest rate environment. Perhaps the most compelling component of the bear case on Realty Income is its massive net debt position and present value of future dividend liabilities that dwarf its annual operating cash flow. The REIT business model isn’t as attractive as many make it out to be.