Valuentum Exclusive Analysis for the Discerning Investor

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Aug 28, 2024

The Difference Between Speculation and Investment
In this edited video transcript, Brian Nelson, President of Investment Research at Valuentum, discusses the difference between speculation and investment.

Mar 19, 2024

Hasbro Is Down But Not Out, Shares Yield ~5.3%
Image: Hasbro’s shares have faced considerable pressure during the past few years. Hasbro's recently reported fourth-quarter results weren't great and showed revenue declining 23% as it experienced material weakness in its Consumer Products segment (-25%) and Entertainment division (-49%) in the quarter. On an adjusted basis, backing out large impairment charges, the firm’s operating loss came in at $50 million in the quarter, while it recorded adjusted net earnings of $0.38 per share. Hasbro continues to navigate a difficult demand environment for physical toys, but the company’s free cash flow remains robust and was in excess of cash dividends paid during 2023. Shares yield ~5.3% at the time of this writing.

Oct 22, 2023

There Will Be Volatility
Image: An ETF tracking Russell 1000 "growth" stocks has outperformed an ETF tracking Russell 2000 "value" stocks since the beginning of 2021. To us, the market remains hypersensitive to almost every economic data point that hits the wires, and we’re just not going to play that game. The macro headlines and never-ending news flow are what many quant and algorithmic traders are trading on, and to a very large extent, for investors with a long-term horizon, these macro data points just don’t factor into the equation. When valuing equities, we’re always after mid-cycle expectations, not peak or trough performance, so our valuations implicitly embed a "normal" recession. Warren Buffett didn’t become a billionaire buying and selling on macro data points, and volatility is simply to be expected given the proliferation of price-agnostic trading these days. Instead of panicking over higher interest rates, we think investors should view the Fed’s work thus far as future potential dry powder to stimulate both the economy and the markets. Whenever you feel like stocks are no good, have a read of Warren Buffett’s classic piece written during the Great Financial Crisis, “Buy American. I Am.” To us, we still like stocks for the long run. Happy investing!

Dec 4, 2022

Apple iPhone Supply Disruptions Not Likely to Hurt Markets with Overall Holiday Sales Reportedly Strong
Image: Holiday sales are expected to expand ~2.5% in 2022 over very strong growth in 2021 and 2020. Image Source: Adobe. Apple's sales of the iPhone 14 Pro and iPhone 14 Pro Max will come in lower than expected this holiday season due to labor unrest in Zhengzhou, but holiday sales for 2022 overall look fairly solid with Adobe Analytics estimating 2.5% growth over 2021, which, itself, was a fantastic year. A prior warning about holiday sales from Target Corp. appears to have been overblown given the sales strength witnessed during Black Friday and Cyber Monday across the retail landscape this year. It may be too early to say that the markets have definitely bottomed as economic data remains inconclusive, but holiday sales so far in 2022 and an overall resilient job market are giving investors something to cheer about in what has turned into an otherwise loathsome year.

Oct 28, 2022

In the News: META, AAPL, AMZN, RSG, DLR, VRTX, XOM, CVX
Image Source: Valuentum. Readers should expect a substantial reduction in our fair value estimate of Meta Platforms on the basis of materially reduced forecasts of free cash flow. Apple’s calendar third-quarter results were good, considering that many were worried about iPhone 14 demand heading into the report. Amazon’s results support a cautious tone with respect to consumer spending, while we remain bullish on three of our best-performing ideas so far in 2022 – Vertex Pharma, Exxon Mobil, and Chevron. We didn’t see anything in the Republic Services and Digital Realty reports that would warrant any material changes to our theses at this time.

Oct 8, 2022

Microsoft Hinted at Trouble in Calendar Q2 But AMD’s Massive $1 Billion Quarterly Q3 Revenue Miss Spells Big Problems for PC Market; Search and News Advertising Revenue Also Likely Weakening Substantially
Image Source: Fritzchens Fritz. Economic conditions have deteriorated rapidly since Microsoft warned about deteriorating PC market demand in July of this year. AMD’s preliminary third-quarter report announced October 6 showed a massive $1 billion miss relative to prior expectations, and we think this is the beginning of a vicious cyclical downturn in the semiconductor industry, with few immune to the troubles, particularly in light of Apple’s warning about iPhone 14 demand. Further, we think search and news advertising has likely deteriorated since the calendar second-quarter reporting season, too, and this doesn’t bode well for the likes of Alphabet and Meta Platforms. Recent news about the strength of Tiktok and the lack of enthusiasm by Meta Platforms’ insiders that are building the metaverse have us thinking that Meta has turned into a value trap. We won’t hesitate to drop shares if the company’s outlook in its third-quarter report comes up short.

Sep 7, 2022

Post-Mortem on Facebook (Meta Platforms): Apple Crushed Our Thesis
Image: Thesis creep kept us excited about Meta, but we've since trimmed the "weighting" in the simulated Best Ideas Newsletter portfolio. We still like Meta near these technical support levels, but only as a smaller "weighting" in the simulated Best Ideas Newsletter portfolio, as updated August 19. What more can we say--Apple is eating Facebook’s lunch, and the iPhone giant is now advancing with its advertising revenue, too. Apple blew up our thesis on Meta, and that's the long and short of it.

Sep 4, 2022

Video: How Many Stocks Should You Own?
Valuentum's President of Investment Research, Brian Nelson, CFA, explains the importance of diversification, how to think about firm-specific and systematic risk, how many stocks one should own to achieve 90% of the diversification benefits, how to think about active asset allocation versus active equity management, and why diversification is a means to achieve goals, not the goal itself. A content-packed 14-minute video. Don't miss it!

Aug 24, 2022

ICYMI (Aug 19) -- ALERT -- PYPL, META, GOOG, V -- Making Some Big Changes in the Simulated Best Ideas Newsletter Portfolio!
Image Shown: We are very happy with the overall "performance" of the simulated Best Ideas Newsletter portfolio, which is carving out 2.6 percentage points of relative outperformance so far in 2022 on a price-only basis, as shown in the table above. However, we're making some big changes to the simulated newsletter portfolio today on some of our favorite names. Our best ideas continue to be in the simulated Best Ideas Newsletter portfolio, the simulated Dividend Growth Newsletter portfolio, the simulated High Yield Dividend Newsletter portfolio, the simulated ESG Newsletter portfolio, and the Exclusive publication, as well as with our additional options commentary. We're making some big moves in the simulated Best Ideas Newsletter portfolio today! At the moment, the simulated Best Ideas Newsletter portfolio is carving out about 2.6 percentage points of relative outperformance so far in 2022, on a price-only basis relative to the the SPDR S&P 500 Trust ETF. Overall, after some huge years, the simulated Best Ideas Newsletter portfolio is down a modest ~8.6% in 2022, by our estimates. Pretty good, all things considered. That said, the SPDR S&P 500 Trust ETF has bounced right off its 200-day moving average (technical resistance), and we're not going to sit by while the risks to the market this year increase. We remain bullish on stocks for the long haul, of course, but we think incremental alpha may be generated by removing/trimming/adding to some of our winners in the simulated Best Ideas Newsletter portfolio at this time. We're changing our mind on a couple things, too, as any good investor does. [This note was emailed to members August 19.]

Apr 27, 2022

Microsoft Soars, Strong Revenue Growth Continues Unabated
Image Shown: Microsoft Corporation put up a solid fiscal third quarter earnings report and we continue to be big fans of the name. Image Source: Microsoft Corporation – Power Point Earnings Presentation Covering the Third Quarter of Fiscal 2022. On April 26, Microsoft Corp reported third quarter earnings for fiscal 2022 (period ended March 31, 2022) that beat both consensus top- and bottom-line estimates. Shares of MSFT jumped higher by ~4%-5% in afterhours trading on April 26 as investors cheered on the good news and its promising near term outlook. Microsoft’s cloud-oriented products and services were a bright spot in the fiscal third quarter and underpinned its impressive pricing power. The firm was able to stay ahead of inflationary pressures and maintain its strong margins while growing its revenues. We include shares of MSFT as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Our fair value estimate for Microsoft sits at $332 per share, well above where Microsoft is trading at as of this writing, indicating that the company has substantial capital appreciation upside. Additionally, we view Microsoft’s dividend growth trajectory quite favorably due to its rock-solid financial position, bright longer-term growth outlook that is underpinned by secular tailwinds and recent acquisition activity, its pricing power, fortress-like balance sheet, and ability to generate sizable free cash flows in almost any operating environment. Shares of MSFT yield ~0.9% as of this writing.