Valuentum Exclusive Analysis for the Discerning Investor

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Jan 15, 2021

Steris Ties the Knot with Cantel Medical
Image Shown: Cantel Medical Corp is getting bought out by Steris PLC through a cash-and-stock deal. The image up above highlights Cantel Medical’s promising long-term growth outlook, though its performance in 2020 was subdued due to headwinds created by the coronavirus (‘COVID-19’) pandemic. In our view, Steris was attracted to Cantel Medical’s improving outlook (the latter started to stage an impressive rebound in the second half of calendar year 2020) and the ability for the combined firm to generate substantial synergies. Image Source: Cantel Medical Corp – December 2020 IR Presentation. On January 12, Steris PLC announced it had reached an agreement with Cantel Medical to buy the company through a cash-and-stock deal worth ~$3.6 billion (~$4.6 billion when including the assumption of debt and convertible notes) that valued CMD at $84.66 per share based on the closing price of STE on January 11. The deal includes $16.93 in cash and 0.33787 share of STE for each share of CMD. Steris is heavily focused on sterilization products for hospitals and laboratories (it also provides related services). The company intends to fund the cash component of its deal for Cantel Medical with new debt issuance and committed bridge financing, which will also be used to refinance most of Cantel Medical’s existing debt. Shares of Cantel Medical have advanced ~38% (as of the end of normal trading hours January 13) from when we first wrote about the idea back in early December 2020. Even before the acquisition was announced, investors started to warm back up to the company due to expectations that the headwinds that held the firm back last year would start to dissipate this year. In our view, Steris’ acquisition of Cantel Medical is highly complementary. It appears Steris was optimistic that Cantel Medical’s long-term growth outlook remained bright even though the firm had a rough 2020.

Nov 11, 2020

Pfizer/BioNTech Vaccine Not a Catalyst for Portfolio Changes
Image: BioNTech. Next Generation Immunotherapy Presentation, October 2020. The world received great news this week that the days of this terrible COVID-19 pandemic may finally be numbered. On November 9, Pfizer and BioNTech announced that “their mRNA-based vaccine candidate, BNT162b2, against SARS-CoV-2 has demonstrated evidence of efficacy against COVID-19 in participants without prior evidence of SARS-CoV-2 infection.” Our thesis on the inevitable successful development of a vaccine for COVID-19 never centered on which pharma/biotech giant would be the first to develop one, but rather our thesis has always been focused on the large number of shots on goal (the large number of vaccine candidates in development, and the high probability that at least one would be effective). We’re sticking with some of the best companies out there in the newsletter portfolios, however, and we’re reiterating our fair value estimate range of 3,530-3,920 on the S&P 500 (established June 12), which we derive as 18-20x multiple on pre-pandemic 2021 earnings of $196. The S&P 500 stands within the range at ~3,560 today.

Sep 26, 2020

Update on Johnson & Johnson
Image Shown: An overview of Johnson & Johnson’s expectations for fiscal 2021 provided during its second quarter of fiscal 2020 earnings report. We continue to like shares of Johnson & Johnson as a top-weighted holding in our Dividend Growth Newsletter portfolio. Image Source: Johnson & Johnson – Second Quarter of Fiscal 2020 Earnings IR Presentation. Johnson & Johnson is a top-weighted holding in our Dividend Growth Newsletter portfolio, and we continue to be big fans of the healthcare and consumer staples giant. The company recently published some key updates that we wanted to draw our members’ attention towards. Before we begin, please note that Johnson & Johnson is near the front of the pack when it comes to developing a potential coronavirus (‘COVID-19’) vaccine. Should Johnson & Johnson prove successful, global health authorities would be better able to combat the severity of the COVID-19 pandemic.

Aug 19, 2020

Update: COVID-19 Vaccine Race
Image Source: Johnson & Johnson – Second Quarter of Fiscal 2020 IR Earnings Presentation. The ongoing coronavirus (‘COVID-19’) pandemic has devasted the global economy (though things are starting to improve) and has fundamentally altered daily human life. According to a draft report from the World Health Organization (‘WHO’), there were 29 COVID-19 vaccine candidates undergoing clinical trials as of August 13 along with 138 other candidates undergoing preclinical evaluation. It is a race against the clock. Unfortunately, as of this writing on August 18, there have been ~170,000 COVID-19-related deaths in the US alone according to data from the US Centers for Disease Control and Prevention (‘CDC’). We are optimistic that one of the many “shots on goal” will end up proving successful. The US launched Operation Warp Speed to accelerate the development of a COVID-19 vaccine, which involves providing funding to companies with promising vaccine candidates. Furthermore, please note that major economies around the world have adjusted their rules and procedures to allow for multiple phases of clinical trials to be conducted concurrently. Before getting into some of the most promising COVID-19 vaccine candidates, we hope everyone, their loved ones, and their family members are staying safe out there as we ride out the pandemic.

Jul 27, 2020

HCA’s Latest Results Indicate Healthcare Providers Are Holding Up Better Than Expected
Image Source: HCA Healthcare Inc – Second Quarter of 2020 Earnings Press Release. The ongoing coronavirus (‘COVID-19’) pandemic has had a devastating impact on the financial performance of healthcare providers (operators of hospitals and other medical facilities) due to the decline in the number of elective surgeries performed. Please note elective surgeries tend to be more lucrative for healthcare providers than the other services they provide, generally speaking. Elective surgeries in many US states were indefinitely postponed when the pandemic first hit. In late March, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (‘CARES Act’) which included $100 billion in emergency funding for hospitals and healthcare providers to mitigate the financial blow from the pandemic and enable the US healthcare system to continue functioning as best it can under the weight of the pandemic.

Jul 21, 2020

Johnson & Johnson Beats Estimates and Raises Guidance
Image Source: Johnson & Johnson – Second Quarter of 2020 IR Earnings Presentation. On July 16, Johnson & Johnson reported second quarter 2020 earnings that beat both consensus top- and bottom-line estimates. Most importantly, Johnson & Johnson increased its full-year guidance for 2020 as the firm is well-prepared to ride out the ongoing coronavirus (‘COVID-19’) pandemic, in our view. We continue to like shares of JNJ in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. As of this writing, shares of JNJ yield ~2.7%.

Jun 18, 2020

Recent Events Concerning Johnson & Johnson
Image Source: Johnson & Johnson – First Quarter of 2020 IR Earnings Presentation. We include Johnson & Johnson as a top-weighted holding in the Dividend Growth Newsletter portfolio and as a medium-weighted holding in the Best Ideas Newsletter portfolio. The firm’s Dividend Cushion ratio sits at a solid 2.1 and please note that this forward-looking dividend coverage ratio factors in our expectations that Johnson & Johnson will grow its per share dividend by mid-single-digits annually over the coming years. Johnson & Johnson earns a “GOOD” Dividend Safety rating and an “EXCELLENT” Dividend Growth rating, with shares of JNJ yielding ~2.8% as of this writing. In our view, Johnson & Johnson’s strong balance sheet and high quality cash flow profile provide it with the financial strength to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic with its current dividend policy and financials intact.

May 18, 2020

Excited By COVID-19 Vaccine Candidates
Image Shown: The race is on to find a cure, or better yet a vaccine, for COVID-19. Image Source: Pfizer Inc – First Quarter 2020 Earnings IR Presentation. The race for a COVID-19 cure and vaccine is rapidly evolving with a lot of exciting press releases being put forth. Gilead has taken the lead with a viable treatment, Sorrento is working toward a cure, and it seems most all of big pharma and biotech is racing to find a vaccine, from Johnson & Johnson to Sanofi/GSK and beyond. Though the evaluation of the full data set from a Phase 2 clinical trial means a lot more than the evaluation of a limited set of data from a Phase 1 clinical trial, we think COVID-19 is on the run as modern medicine pushes forward. We’re reiterating our bullish take on the markets today, as we believe that the Fed will do anything and everything to keep this market moving higher, meaning stocks may remain divorced both from economic data and even virus data for some time as they continue to climb. We continue to point to ideas in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio and Exclusive publication. Our top 10 capital appreciation ideas and dividend growth ideas amid COVID-19, respectively, can be found at the following link, “Valuentum's COVID-19 Ideas Have Outperformed Significantly.” As we walk through a ‘who’s who’ as it relates to COVID-19 vaccine candidates, we maintain our view that investors may be facing a “win-win” situation as we outlined in our piece, “Stay Optimistic. Stay Bullish. I Am.” We remain unequivocally bullish on stocks for the long run.

May 8, 2020

ICYMI: Never Been More Bullish Even as Buffett Dumps Airlines
Image Source: IATA. Data Source: McKinsey & Company (IATA). Airlines haven’t been able to earn their estimated cost of capital for as long as we can remember. There have been hundreds of airline bankruptcies since deregulation in 1978. The news may be scary in coming months, and market volatility may elevate again, but we’ve never been more bullish on the longer run. The biggest advantage of an individual investor is something called time horizon arbitrage. As many professionals continue to fear a break below the March 23 lows, we’re focused on how this market absorbs the tremendous and unprecedented stimulus in the coming months and what that means for nominal equity prices in the longer run. It may not happen this month or this year, but we expect lift off as investors race to preserve purchasing power! Our favorite ideas for a portfolio setting remain in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, and High Yield Dividend Newsletter portfolio. Our favorite brand new ideas, released each month, are included in the Exclusive publication.

Apr 16, 2020

Johnson & Johnson Beats Estimates, Adjusts Guidance in Light of COVID-19
Image Source: Johnson & Johnson – First Quarter 2020 Earnings IR Presentation. On April 14, Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Johnson & Johnson increased its quarterly dividend by over 6% sequentially to $1.01 per share which represents the firm’s 58th consecutive annual increase. We view this payout boost in the face of the ongoing coronavirus (‘COVID-19’) pandemic as a sign of management’s confidence in Johnson & Johnson’s future free cash flows, which we appreciate. Shares of JNJ now yield ~2.8% as of this writing at the new annualized payout rate.