Valuentum Exclusive Analysis for the Discerning Investor

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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!

Oct 10, 2022

Best Idea Vertex Pharma Outperforming in 2022
Image Shown: Shares of Vertex Pharmaceuticals Inc, an idea included in our Best Ideas Newsletter portfolio, have performed incredibly well year-to-date through October 2022. Vertex Pharma’s performance this year has been stellar, and its financial position is rock-solid. The company has ample financial firepower to invest heavily towards commercializing its existing drug development pipeline and is well-positioned to ride out the numerous exogenous shocks seen of late (inflationary pressures, geopolitical tensions, and the increasing likelihood of a global recession in the near term). We continue to like shares of VRTX in the simulated Best Ideas Newsletter portfolio.

Aug 19, 2022

Nelson: The 16 Most Important Steps To Understand The Stock Market
Image Source: Tim Green. We outline the '16 Most Important Steps to Understand the Stock Market.' We think it's important to take a read of these key stock market tenets when things are going great -- and perhaps even more important when things aren't going your way. This continues to be a working document.

Nov 3, 2021

Large Cap Growth Has More Room To Run
“The stylistic area of large cap growth has been one of our favorite areas because of the strong net cash rich, free cash flow generating, secular growth powerhouses that make up much of the space. The image is a rundown of the key Valuentum statistics for the top 15 holdings of the Schwab U.S. Large Cap Growth ETF (SCHG). We believe where large cap growth goes, so does the broader market, considering the hefty weightings of some of these stocks in other broad-based indices. Based on the high end of our fair value estimate range for this group of bellwethers, the broader U.S. markets still have room to run, to the tune of 7%+, despite the many highs already reached during 2021. Though traditional valuation multiples may seem stretched by most measures, many market bellwethers have huge net cash positions and tremendous free cash flow growth potential. We expect the equity markets to continue to be led by large cap growth.” – Brian Nelson, CFA

Jun 14, 2021

Vertex Pharma Still Extremely Healthy Even After VX-864 Disappointment
Image Shown: Vertex Pharma has a huge net cash position on the balance sheet offering it tremendous financial flexibility. Image Source: Vertex Pharma. We like Vertex Pharma as our speculative biotech idea in the Best Ideas Newsletter portfolio, albeit as a small allocation. The company has solid revenue support with its treatments for cystic fibrosis, an extremely healthy net-cash-rich balance sheet, and tremendous free cash flow generating capacity as it advances its pipeline and grows its relationship with gene-editing firm CRISPR Therapeutics. As an idea within the context of a well-diversified equity portfolio, Vertex Pharma continues to make the cut. We still like shares.

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.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Jan 24, 2021

Best Idea Vertex Pharma Is an Intriguing Biotech Play
Image Shown: A snapshot of Vertex Pharmaceuticals Inc’s approved therapeutic offerings and its drug pipeline. Image Source: Vertex Pharmaceuticals Inc – January 2021 IR Presentation. Vertex’s market leading position in the cystic fibrosis ('CF') therapeutics space underpins our expectations that its free cash flow will grow at a brisk pace going forward (supported by the potential for the company to expand into new markets and the potential to grow the application of its CF portfolio). We also like Vertex’s exposure to gene therapies via its partnership with CRISPR Therapeutics. Vertex’s existing drug pipeline is decent, and the biotech has the ability to use its net cash position to bulk up its drug pipeline even further if needed (through a strategic partnership, acquisition, purchase of drug development rights, etc.). Though we generally don't get too excited about biotech plays given their speculative nature, the difficulty in predicting the success of drugs in their pipeline, and the potential for shareholder dilution via new equity issuance, Vertex’s financial position is rock-solid, its outlook is bright, and we like having exposure to the company in the Best Ideas Newsletter portfolio.

Jun 1, 2020

June Dividend Growth Newsletter & Intrinsic Value Investing
"But how, you will ask, does one decide what [stocks are] "attractive"? Most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth,"...We view that as fuzzy thinking...Growth is always a component of value [and] the very term "value investing" is redundant." -- Warren Buffett, Berkshire Hathaway annual report, 1992

Oct 12, 2017

An Overview on Valuing Junior Biotech Companies -- Does Clovis Fit the Bill?
The biotech industry remains one of the most fascinating yet perplexing industries for investors. Anecdotes of the entry-stage biotech with a home-run new therapy are often romanticized, but the reality is the vast majority of molecules fail in various stages of clinical testing.  Due to the boom-bust nature of the industry, many are wary of investing in the space, and traditional valuation metrics are not as useful due to a large number of such speculative entities being in the pre-revenue stage. With this in mind, let’s take a glimpse into our thought process when evaluating upstart biotech companies.