Valuentum Exclusive Analysis for the Discerning Investor

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Mar 11, 2024

How Some Members Use Valuentum’s Investment Services
We serve a wide variety of investors, including dividend growth investors, value investors, and pure Valuentum investors, among others. Many different types of investors and professionals use our research and financial analysis in a whole host of applications from individual stock-selection to the evaluation of closed-end funds to an overlay in a money-management setting and beyond. The Best Ideas Newsletter portfolio seeks to find stocks that have good value and good momentum characteristics and typically targets capital appreciation potential over a longer-term horizon. The Dividend Growth Newsletter portfolio seeks to find underpriced dividend growth gems that generate strong levels of free cash flow and have pristine, fortress balance sheets, translating into excellent Valuentum Dividend Cushion ratios. The High Yield Dividend Newsletter portfolio seeks to find some of the highest-yielding stocks supported by strong credit profiles and solid business models, but not always robust traditional free cash flow. Ideas in this newsletter offer higher-yielding opportunities, but also much higher capital and income risk. We also offer a full suite of products to financial advisers (gold level) that range from a more extensive Excel-based screening tool (the DataScreener) to 'Ideas' and 'Dividend' publications that are released on a quarterly basis. Our research product includes hundreds of stock reports, fair values, fair value ranges, associated commentary, as well as dividend reports with Valuentum Dividend Cushion ratios and expected dividend growth rates. Silver and gold-level members can add the Valuentum Exclusive or additional options commentary/ideas to their plans. The Exclusive publication is a part of the institutional (platinum) level membership.

Feb 11, 2022

Dividend Increases/Decreases for the Week February 11
Let's take a look at companies that raised/lowered their dividend this week.

Jan 11, 2022

Valuentum’s Theses on Best Ideas Chevron and Exxon Mobil Playing Out
Image Shown: Shares of Chevron Corporation (the green/red bars) and Exxon Mobil Corporation (the blue/yellow bars) have been on a nice upward climb over the past six months with room to run higher as investors are rotating into energy firms in a big way. Raw energy resources pricing has surged higher during the past year with room to run. The global energy complex is on the rebound as demand for crude oil and refined petroleum products is steadily recovering from the worst of the coronavirus (‘COVID-19’) pandemic. As demand for electricity and heating needs held up well during the pandemic, liquified natural gas prices (‘LNG’) put up a strong year in 2021 and remain elevated. The OPEC+ cartel is committed to slowly phasing out its crude oil supply curtailment agreement first enacted in 2020, effectively limiting growth in global oil supplies at a time when demand is rebounding at a brisk pace. We view the near-term outlook for the global energy complex quite favorably and have been pounding the table on this issue for some time. Back on June 27, 2021, we added Chevron Corp and Exxon Mobil Corp as ideas to both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios and highlighted these portfolio changes. Shares of CVX and XOM yield a juicy ~4.3% and ~5.1% as of this writing, respectively. Recently, shares of both CVX and XOM have started shifting higher, and in our view, this is just the beginning of a strong cyclical recovery. We also recently added Chevron and Exxon Mobil as ideas to the High Yield Dividend Newsletter portfolio, and highlighted two of our favorite midstream master limited partnerships (‘MLPs’) in that publication as well. Our fair value estimate for Chevron sits at $140 per share and the high end of our fair value estimate range sits at $175 per share, while CVX is trading at ~$127 as of this writing. Our fair value estimate for Exxon Mobil sits at $92 per share and the high end of our fair value estimate range sits at $122 per share, while XOM is trading at ~$71 per share as of this writing. As investors continue to rotate into energy firms, we expect that the stock prices of Chevron and Exxon Mobil will continue converging towards our estimate of their respective intrinsic values.

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 25, 2021

ALERT: Bull Raids, Short Squeezes and Highly Unusual Market Activity
Image: Shares of GameStop have been on an irrationally wild ride recently driven by what looks to have been an orchestrated and highly unethical (and perhaps illegal) short squeeze on the stock. According to some reports, during the pre-market session January 25, GameStop’s shares were up ~80%, and turned red during the trading session, with no fundamental news.In late 2018, Valuentum published Value Trap, a book that warned to all that would heed its warning that a collapse in the traditional quant value factor was coming and that excessive volatility in the markets caused by price-agnostic trading--or those that aren’t paying attention to fair value estimate calculations--would only build and build to eventually reach extreme and irrational levels. The book, while hugely successful winning award after award, was largely ignored by the media, despite our best efforts to get the word out. Now, the chickens are coming home to roost.

Jan 21, 2021

ICYMI: Valuentum's Brian Nelson on the Latest Howard Marks' Memo: "Something of Value"
Valuentum's President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks' latest memo, "Something of Value," January 11, 2021.

Nov 16, 2020

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process
With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company's revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There's a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Aug 14, 2020

Our Thoughts on Chevron Buying Noble Energy
Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation. On July 20, Chevron Corp announced it was acquiring Noble Energy through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping in mind the firm had approximately 1.85 billion shares outstanding on a weighted-average diluted basis as of the second quarter of 2020. The deal is expected to close during the fourth quarter of this year and is forecasted to generate $0.3 billion in annualized run-rate cost synergies one year after closing.

Jun 16, 2020

Exxon Mobil Puts on a Brave Face
Image Source: Exxon Mobil Corporation – November 2019 Guyana IR Presentation. Near-term oil prices and most importantly, the oil price futures curve, have improved materially since just a couple of months ago when it looked like the sky was falling. For the first time ever, WTI turned negative in April 2020 for physical deliveries due May 2020 of light sweet oil to Cushing, Oklahoma, as storage options were limited (and arguably, many speculators had jumped into the market not fully aware of the risks they were taking on). Exxon Mobil Corp has seen its share price recover considerably since the drop, though we caution that management’s commitment to the dividend will prove a hard task if things do not improve materially in the short-term. As of this writing, near-term futures for WTI and its international counterpart Brent are trading near $40 per barrel. In the face of COVID-19, low raw energy resource prices (Exxon Mobil’s upstream operations form its largest single business segment), and subdued demand for refined petroleum and petrochemical products (from gasoline to plastics) have significantly weakened Exxon Mobil’s cash flow profile. The ongoing coronavirus (‘COVID-19’) pandemic has shaken energy markets to their core in ways we have not seen ever before. Shares of XOM yield ~7.4% as of this writing. We give Exxon Mobil a Dividend Cushion ratio at 0.2, though its Dividend Safety rating is “GOOD” given the company’s ability to tap capital markets, especially debt markets as the oil giant carries high quality “A-rated” investment grade credit ratings. There is a limit to how much debt Exxon Mobil can take on to cover its dividend obligations, however, which we will cover in greater detail in this article.

Apr 13, 2020

Historic Oil Deal Reached
Image Source: Chevron Corporation - March 2020 Security Analyst Meeting Presentation. Over the Easter holiday weekend, members from the Organization of Petroleum Exporting Countries (‘OPEC’), non-OPEC members that are part of the OPEC+ group (countries that in the recent past have joined forces with OPEC to curtail global oil supplies in a formal manner), and non-OPEC members outside of the OPEC+ group such as Brazil, Canada, and the United States came to an agreement to cut their collective oil output by north of 10 million barrels per day. Global oil and other raw energy resource prices have been simply demolished year-to-date due to a combination of demand destruction from the ongoing coronavirus (‘COVID-19’) pandemic and the emergence of a price war between Saudi Arabia and Russia. Please note that oil demand destruction due to the “cocooning” of households (and the related drop off in refined petroleum product demand from automobiles, airplanes, etc.) may be as high as 35 million barrels per day according to some analysts, an enormous figure that’s resulting in major stockpile buildups all over the world. Other analysts don’t necessarily see the level of demand destruction as that high (projections are being updated constantly); however, they are still calling for a drop off in demand that’s in the ten(s) of millions of oil barrels per day range (at least in the short-term, depending on how long the pandemic lasts). Even if this agreement is effectively implemented, that won’t result in oil prices (and other raw energy resource prices) returning to pre-COVID-19 levels in the short/medium-term, in our view, but will make emerging from this pandemic an easier task given that global oil storage capacity is nearing its limit. As of this writing on April 13, oil prices are trading up modestly but are still down by well over 50% year-to-date.