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FAQ: How Is Your Best Ideas Portfolio Doing This Year?

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At Valuentum, we task ourselves with a tall order. While most investment newsletters compare themselves to a market benchmark, we go one step further. We want to deliver positive returns to you, our subscriber, year after year, in addition to outperforming the market benchmark. Below, we outline a table that shows the outperformance we provided to our members since the time they joined.  So, for example, if you joined as a member on April 13, 2012 our Best Ideas portfolio has offered 3.8 percentage points of outperformance. Or, if you joined on July 13, 2011, our Best Ideas portfolio has offered 22 percentage points of outperformance. Importantly, did you know that, according to Advisor One, only 13% of hedge funds are beating the S&P … Read more

Alcoa Beats Estimates; Waiting for Global Growth

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Integrated aluminum company Alcoa (click ticker for report: ) kicked off earnings season Tuesday afternoon, reporting a surprise profit for the third quarter. Revenues fell 9% year-over-year to $5.8 billion, which was stronger than consensus estimates. Earnings increased to $0.03—adjusted for one-time items—down from $0.15 per share during the same period last year, but a few cents better than the consensus expected. Perhaps the most unusual fact about the firm’s revenue growth was that volumes remained relatively strong despite fears of a global slowdown. Weakness came from pricing, as realized alumina prices fell 17% and realized metal prices dropped 20%. CEO Klaus Kleinfeld noted that the supply/demand situation for aluminum remained fairly balanced, with inventories declining. On its conference call, … Read more

Stay the Course: Alcoa’s 1Q Results Support the Overweight Aerospace Position in Our Best Ideas Portfolio

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Alcoa kicked off first-quarter earnings season with a solid report. Despite views that first-quarter earnings growth will be meager and almost negligible absent Apple (AAPL), we strongly disagree. We expect continued strong performance out of the cyclical aerospace sector coupled with improving earnings from the energy firms levered to oil. Alcoa, for example, posted $0.09 in earnings per share during the period versus consensus expectations of a $0.04 per share loss. But we had been expecting the earnings beat from the aluminum giant, and our fair value estimate for Alcoa remains unchanged following the report. We view Alcoa’s report more important for interpreting how certain end markets are performing than anything else. With that said, Alcoa reported year-over-year revenue growth … Read more

Alcoa Posts Weak Fourth-Quarter Results, Will Focus on Preserving Cash Balance in 2012

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Similar to the third quarter, Alcoa (AA) kicked off fourth-quarter earnings season with a wimper. The aluminum giant posted a fourth-quarter loss on charges associated with cutting high-cost smelting capacity, lower aluminum prices, and general market weakness. We continue to be comfortable with our fair value estimate and do not expect to make any changes to it at this time. Revenue fell 7% sequentially thanks to weakness in Europe and weak alumina and aluminum pricing, but increased 6% from the same period a year ago. Revenues in packaging, industrial products, and building and construction each fell at a mid-to high-teens pace on a sequential basis, with only the aerospace and industrial gas turbine markets revealing continued growth. On a year-over-year … Read more

Alcoa Cuts Smelter Capacity on Reduced Aluminum Prices

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On Friday, aluminum-giant Alcoa (AA) announced that it would reduce system capacity by 12% to lower its cost structure in the wake of lower aluminum prices. We’re not surprised by the news as the firm’s third-quarter performance (click here), released in October, was among the worst reports during earnings season. Our fair value estimate remains unchanged for Alcoa. Specifically, Alcoa will curtail roughly 531,000 metric tons of global smelting capacity via permanent closure of its smelter in Alcoa, Tennessee, and two of its idled potlines in Rockdale, Texas. In additional to these closures (which account for about 291,000 metric tons), the firm will curtail an additional 240,000 metric tons in the “near future.” Aluminum prices have dropped almost 30% since … Read more

Alcoa’s Results Disappoint; We’d Remain on the Sidelines

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Alcoa’s third-quarter earnings missed expectations horribly Tuesday, or by over 30%. Income from continuing operations came in at about $0.15 per share, while the Street was looking for $0.22 — and this estimate had come down significantly in recent weeks. We are maintaining our $11 fair value estimate for Alcoa and still believe that a good entry point is below $6 per share for the company, as we outline in our equity research report. Though this means Alcoa has to drop significantly from today’s levels, we think the application of a sufficient margin of safety and patience are two reasons for the meaningful outperformance of our Best Ideas Newsletter. Alcoa’s revenue jumped over 20% on a year-over-year basis in the quarter, but fell 3% sequentially … Read more

ICYMI — Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?

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President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report. Summary Make sure you review Value Trap on Amazon. Do so here. We think those that bought equities near the bottom of this swoon may be looking to take profits at present levels. The market is currently reflecting an 80%-85% probability of a return to normalcy before 2021, which we believe is too high at this time. Our main concern is that government … Read more

VBI Ratings Not as Impressive As We Would Have Liked in 2022

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Image: How the VBI rating system has ranked equities so far this year. By Brian Nelson, CFA At Valuentum, we use the Valuentum Buying Index (VBI) to source ideas into diversified simulated newsletter portfolios, and the VBI may be most applicable to the simulated Best Ideas Newsletter portfolio, where we generally like to include ideas when they register a high VBI rating and remove them when they register a low VBI rating. We always use the VBI in a portfolio setting and never by itself. But what about the Valuentum Buying Index ratings, themselves? How did they “perform” during 2022 in one of the worst years for stock market investors in history? Well, not as spectacular as we would have … Read more