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Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Resetting Your Mental Model

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Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Our Reports on Stocks in the Specialty Retailers Industry

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Images Source: Mike Mozart (Home Depot, Lowes) Structure of the Specialty Retailers Industry The specialty retail segment is fragmented, highly competitive, and economically-sensitive. The group covers a broad array of businesses and is dominated by retailers with large brick-and-mortar store footprints. Though some constituents may be insulated from e-commerce competition, others risk obsolescence as product distribution moves to digital means, and online retailers offer lower prices for identical goods and services. We’re fairly neutral on the structure of the industry, though some constituents will inevitably face secular and permanent declines. For coverage of firms in the Specialty Retailers Industry, please click here. 

Best Buy’s Rebound Continues

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Image Shown: Best Buy Co Inc has staged an impressive rebound over the past few years. This rebound was aided by significant investments in its digital presence, recognizing the core markets Best Buy wanted to target, and ultimately comparable store sales growth.  By Callum Turcan On November 26, Best Buy (BBY) reported third quarter earnings for its fiscal 2020 (three month period ended November 2, 2019) that beat both top- and bottom-line consensus estimates. Even better, Best Buy raised its guidance for fiscal 2020, largely on the back of stronger than expected same-store sales growth. Best Buy’s update helped send shares of BBY over our fair value estimate of $76 per share, and if this outperformance is sustained, the retailer … Read more

Berkshire Hathaway Invests in RH, a Quality Company in Our View

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Image Shown: RH now counts Berkshire Hathaway Inc as a shareholder, which saw shares of RH initially spike up on the news. By Callum Turcan In a recent regulatory filing, Berkshire Hathaway Inc (BRK.A) (BRK.B) announced it had acquired a ~$0.2 billion stake in upscale home-furnishings company RH (RH), formerly known as Restoration Hardware Holdings, by initiating a position in the company’s equity. Please note RH does not pay out a common dividend at this time, indicating Berkshire Hathaway is seeking capital appreciation with this investment. Additionally, RH’s fiscal 2018 ended on February 2, 2019. Business Overview As of February 2, 2019, RH operated 86 galleries and showrooms across the US, Canada, and the UK. That includes galleries highlighting offerings … Read more

Valuentum Stock Screeners

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This article was sent to members via email December 29. That email can be accessed at the link that follows this article. By Brian Nelson, CFA Hi everyone, I wanted to provide an update with respect to Valuentum’s stock screeners. We believe our stock screeners are among the most robust when it comes to providing forward-looking data, or data that is important with respect to the investment decision-making process. We publish screens in each of the monthly newsletters, but we also provide a basic weekly screener for download on the left column of the website, “Download Weekly Stock Screener (xls) — login required.”   We also have other products. The more robust DataScreener, for example, is part of the quarterly Financial … Read more

Market Mayhem — Alerts for Members

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During these extremely volatile times, it’s important to stay focused. On December 15, we informed all of our members to “Pay Attention.” Shortly thereafter, we notified members of the potential for a stock market technical breakdown. This morning, we offered a pre-market briefing about the importance of thinking about portfolio protection. For Best Ideas Newsletter and Dividend Growth Newsletter members: http://campaign.r20.constantcontact.com/render?preview=true&m=1110817109903&ca=e2406cd6-c113-4344-8731-493f33fc44a4&id=preview For High Yield Dividend Newsletter members: http://campaign.r20.constantcontact.com/render?preview=true&m=1110817109903&ca=b3ba530f-38b3-489a-ac96-2961dca89c6b&id=preview For Exclusive members: http://campaign.r20.constantcontact.com/render?preview=true&m=1110817109903&ca=ba6d90c0-4433-48b2-9b8a-aac4ddf9006e&id=preview We’re here for any questions. Please just let us know how we can help! Kind regards, Brian Nelson, CFA  brian@valuentum.com

Retail Margins Weighed Down by Labor, Transportation Costs

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Image Source: Mike Mozart Selling pressure across retail came after several notable operators reported earnings November 20. Let’s take a look at what is driving investor reaction within the space. By Kris Rosemann A number of high profile retailers (XRT) reported earnings before the open November 20, and selling pressure ensued due in large part to margin weakness across the space. Higher transportation and wage costs were common themes, but top-line performance held solid for the group, generally speaking. A number of retailers from a variety of segments within the sector are feeling the damage to sentiment from the flurry of reports as the implications of the margin pressures are not expected to be unique to those specific retailers that reported … Read more

Dividend Increases/Decreases for the Week Ending November 9

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Below we provide a list of firms that raised their dividends during the week ending November 9. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Aaron’s (AAN): now $0.035 per share quarterly dividend, was $0.03. Air Lease (AL): now $0.13 per share quarterly dividend, was $0.10. AmerisourceBergen (ABC): now $0.40 per share quarterly dividend, was $0.38. Assurant (AIZ): now $0.60 per share quarterly dividend, was $0.56. Atmos Energy (ATO): now $0.525 per share quarterly dividend, was $0.485. Atlantica Yield (AY): now $0.36 per share quarterly dividend, was $0.34. Black Hills (BKH): … Read more

Valuentum’s Weighted Average Cost of Capital (WACC) Distribution

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The weighted average cost of capital is one of the most subjective measures in corporate finance, but it is also one of the most important ones. “The most important item over time in valuation is obviously interest rates…If interest rates are destined to be at low levels…It makes any stream of earnings from investments worth more money. The bogey is always what government bonds yield….Any investment is worth all the cash you’re going to get out between now and judgment day discounted back. The discounting back is affected by whether you choose interests rates like those of Japan or interest rates like those we had in 1982…When we had 15 percent short-term rates in 1982, it was silly to pay … Read more