AINV

ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

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

What is Risk?

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Image Source: Mike Cohen By Matt Warren Let’s start by talking about what isn’t risk. Risk isn’t easily measured and yet that is what the asset management industry and academia tend to serve up to the average and professional investor alike. You will see the standard deviation of a stock or portfolio, showing how much the value wiggles. You will see beta, which shows how much the value wiggles as compared to the benchmark’s own wiggles. You will see things like the Sharpe and Sortino ratios, which tackle further quantifiable ways to describe risk–and the list of equations goes on and on. Do you know what is a much more difficult question for an asset manager to answer? How much … 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

Join the Conversation on the Market Plunge

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The Valuentum team shares its thoughts on the recent surge in volatility and collapse in interest rates amid a trade and currency war between two of the largest economies in the world, the US and China. No changes to the newsletter portfolios at this time. During the past few days, the US (SPY, DIA) and China (FXI, MCHI) have escalated a trade war, turning it into a currency war, the latter allowing its yuan to drop to lower levels against the U.S. dollar. The US has now labeled China a “currency manipulator,” and China has responded by suspending U.S. agricultural purchases. China is one of the largest buyers of U.S. agricultural goods. The Valuentum team builds on its previous conversation … Read more

In the News: Second-Quarter Earnings Season Marches On

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We like what we saw out of a few industrial names, including Honeywell, Danaher and Dover. We thought Taiwan Semi’s report was okay, and Philip Morris continues to navigate declining cigarette volumes. We include our thoughts on some of the mid-size banks. By Brian Nelson, CFA For those just catching up, please have a read of our introductory second-quarter earnings season piece here. We saw some nice reports from J&J (JNJ) and Abbott (ABT), and while we had some concerns about the core industrial economy in light of Fastenal’s (FAST) and CSX’s (CSX) reports, news from Honeywell (HON), Danaher (DHR), and Dover (DOV) suggest that industrial activity is more likely mixed than outright deteriorating. Honeywell’s second-quarter results, released July 18, … Read more

What About BDCs?

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Business Development Companies, or BDCs, are often considered by dividend investors as a result of their quite sizable dividend yields, as compared to the overall market. In this piece, let’s take a look at how these companies operate and then also compare some important metrics between the various players. First, let’s looks at the below slide from Prospect Capital, which highlights some important differentiating features of BDCs. Image Source: Prospect Capital Investor Presentation Importantly, please know that you will need to consult a tax professional to determine how to treat the various dividend and return of capital from BDCs. Let’s also look at the below graphic from Prospect Capital (PSEC), which highlights the growth in BDCs over the past 10 … Read more

Excerpt: Big Six Banks as a Yield Play?

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An article excerpt from our monthly High Yield Dividend Newsletter. Order the High Yield Dividend Newsletter here. To continue reading… become a member of the High Yield Dividend Newsletter today! —– Banks – Regional and Asset Management: AB, AINV, AMP, ARCC, BCH, BEN, BGCP, BKU, BLK, BMO, BNS, CM, FSIC, ISBC, KKR, LAZ, LM, MAIN, MTB, NABZY, NYB, OCN, PBCT, PFG, PSEC, RY, SBNY, SBSI, STT, TD, VLY, WBK  Banks & Money Centers: AXP, BAC, BBT, BK, C, DFS, FITB, GS, HBC, JPM, KEY, MS, NTRS, PNC, RF, STI, TCF, USB, WFC Related: XLF, KBE, KRE —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. … Read more

Big Bank Roundup, Bank of America Catches Our Eye

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In this article, let’s catch up with how far the big 6 banks in the US have come since the height of the financial crisis exactly a decade hence. We will highlight the improvements in the banking system, some of the key risks, and a few high level thoughts about the individual franchises leading the US banking system. We like Bank of America the most, and we include diversified banking exposure in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. “Both a European bank crisis and/or a Chinese banking and economic crisis would be mutually reinforcing to the downside and a major cause of global deflation.” – Matthew Warren By Matthew Warren When you take a look at the … Read more

Our Report on the Regional Banks and Asset Management Stocks

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Image Source: Carlssa Rogers Structure of the Regional Banks/Asset Management Industry The regional banking and asset management industry is based almost entirely on the confidence of intermediaries and counterparties that make up the building blocks of the financial system. An investment in a bank or asset management firm must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Though we don’t expect one anytime soon given the recent favorable stress-test results of the largest US banks, it’s worth noting that there have been three significant banking crises during the past three decades alone: the savings and loan crisis of the late 1980s/early 1990s; the fall of Long-Term Capital … Read more