AMZN

Capital Spending a Key Headwind to Broader Markets in 2022

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  The undercurrents of the market in 2022 aren’t as strong as we would like, with the Federal Reserve expected to tighten soon and capital spending expected to increase materially, but we continue to like stocks for the long run and don’t see any reason to make any changes to the newsletter portfolios at this time in light of these observations. By Brian Nelson, CFA One of the biggest themes in 2022 is the amount of money companies will spend in capex (“capital expenditures”). A key reduction to net cash flow from operations to arrive at traditional free cash flow is capital expenditures, and we’re seeing some of the largest companies spend aggressively to the detriment of internal free cash … Read more

Don’t Throw the Baby Out with the Bathwater

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Image: Erica Nicol Takeaways: Junk tech should continue to collapse, but the stylistic area of large cap growth and big cap tech should remain resilient. Moderately elevated levels of inflation coupled with interest rates hovering at all-time lows isn’t a terrible combination. In fact, it’s not bad at all. The markets are digesting the huge gains of the past few years so far in 2022, and the excesses in ARKK funds, crypto, SPACs, and meme stocks are being rid from the system. Our best ideas are “outperforming” the very benchmarks that are outperforming everyone else. The BIN portfolio is down 6.4% and the DGN portfolio is down 3.2% year to date. The SPY is down 7.8%, while the average investor … Read more

We Remain Bullish on Disney’s Capital Appreciation Upside Potential

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Image Shown: Shares of The Walt Disney Company have shifted lower over the past month, though are still bullish on its capital appreciation upside. Our fair value estimate sits at $192 per share of Disney. By Callum Turcan The Walt Disney Company (DIS) reported fourth-quarter earnings for fiscal 2021 (period ended October 2, 2021) on November 10 that missed consensus top- and bottom-line estimates. While the company’s ‘Disney Parks, Experiences and Products’ segment (includes its theme parks and resorts operations) staged an impressive turnaround last fiscal quarter, its ‘Disney Media and Entertainment Distribution’ segment (includes its video streaming businesses) grew at a slower pace than expected. Shares of Disney sold off after its latest earnings report, though we remain confident … Read more

ICYMI: The PayPal Wave Recedes, We Still Like Shares

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This article was originally published November 10, 2021. The fair value estimate has been updated in this version. Video: PayPal By Brian Nelson, CFA We knew something wasn’t quite lining up at digital-payments provider PayPal (PYPL) when the rumor mill started to turn with reports it was interested in scooping up Pinterest (PINS) for a pretty penny. PayPal has since put to rest rumors about buying Pinterest, but it left investors with a sour outlook when it issued third-quarter 2021 results November 8. Though the market wasn’t happy with the forecast for the fourth quarter of 2021 and into 2022, the company continues to grow revenue at a robust pace, and we expect several key initiatives to drive sustainable top-line … Read more

Hard Work and the Trust That Binds

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Image Source: Terry Johnson By Brian Nelson, CFA We’ll have our traditional Valuentum Weekly email coming out on Sunday, and I’m excited to say our team is putting the finishing touches on our technology industry update, so we’ll have a whole bunch of fresh reports for you to look at Sunday evening/Monday morning. It’s easy to forget how much we’ve been through the past two years. Often, we forget how helpful the warning that markets were going to crash was the weekend before they did on February 22, 2020, “Is a Stock Market Crash Coming? – Coronavirus Update and P/E Ratios,” how we thought dollar-cost-averaging made sense at the bottom in March 2020, and how we went “all-in” in April … Read more

Large Cap Growth Has More Room To Run

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“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 … Read more

High-Yield Idea CyrusOne Considers Selling Itself

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Image Shown: Shares of CyrusOne, an idea included in our High Yield Dividend Newsletter portfolio, are on a modest upward climb of late. The data center real estate investment trust (‘REIT’) is reportedly considering putting itself up for sale, though we like the REIT’s income generation upside regardless of whether a sale does materialize as its outlook continues to improve after posting stellar performance during the first half of 2021. By Callum Turcan Reportedly, CyrusOne (CONE) is actively exploring a potential sale according to Reuters. We include shares of CONE as an idea in the High Yield Dividend Newsletter portfolio (more on that here). The data center real estate investment trust (‘REIT’) has experienced significant turnover in its top ranks … Read more

Markets Look Vulnerable, Adding “Protection”

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Image: The S&P 500 (SPY) and corresponding 50-day (green), 100-day (purple), and 200-day moving averages (red). We expect the SPY may have to “correct” to the 200-day moving average, or about $412-$413 per share before it finds its footing. Self-inflicted wounds the past several weeks have altered the market’s sentiment for the worse, and we don’t think the selling is done yet. To read the email, please click here. — Hi everyone: — Volatility has picked up, and options trading is all the rage. — The markets are under pressure again this morning, and we’re not wasting any time to add put option “protection” to both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. The last time we added … Read more

Facebook’s Stock Sell Off Explained

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Image: Facebook’s free cash flow generation has been resilient in the face of prior iOS updates, and we think it will continue to grow rapidly in the future. Source: Facebook. By Brian Nelson, CFA We never like to see a 10-rated stock sell off, even if it’s up more than 30% so far this year and up over 140% since it registered a 10 on the Valuentum Buying Index in January 2019, but that’s what we’ve been closely following with Facebook (FB). The stock experienced similar selling pressure during the summer of 2018, and while we’re huge fans of this underpriced tech giant in the long run, we think shares may face more selling pressure in the near term. Nonetheless, … Read more

The Investment Case for More Gender Diversity

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Image: The Impact Shares’ YWCA Women’s Empowerment ETF (WOMN) has trounced the S&P 500 since inception, while the SPDR SSGA Gender Diversity Index ETF (SHE) has bested the quantitatively-hailed small cap value ETF over the same time period. By Valuentum Analysts There has been a plethora of research over the years regarding the value of diversity on teams, in corporate boardrooms, and across asset management. The CFA Institute defines diversity as “the spectrum of human attributes, perspectives, identities, and backgrounds,” and notes that “the discussion around motivations for pursuing diversity in investment management often revolves around two main areas: ‘the business case for diversity’ (i.e., with more diverse perspectives, business outcomes will improve) and ‘because it is the right thing … Read more