ARMH

Update: Analyzing Valuentum’s Economic Castle Index: A Walk Forward Case Study

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This article was originally published February 20, 2020. By Callum Turcan and Brian Nelson, CFA In , the Valuentum team published a paper called The Castle Trumps the Moat which sought to change the conversation around Warren Buffett’s very popular phrase “economic moat” towards one with a more quantitative grounding. The idea behind an economic moat is that companies with such a qualitative attribute should generate stronger returns than those that don’t, at least so the thinking goes, given the ability for these firms to generate competitive advantages for themselves in their respective fields (allowing for these firms to charge relatively higher prices and/or incur lower expenses, resulting in larger profit streams than “non-moaty” companies). There are two things generally … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

New Highs: Intel Makes Splash in Mobile; AIG Scooping Up Underpriced Shares

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At the Computex conference in Taiwan late last week, Best Ideas portfolio holding Intel (INTC) revealed the most energy-efficient processor in history — its Core M line of processors. The goal of the Core M, which is based off of the Core i3, i5, and i7 processors, is to enhance processor performance (with less power consumption) in mobile products, and we think the firm will make a big splash with the new chip. Picture: The first 14nm fanless mobile PC reference design from Intel; it has a 12.5 inch screen that is 7.2mm thin with keyboard detached and weighs 670 grams. The design is based on Intel’s next generation 14nm Broadwell processors. Named the Intel Core M processor, it delivers … Read more

Cisco’s Investor Update Reveals Challenges

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On Thursday, switching and routing giant Cisco (CSCO) hosted its 2013 Financial Analyst Conference, and management’s commentary during the meeting wasn’t encouraging. The firm’s fiscal first quarter 2014 results, released mid-November, had showcased significant order weakness (see here) and commentary on the company’s fiscal first-quarter conference call indicated that the firm did not anticipate material improvement in its order growth during the second quarter, but CEO John Chambers’ reiteration of his view today that emerging markets remain “extremely challenged,” particularly in Brazil and Russia, has sent shockwaves across much of the networking industry. It appears the market had been building in expectations that some order stabilization would occur at this point during the quarter, and Chambers comments may have mitigated … Read more

Cisco’s Outlook Comes up Short; Shares under Pressure

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On Wednesday, networking giant Cisco (CSCO) reported mixed fiscal first-quarter results (ending in October), and the company’s order performance in the period and fiscal second-quarter guidance came up short versus expectations. Revenue in the fiscal first-quarter dropped 2% year-over-year, but non-GAAP net income and earnings per share advanced 11.6% and 10.4%, respectively, from the prior-year period. Non-GAAP diluted earnings per share of $0.53 came in a few pennies better than expected. Net cash from operations advanced to $2.65 billion from $2.47 billion in the year-ago period, while capital expenditures expanded to $315 million from $265 million. Free cash flow was $2.3 billion, or 19.3% of sales (a strong figure). Cash and investments totaled $48.2 billion and short and long-term debt totaled … Read more

Checking In With Intel

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While shares languished throughout 2012, Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Intel (click ticker for report: ) has experienced a solid rebound in 2013, with shares up 21% year-to-date. We have a nice gain on the position in our actively-managed portfolios, and the firm continues to pay out a nice and safe dividend yield (about 3.7%). Our conviction in the significant valuation upside of the firm remains unchanged (the high end of our fair value range is north of $30 per share), and we continue to think fears that Intel would never become a player in the mobile space are completely unfounded. Intel recently received the “Barron’s treatment,” as the financial publication called for shares to double. Though the publication … Read more

Intel Struggles With The PC Market Slumping

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Best Ideas and Dividend Growth Newsletter holding Intel (click ticker for report: ) reported lackluster results Tuesday afternoon. For the first quarter, the firm posted a revenue decline of 3% year-over-year, which was slightly worse than consensus expectations. Earnings were a penny shy of consensus estimates, falling 17% year-over-year to $0.40 per share. Gross margins fell 800 basis points year-over-year to 56%, but the firm maintained its full-year outlook for gross margins of 60%. Ultimately, the market knew not to expect a blowout quarter, as PC sales languish. For the quarter, PC client revenue declined 6% year-over-year to $7.99 billion, but the segment’s operating income decline was steeper, falling 28% year-over-year to $2.5 billion as the firm took large inventory … Read more

Intel Maintains Margins While PC Business Stalls

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Chip-maker Intel (click ticker for report: ) reported better than expected, though still weak, third quarter results Tuesday afternoon. The tech giant saw revenue fall 5% year-over-year to $13.5 billion, which was better than consensus expectations. Earnings per share fell 11% year-over-year to $0.58 per share, which was meaningfully better than the consensus estimate of $0.49 per share. Gross margins remained flat quarter-over-quarter at 63.3%, enabling the company to beat estimates and maintain profitability. Revenue in every region except Europe was down slightly from the previous quarter. Not surprisingly, most of Intel’s weakness came in the PC Client Group, where sales tumbled 8% year-over-year to $8.6 billion, as average selling prices fell 4% and volumes fell 4%. Production remains muted … Read more