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Shopping for Income Within Retail in a Digital World

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Image Source: Mike Mozart The 2017 holiday shopping season has shown that e-commerce has never been stronger and it will only continue to grow. But there is still potential for income generation among more traditional retailers. Investors must be tremendously discerning in this area, however, as margin, and ultimately free cash flow, pressures remain prevalent. We like Walmart, Target, Costco as income ideas in retail, but TJX Companies and Best Buy may be worth a look. We’re avoiding the department stores and teen retail like the plague, regardless of their Dividend Cushion ratios. By Kris Rosemann and Brian Nelson, CFA What an incredible time we’re living in. For those that study history, the US’ pressure on other countries like China … Read more

eBay Up 50%+ Since Nelson’s Open Letter to Yahoo CEO

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In February 2016, President of Investment Research at Valuentum penned an open letter to Yahoo’s CEO Marissa Mayer. In it, he said a combination of Yahoo-eBay would be substantially value-creating for shareholders. eBay’s stock has advanced 50%+ since that letter. By Valuentum Analysts We don’t write letters to CEOs often, but when we do, we have good reason. In February 2016, Yahoo (YHOO) had been under major pressure to monetize its stake in Alibaba (BABA), and CEO Marissa Mayer had faced continuous and tremendous criticism during her tenure. Working under the assumption that Yahoo wanted to monetize its stake in Alibaba at that time and put cash to work, President of Investment Research at Valuentum Brian Nelson wrote in an … Read more

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more

Around Retail: Aspirational Brands Battle Consumer Perception

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Summary · After positive data reads in the months of October and November, things may finally be looking up for retail spending, but the impact of discounting looms large for many in the space. There are pockets of weakness and strength. · Aspirational and luxury goods manufacturers and retailers are not only subject to the pressures of the promotional retail environment, but also are subject to additional outside forces such as tourism and brand perception. While not dead, mall traffic has been challenging. · Whether it is next-generation wearable technology, a refined online presence, a reduction in markdown allowances, or an enhanced shopping experience, luxury goods companies continue to invest for sustainable growth. Fossil and Richemont have been caught by … Read more

What You Should Know About MMORPGs

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The Valuentum analyst team talks about the Chinese gaming industry and the financials of Tencent (TCEHY) and Netease (NTES), in particular. Both generate strong free cash flow and have solid balance sheets, but there are myriad risks to consider, too. ~5 mins. Podcast no longer available. Transcript as follows. Chris Araos: Welcome to Valuentum’s podcast. This is Christopher Araos, and joining us today is Brian Nelson and Kris Rosemann. Today, we’re going to talk about the MMORPG landscape in China. Brian? Brian Nelson, CFA: Thanks for that Chris. I think just to give a little bit of background MMORPG stands for massively multiplayer online role-playing (PC-client) games. Wow, that’s a mouthful. These are very, very popular games across the globe … Read more

The “Uninvestable” Twitter and Netflix Buoyed By Takeout Chatter

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By Kris Rosemann and Brian Nelson, CFA At Valuentum, we like slam-dunk, no-brainer investment opportunities–like Microsoft (MSFT) in the mid-$20s before it doubled, or Visa (V) prior to its strong equity price performance in recent years, or even cigarette-maker Altria (MO) in advance of its ongoing march higher since the dawn of the release of the inaugural Best Ideas Newsletter. Our members count on us to use our knowledge of valuation to sort out “investable” stocks from “uninvestable” ones; good stocks with fundamental promise from bad ones built on fantasy outcomes. Benjamin Graham calls what we do “investing,” while he may call readers that dabble in the two highlighted stocks in this piece “speculators.” There is a difference, and it’s … Read more

Getting the Job Done

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By Brian Nelson, CFA The broader stock market has pretty much gone nowhere (not a technical term) since the spring of 2015, and investors are growing impatient. Well, maybe index investors mostly… Lofty earnings multiples on some of the most well-known stocks, Brexit uncertainty and concerns over systemic risk, emerging-market weakness (particularly in China and Brazil), and the list goes on and on as reasons why the markets have been “stuck” – also not a technical term. Long-term investors may not care, but with the broader S&P 500 (SPY) having tripled since the March 2009 panic bottom, they should at least be paying attention, in my view. After all, a haircut of 10%-20% on broader market prices or more wouldn’t … Read more

The Quiet Analyst Speaks

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Image Description and Source: Mailslot for Cantor Fitzgerald, on the top floors of the WTC. The mailslot was located in a post office near the WTC site. The mailslots are with the Smithsonian Institution. Travis Wise. It’s 9pm Sunday, September 11, 2016. The day is a somber one. The 15th year passing of the tragic events of 9/11 were on everyone’s minds, and I can’t help but think specifically of Cantor Fitzgerald. The financial services company’s headquarters were on the 101st-105th floors of One World Trade Center, just a few floors above the impact zone of one of the hijacked airplanes. The firm lost 658 employees, over two thirds of its workforce, more than “any of the other World Trade … Read more

Yahoo! Should Still Buy eBay’s “Free Cash Flow”

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Image Source: eBay According to the latest from CNBC, there are five bidders left for Yahoo’s (YHOO) core business, and it’s very likely the company will make the sale to one of them soon. Many are saying that Verizon (VZ) is the front-runner, but we can’t rule out the buying power of the group led by Quicken Loans’ Dan Gilbert, who has the backing of the Oracle of Omaha himself, Warren Buffett, or a high-ball bid from private equity, perhaps TPG Capital. AT&T (T), Time (TIME), and other private equity giants KKR and Bain Capital might still be in the game as well. We think breaking apart Yahoo! or selling it outright, instead of merging it with eBay (EBAY) isn’t … Read more

Walmart Forms Alliance with Leading Chinese E-commerce Firm

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Image Source: Bill L By Kris Rosemann As some US corporations are finding the Chinese market an increasingly difficult one in which to operate, “China (May 2016),” Walmart (WMT) is taking moves to strengthen its presence in the world’s second largest economy. On June 20, the retailing behemoth announced that it has entered into a partnership with JD.com (JD), one of China’s largest e-commerce companies, a move that will enhance offerings to consumers throughout China via a combination of JD.com’s e-commerce prowess and Walmart’s traditional retail operations. While Walmart continues to expand internationally, Target (TGT) continues to retreat from non-US markets, even having abandoning efforts in Canada recently. In the deal with JD.com, Walmart has agreed to sell its grocery-focused, … Read more