BABA

Emergency Update on COVID-19

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President of Investment Research at Valuentum, Brian Nelson provides an emergency update on COVID-19. He talks about how policymakers have dropped the ball thus far, and why investors should not let their guards down, despite what has been a nice bounce from the March 23 bottom. As of April 24, the world has now borne witness to the deaths of nearly 182,000 people from Coronavirus disease, or COVID-19, with more than 2.6 million confirmed cases. The United States remains the epicenter of the global pandemic with the country confirming 830,000 cases and more than 42,000 deaths. The sad reality is that, despite the many months that have now passed, medical professionals know little more about the disease than when news … Read more

What To Do Now?

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— Dear members: — It’s Brian here. It seems like I went to bed February 22 after writing the following note to you — Is a Stock Market Crash Coming? — Coronavirus and P/E Ratios — and just woke up now. That’s how crazy the markets have been. It’s been two months of a whirlwind of a ride. For those just joining today, we recapped the events since our warning about the Great Crash of 2020 on February 22 in the following two videos — The Question Is If the Economy Can Be Held Together Without Vast Equity Dilution (April 12) and Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway? (April 19). — Before going on, I want to pause … Read more

ICYMI — Video: The Question Is If the Economy Can Be Held Together Without Vast Equity Dilution

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President of Investment Research at Valuentum and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how the range of probable fair value outcomes of S&P 500 companies has increased as a result of COVID-19 and possible equity dilution on the downside to long-run inflationary pressures on stocks driven by runaway Fed and Treasury stimulus on the upside. — Editor’s note: Brian emphasizes the importance of “expert analysis” over “backward-looking analysis,” and we would like to clarify that he is not giving personalized advice. 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. Not a member? Subscribe today. The first 14 days are … Read more

Wayfair’s Sales Rise as US Households Stay In

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Image Shown: Shares of Wayfair Inc shot up on April 6 after publishing a very favorable business update. By Callum Turcan E-commerce firm Wayfair Inc (W) sells furniture and home décor online and operates several websites including Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold. Shares of W surged upwards on April 6 after the e-commerce company put out a very promising business update that stated Wayfair’s sales were skyrocketing upwards. Here’s a key excerpt (emphasis added): For its first quarter of 2020, Wayfair expects to meet or exceed its previously issued guidance of 15% to 17% consolidated net revenue growth year-over-year and consolidated Non-GAAP Adjusted EBITDA Margin in a negative 7.3% to 7.8% range. Wayfair continues to see … Read more

Bullets: Recapping the Crash, Where Are We Now?

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Image: The S&P 500 has only retraced a small part of its decline since the top in February 2020. By Brian Nelson, CFA In August 2019, Valuentum took a cautious bent on the markets, removing the Financial Select Sector SPDR (XLF) and the Energy Select Sector SPDR (XLE), raising cash at the time. Financials and energy have been material underperformers during the swoon, with the Fed/Treasury launching more stimulus than the Great Financial Crisis and Saudi Arabia/Russia continuing their oil-price war. Here’s what we said in August 2019: August 2019: There are myriad risks as we near the end of this now-decade long bull market: a US-China trade/currency war, slowing global economic growth (Germany’s economic growth turned negative during the … Read more

Attack COVID-19 With Forward-Looking, Expected Data

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President of Investment Research at Valuentum Brian Nelson shares his financial wisdom in detailing how the world must attack COVID-19 with forward-looking expected data (not backward-looking, empirical data) as the global economy faces what could become the worst business environment since the Great Depression, irrespective of government fiscal stimulus. — Editor’s note: Brian emphasizes the importance of “expert analysis” over “backward-looking analysis,” and we would like to clarify that he is not giving personalized advice. 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. Not a member? Subscribe today. The first 14 days are free. Brian Nelson owns shares in SPY and SCHG. Some … Read more

Lululemon’s Pristine Balance Sheet and Digital Sales Channels Provides Support During These Harrowing Times

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Image Source: Lululemon Athletica Inc – Fourth Quarter of Fiscal 2019 Earnings Infographic By Callum Turcan On March 26, Lululemon Athletica Inc (LULU) reported fourth quarter and full-year earnings for fiscal 2019 (period ended February 2, 2020) that had some bright spots, though shares of LULU initially traded down on March 27. While the company beat on both the top- and bottom-lines, investors are growing increasingly worried about the performance of discretionary consumer goods companies in the face of the ongoing novel coronavirus (‘COVID-19’) pandemic. In fiscal 2019, Lululemon’s GAAP revenues rose 21% year-over-year and its GAAP gross margin climbed by ~65 basis points, with its financial performance supported by rising direct-to-consumer sales (up 35% year-over-year) which tend to command … Read more

Nike Reports Blowout Earnings in the Face of COVID-19

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Image Shown: Shares of Nike Inc reclaimed some of their lost ground on March 25 after the sports apparel company reported a blowout earnings report. By Callum Turcan On March 24, Nike Inc (NKE) reported blowout earnings for its third quarter of fiscal 2020 (period ended February 29, 2020) with its revenues and non-GAAP EPS figures coming in well above consensus estimates. The sports apparel firm’s sales rose by 5% year-over-year on a GAAP basis, and 7% on a constant currency non-GAAP basis, due to strong growth at its Nike Direct offering (a digitally oriented direct to consumer distribution system) which helped drive 36% digital sales growth. Please note that Nike sold off its Hurley brand last fiscal quarter, which … Read more

Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?

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Image Source: Value Trap: Theory of Universal Valuation From Value Trap: “The banking sector was not the only sector that faced considerable selling pressure during the Financial Crisis of the late 2000s, of course. Other companies that required funding to maintain their business operations faced severe liquidity risk, or a situation where refinancing, or rolling over debt, might be difficult to do on fair terms, making such financing prohibitive in some cases. Those that faced outsize debt maturities during the most severe months of the credit crunch faced a real threat of Chapter 11 restructuring had the lending environment completely seized. In thinking about share prices as a range of probable fair value outcomes, equity prices tend to face pressure as … Read more

A ~0.1% Probability Since 1896

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Image Source: Wikipedia Commons   By Brian Nelson, CFA It was mid-June 2015, and our team released our case on why the midstream MLP space would collapse. To us, it just made sense. We’ve been practicing enterprise valuation for a long time, and to this day, we’ve updated over 20,000+ discounted cash flow models. I used to head up the methodology and valuation infrastructure of a department of over 100 analysts across several continents and all sectors when I used to work at Morningstar. Baptism by fire as they say. This was about 10 years ago now. Since our call in mid-June 2015 through March 2, 2020, on a price basis, the S&P 500 (SPY) has advanced 46%, while the Alerian MLP … Read more