BEAM

The Difference Between Speculation and Investment

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Brian Nelson, President of Investment Research at Valuentum, discusses the difference between speculation and investment.  Brian Nelson, CFA: This is Brian Nelson from Valuentum Securities. I’d like to talk about the concept of speculation. I think it is best taught with a story perhaps, one of my personal experiences. I used to work on the buy side and one of the more interesting stocks that I pitched in my experience was a company called Synaptics (SYNA). This must have been in 2004-2005 — almost 20 years ago now. Synaptics made an interface for a number of electronic devices, and what it held was some of the technological building blocks for a click-wheel technology. About a year or two later following that … Read more

FDA Accepts License Application for Vertex Pharma’s and CRISPR Therapeutics’ Key Investigational Treatment

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  Image: Vertex’s pipeline is impressive. We like its areas of focus and the progress it continues to make with key therapies in CRISPR and pain management. By Brian Nelson, CFA On June 8, it was announced that the Biologics License Applications (BLAs) for the investigational treatment exagamglogene autotemcel (exa-cel) for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT) from two of our favorite speculative biotech entities Vertex Pharma (VRTX) and CRISPR Therapeutics (CRSP) have been accepted by the U.S. FDA. The submission received Priority Review for SCD, and exa-cel has the potential to be the first CRISPR gene-editing therapy to be approved. We continue to be huge fans of this technology and Vertex’s risk-adjusted exposure to the potential … Read more

Best Idea Vertex Pharma Outperforming in 2022

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Image Shown: Shares of Vertex Pharmaceuticals Inc, an idea included in our Best Ideas Newsletter portfolio, have performed incredibly well year-to-date through October 2022. By Callum Turcan Through the end of normal trading hours on October 7, shares of Vertex Pharmaceuticals Inc (VRTX) are up ~34% year-to-date on a price-only basis. We include shares of Vertex Pharma as an idea in the simulated Best Ideas Newsletter portfolio and remain huge fans of the name. Vertex Pharma’s commercialized drug portfolio consists of various treatments for cystic fibrosis (‘CF’) and the cash flows generated from sales of these therapeutics are used to invest in the biotech company’s robust drug development pipeline. Earnings and Guidance Update On August 4, Vertex Pharma reported second … Read more

Video: How Many Stocks Should You Own?

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Video: Valuentum’s President of Investment Research, Brian Nelson, CFA, explains the importance of diversification, how to think about firm-specific and systematic risk, how many stocks one should own to achieve 90% of the diversification benefits, how to think about active asset allocation versus active equity management, and why diversification is a means to achieve goals, not the goal itself. A content-packed 14-minute video. Don’t miss it! –——— Tickerized for holdings in the ARKK. Also tickerized for META, PYPL. Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE. Some of the other securities written about in this article may … Read more

Our Favorite Biotech Vertex Pharma Powers Ahead, Leaps 6%+

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Image: Vertex Pharma continues to soar toward our fair value estimate. By Brian Nelson, CFA  On Wednesday, January 26, Vertex Pharma (VRTX) reported solid fourth-quarter results that showed continued advancement across its clinical pipeline. For background reading on our thesis on the net cash rich, free cash flow generating biotech tied to established cystic fibrosis (CF) therapies and CRISPR technology, please read: “Best Idea Vertex Pharma Boosts Guidance (Again), Buying Back Stock While Awaiting Key Clinical Trials (December 2, 2021)” and “Best Idea Vertex Pharma Marching Forward with Innovative CRISPR Technology” (August 31, 2021).” Following fourth-quarter results, we’re reiterating our $250 per share fair value estimate at this time.   Image: Vertex finished an exciting 2021, and we look forward to … Read more

Some Questions Answered: The Fair Value Estimate Range and ROIC

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Q: In the 16-page stock reports, why doesn’t the ‘percentage undervalued / overvalued’ match up to the actual discount/premium to Valuentum’s fair value estimate of the company? A: We view the intrinsic value of a company as a Fair Value Range, not necessarily a single point estimate, so the undervalued and overvalued calculations match up to either the low fair value estimate or high fair value estimate, respectively. Within the context of a margin of safety, we wouldn’t necessarily view a company to be worth precisely $55 per share, for example; instead we’d view the company as worth between $50 (low end fair value estimate) and $60 per share (high end fair value estimate), with the low and high fair … Read more

Best Idea Vertex Pharma Marching Forward with Innovative CRISPR Technology

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Image Shown: An overview of Vertex Pharmaceuticals Inc’s commercialized drug portfolio and pipeline. Image Source: Vertex Pharmaceuticals Inc – Second Quarter of 2021 IR Earnings Presentation By Callum Turcan The world of medicine and therapeutics continues to evolve, with gene editing CRISPR technology offering the medical community an immense source of potential life-saving therapies over the years and decades to come. Our favorite way to gain exposure to this space is through Vertex Pharmaceuticals Inc (VRTX), an idea included in the Best Ideas Newsletter portfolio. What Is CRISPR? In short, CRISPR gene editing technology can identify a specified portion of DNA in a cell and when done properly (this is no easy task), CRISPR technology can alter that DNA, potentially … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Best Ideas Newsletter Excerpt: A+ for Altria and Apple

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By Brian Nelson, CFA Just as I’m writing the intro to this edition of the September edition of the Best Ideas portfolio, the good news keeps coming. If you’ve read anything about our top holdings, you’d be hard-pressed to miss a discussion on Altria (MO) and our thesis that goes into the tobacco firm’s 27% economic stake in fast-growing global brewer SABMiller (SBMRY) as support for not only its dividend growth but also its valuation. The news wires are buzzing that SABMiller approached Heineken (HEINY) for a tie-up, and that Heineken rejected its offer. However, there are now talks that Anheuser-Busch InBev (BUD) is looking to put together a bid for SABMiller, and shares of the latter are soaring on … Read more