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Nelson: I Have Been Wrong About the Prospect of Near-Term Inflationary-Driven Earnings Tailwinds

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Transcript During the past several weeks, we’ve grown increasingly concerned about the health of consumer-tied entities across not only the consumer staples but also the consumer discretionary spaces. Many consumer staples entities, while raising prices, aren’t raising them fast enough to drive operating-income and bottom-line expansion, while many consumer-discretionary companies are facing higher freight and logistics costs and weaker performance in China, perhaps best revealed by Nike’s most recently-reported quarter, where inventory advanced 23% compared to the prior-year period. The tell-tale sign about the health of the consumer may be Amazon (AMZN) Prime Day, which is coming up on July 12-13, but based on many of the reports we’ve monitored this past earnings season, even if sales are strong on … Read more

Shares of Top Biotech Idea Vertex Pharma Volatile But Company Fundamentals Sound

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Image Shown: Shares of Vertex Pharmaceuticals Inc have surged higher over the past year. We continue to like the biotech firm in our Best Ideas Newsletter portfolio. By Callum Turcan The biopharmaceutical space is full of attractive investment opportunities, though early-stage firms without commercialized drug portfolios are quite risky investments given their lack of meaningful revenues and sizable negative cash flows. Vertex Pharmaceuticals Inc (VRTX), on the other hand, has a commercialized portfolio of therapeutics that treat cystic fibrosis (‘CF’) which enables the biotech firm to generate substantial revenues and cash flows. We include Vertex Pharma as an idea in the Best Ideas Newsletter portfolio. Overview Due to the asset-light nature of its business model (most expenses flow through R&D … Read more

Dividend Growth Idea UnitedHealth Group Boosts Guidance

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Image Shown: Dividend growth idea UnitedHealth Group Inc has seen its share price surge higher over the past year. By Callum Turcan One of our favorite dividend growth ideas is UnitedHealth Group Inc (UNH). The company runs an expansive portfolio of domestic health care operations including large health insurance businesses, pharmacy benefits managers (‘PBMs’) and specialty pharmacy businesses, outpatient surgical centers, in-home health care service providers, analytical services, and services geared towards administrative activities, among many other operations involving health care. Its four business reporting segments are Optum Health (national health care delivery platform), Optum Insight (services, analytics, and platforms aimed at generating insights and efficiencies while improving patient outcomes), Optum Rx (portfolio of pharmacy care services), and UnitedHealthcare (portfolio … Read more

Shares of Newsletter Portfolio Idea Johnson & Johnson Off to the Races!

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Image Shown: Shares of Johnson & Johnson, an idea in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, are shifting higher. By Callum Turcan On April 19, Johnson & Johnson (JNJ) reported first-quarter earnings for 2022 that missed consensus top-line estimates but beat consensus bottom-line estimates. The company lowered its guidance for 2022, but shares of JNJ rallied during regular trading hours that day as its underlying performance remains strong. J&J suspended guidance for its coronavirus (‘COVID-19’) vaccine sales, though we want to stress that these sales were not needle-moving as it concerns our estimate of the company’s fair value. The firm was selling the vaccines on a not-for-profit basis and didn’t intend to change that until the … Read more

Johnson & Johnson’s Pending Split-Up, Talc Liabilities, New CEO Add Complexity to a Once-Clean Dividend Growth Story

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  Image Shown: J&J continues to face legal liabilities due to talcum powder lawsuits. Image Source: Mike Mozart.  By Brian Nelson, CFA Johnson & Johnson’s (JNJ) dividend growth story has become much more complicated in recent years. On a price-only basis, shares of the consumer and pharma giant haven’t been nearly as impressive as that of technology names, but the company still has put up a nice 45% price-only return the past five years, further bolstered by a continuous stream of quarterly dividend payments. J&J yields ~2.6% at the time of this writing, and the company reluctantly remains the bedrock of the Dividend Growth Newsletter portfolio, at least for now. The Split-Up Before we dig into J&J’s fourth-quarter 2021 results, … 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

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

Johnson & Johnson Boosts Guidance Again, Posts Great Earnings Update

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Image Shown: Johnson & Johnson reported strong performance across its three core business operating segments in the third quarter of fiscal 2021. Image Source: Johnson & Johnson – Third Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan On October 19, Johnson & Johnson (JNJ) reported third quarter earnings for fiscal 2021 (period ended around the end of September 2021) that missed consensus top-line estimates but beat consensus bottom-line estimates. The healthcare giant also raised its full-year guidance (again) for fiscal 2021 as its ‘Pharmaceutical’ segment is growing at a robust pace, its ‘Medical Device’ segment is steadily recovering from the worst of the coronavirus (‘COVID-19’) pandemic, and its ‘Consumer Health’ segment is holding up well. We continue to … Read more

Johnson & Johnson Beats Estimates, Raises Guidance Once Again

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Image Source: Johnson & Johnson – Second Quarter of 2021 IR Earnings Presentation By Callum Turcan On July 21, Johnson & Johnson (JNJ) reported second-quarter 2021 earnings that beat both consensus top- and bottom-line estimates. The company (once again) boosted its full-year guidance in conjunction with its latest earnings update as Johnson & Johnson’s business is steadily rebounding from the worst of the coronavirus (‘COVID-19’) pandemic, with an eye towards the ongoing recovery in the sales of its medical devices and related offerings. We include shares of JNJ as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Its latest earnings report and guidance boost reinforced our favorable view towards the name. Shares of JNJ yield … Read more