The “Luck” and “Randomness” of Index Funds
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Video: Quants! You’re NOT Measuring VALUE and Nelson’s Theory of Universal Value
President of Investment Research Brian Nelson defines the concept of universal value and shows how quantitative statistical methods are inextricably linked to those of fundamental, financial, business-model related analysis. Value does not exist in respective process vacuums! Value is universal. Find out why. Running time: ~10 minutes. Tickerized for Valuentum’s stock and ETF coverage universe. Transcript Hi this is Brian Nelson from Valuentum Securities, and this is the tenth edition of a series that I call “Off the Cuff,” where I get in front of the camera and I talk for ten minutes. This is what we have to talk about today. We have to talk about this concept: The Theory of Universal Value. Value does not exist in vacuums … Read more
Target, Kroger Launch Counterattack on Amazon-Whole Foods; Industry Earnings to Shrink
Image Source: Valuentum The pricing war has begun, but it may take years before we see the final effects. Only the strongest may come out ahead, and only those already focusing on giving customers the very best value proposition at the lowest prices may retain share. By Brian Nelson, CFA The grocery store business is now on a path of significant change in the wake of news that Amazon (AMZN) would acquire upscale organic grocer Whole Foods (WFM). The online retailing giant has wasted little time in resetting the product pricing environment at Whole Foods, and we expect that other grocers will have to follow. The group had already been on high alert given recent language from Kroger (KR), suggesting … Read more
Amazon To Buy Whole Foods: Not Creative Destruction, Just Destruction
Image Source: Mike Mozart Amazon announced plans to buy Whole Foods. We’re viewing the news as affirmation of our decision to stay largely away from retail exposure in the newsletter portfolios. We think a bidding war for Whole Foods is possible, mostly to keep it and its real estate out of the hands of Amazon, potentially setting up for a true “winner’s curse” scenario. The winner will overpay. By Brian Nelson, CFA We’re not pleased, but then again, it’s okay. Amazon (AMZN) announced June 16 that it will buy high-end grocer Whole Foods (WFM) for $42 per share in cash. Though we mentioned that Amazon was expanding into the grocery store market anecdotally, we must say that it still is … Read more
Valuentum’s 3 Breakthroughs in the Field of Finance and More
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
Restaurant Traffic – What’s Going On?
By Kris Rosemann What’s going on with restaurant stocks these days? Sonic’s (SONC) announcement of preliminary results for the fiscal fourth quarter of 2016, ended August 31, has been the latest catalyst to drag the restaurant sector (BITE) lower due to it reporting “lower-than-expected traffic, reflecting lower consumer spending in restaurants and continued aggressive competitive activity.” Our newsletter portfolios have not been spared the pain as shares of Dividend Growth Newsletter portfolio holding Cracker Barrel (CBRL) have faced pressure since its fiscal fourth quarter report September 14, and Best Ideas Newsletter portfolio holding Buffalo Wild Wings (BWLD) has suffered as a result of the weak data as well. Sonic’s report was not the first we’ve been hearing of slowing consumer … Read more
Excited About Putting Cash to Work…Eventually
Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel … Read more
Major Grocers Growing Sales But Not Clean Stories
Firms in the mature food retailers industry generally have slim profit margins and face significant competition from brick-and-mortar locations (discount, department, drug, dollar, warehouse clubs and supermarkets) as well as Internet-based retailers–including Amazon (AMZN). Though the industry is not terribly cyclical, economic conditions, disposable income, credit availability, fuel prices, and unemployment levels drive ticket size and traffic trends. Offering consumers a compelling value proposition is a must, even as higher-priced organic food offerings proliferate. The national average for gas prices are over $1 lower than at this time a year ago, according to reports, though places in the Midwest continue to feel the pinch at the pump from a key refinery shutdown in Indiana. Other economic conditions have been relatively … Read more
10 Bucks per Hour; What It Really Means
Source: US Department of Labor, Walmart Walmart (WMT) is quite savvy. The big box retailer announced February 19 it would raise the minimum wage for all of its US workers to $9 per hour in April of this year and at least $10 per hour by next February. The move comes amid ongoing public scrutiny of its labor practices, elevated worker turnover, and general malaise among the ranks on social media platforms. At face value, the news headlines show Walmart caving to public pressure, and a win for big labor, but in reality, the retailing giant is merely doing what good businesses do – pleasing customers (which are its workers, too) and widening its economic moat. Hiking wages accomplishes both. … Read more
Walgreen’s and Target Distracted; Dollar General Enters the Fray
Walgreen’s (WAG) and Target (TGT) have been in the news quite a bit as of late–Walgreen’s bowing to political pressure from the proposed ban on tax ‘inversion deals’ and Target as a result of its delayed disclosure of the magnitude of its credit card data breach. Both items have been a major distraction to the respective executive suites, and it is starting to show. In the case of Walgreen’s, the CFO and pharmacy chief lost their jobs today, in part as a result of a ~$1 billion forecasting error related to its prescription-drug business. Though the revision is not an act of illegal wrongdoing (companies change forecasts all the time), the revision is still an embarrassment for the company, especially in light … Read more