COST

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

by

Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Walmart Reports Fourth Quarter Results, Raises Dividend

by

Image Source: Valuentum By Brian Nelson, CFA On February 18, global brick-and-mortar retail bellwether Walmart (WMT) reported mixed fourth-quarter fiscal 2020 results (ends January 31, 2020) that showed revenue advancing 2.1% and non-GAAP earnings per share of $1.38 missing the consensus forecast. We await the filing of the firm’s 10-K to roll our valuation model forward, but we do not expect to make any material changes to our fair value estimate at this time, which stands at $109 per share. The stock is trading hands at ~$118 per share at the moment. Walmart’s US comparable store sales growth, on a two-year stacked basis, came in at 6%, which is solid in our view, but the most recent quarterly pace (+1.9%) … Read more

Resetting Your Mental Model

by

Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds

by

Image: President of Investment Research Brian Nelson, CFA By Brian Nelson, CFA A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception. Though the book focuses more on the life and times of founder Jim Simons and dedicated only a page or two to the fall of Long-Term Capital Management (LTCM), another quant fund that went belly-up during the late 1990s, it was nonetheless a thoroughly interesting and enjoyable read. But why I am bringing up one of the most successful quant … Read more

Our Reports on Stocks in the Food Retailing Industry

by

Image Source: Mike Mozart Structure of the Food Retailers Industry 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). 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. We’re generally neutral on the group. We’ve reallocated our resources to cover more recession-resistant stocks. See here.

Best Buy’s Rebound Continues

by

Image Shown: Best Buy Co Inc has staged an impressive rebound over the past few years. This rebound was aided by significant investments in its digital presence, recognizing the core markets Best Buy wanted to target, and ultimately comparable store sales growth.  By Callum Turcan On November 26, Best Buy (BBY) reported third quarter earnings for its fiscal 2020 (three month period ended November 2, 2019) that beat both top- and bottom-line consensus estimates. Even better, Best Buy raised its guidance for fiscal 2020, largely on the back of stronger than expected same-store sales growth. Best Buy’s update helped send shares of BBY over our fair value estimate of $76 per share, and if this outperformance is sustained, the retailer … Read more

ICYMI: Interview with Valuentum’s President Brian M. Nelson, CFA

by

Catch up with Valuentum’s President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles. By Brian Nelson, CFA Recently, I was interviewed by Arne Magnus Lorentzen Ulland of the blog stockles. Arne is a dividend growth investor like many of you, and I sincerely hope you enjoy the interview he put together. I’m very grateful for his interest. His questions were fantastic. We discuss why and how I incorporate independence and integrity into the service at Valuentum. We go into detail regarding why Valuentum views stocks the way it does, and how Valuentum combines enterprise valuation and the information contained in prices in its stock-selection process. I discuss the pitfalls … Read more

Kroger Posts Solid Quarter, Issues Weak Guidance

by

Image Shown: Kroger Company – IR Presentation By Callum Turcan On September 12, food retailer Kroger Company (KR) reported second-quarter earnings for its fiscal 2019 that ended August 17. The company posted 2.2% year-over-year same-store sales growth, when excluding fuel sales (due to the volatile nature of petroleum product prices), and that was assisted by 31% year-over-year digital sales growth. Its FIFO gross margin contracted by almost 30 basis points according to management due to pressures at its pharmacy and specialty pharmacy business. However, corporate initiative Restock Kroger allowed for the retailer’s GAAP operating margin to climb marginally year-over-year as operating expenses were kept relatively contained. Shares of KR, after a volatile trading session, ended flat September 12. Restock Kroger … Read more

Target Stuns, Shares Jump Higher

by

Image Shown: Shares of Target Corporation (TGT) leapt higher on August 21 on the back of its strong performance during the second quarter of FY2019. In particular, the retailer’s comparable same store sales growth was quite impressive given the hard comparison period, with e-commerce and same-day fulfillment leading the way. By Callum Turcan On August 21, Target Corp (TGT) reported very strong second quarter FY2019 earnings (three months ended August 3) that sent shares up ~20% on the trading session. For starters, comparable store sales growth clocked in at 3.4% year-over-year and was up 9.9% on a two-year basis (adding comp growth from the second quarter of 2018 and 2019 together). That indicates this was much more than just a … Read more

Macy’s Cuts Guidance, Dividend Cut Could Be on the Horizon

by

Image Source: Macy’s Inc – IR Presentation By Callum Turcan Retailers (XRT, RTH) have been struggling as the e-commerce shift has stressed margins and hurt foot traffic at stores and malls all across America. Macy’s Inc (M) had fared better than most, but that’s beginning to change. The company reported second quarter FY2019 earnings on August 14 which came with a guidance cut that saw shares of Macy’s plummet below their late-2017 lows. While Macy’s recovered throughout the trading day, the market is clearly signaling that investors are expecting more pain is ahead. As of this writing, shares of Macy’s yield ~9.0%, a major red flag. Guidance Cut Management cut earnings guidance for the full fiscal year while keeping estimates … Read more