CVNA

What Causes Fair Value Estimates to Change?

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Image: A screenshot of the discounted cash-flow model learning tool for individual investors. By Brian Nelson, CFA If you’ve been a member of Valuentum for a while, you’ll notice that when we update a stock report, our estimate of a company’s fair value and the firm’s Valuentum Buying Index ratings can change. This is completely normal and should be expected (over time, companies generate cash and stock prices change). But sometimes the changes can be confusing, particularly if they are material (i.e. 10%, 20%, or more). In this article, let’s talk about why changes are standard operating procedure for investment research publishers. First, some background. Our estimate of a company’s fair value is driven by myriad factors. To derive a … Read more

CarMax Dealing with Vehicle Affordability Issues

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Image: CarMax’s shares have yet to recover from prior year highs. By Brian Nelson, CFA CarMax (KMX) reported better than expected first quarter fiscal 2024 results on June 21. Net sales declined ~7.5%, modestly better than the consensus estimate, while GAAP earnings per share of $0.97 edged out what the Street was looking for. Retail used unit sales decreased 3.1% from the same period a year ago, while comparable store used unit sales fell 3.8% and wholesale units dropped 8.3% on a year-over-year basis. Gross profit per retail used unit was $2,347, roughly in line with last year’s mark. CarMax Auto Finance (CAF) income grew 7% from last year’s quarter. Management had the following to say about the quarter: I … Read more

Theft Becoming a Huge Problem for Retailers

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Image Source: Ben Schuman Theft has always been a problem for retailers, but it has never been as big of a problem as it has been in recent quarters. Emboldened by the lack of police response and employees sometimes getting fired for confronting shoplifters, retail organized crime is on the rise. We’re not talking theft in the millions, or billions, but likely in the tens of billions per year or more across the U.S. Some attribute the rise of organized retail crime to the pandemic, which paved the way for shoplifters to post their loot online in order to make a quick buck. Some retailers are especially feeling the pinch, and recent commentary reveals just how bad retail theft (shrink) … Read more

ICYMI: How Big Is Your “Too Hard” Bucket?

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Dear members: — I wrote a note about the role of luck in investing, and luck is certainly not to be underestimated when it comes to the long-term success of a company. Even minor changes in the history of the path of successful companies would have relegated them to mere footnotes in the annals of time. — Amazon (AMZN), as probably the best example, may not have made it past the dot-com bust without some timely financing just before the dot-com crash in 2000, while other companies may have looked a whole lot different today had just a few things not gone their way, from Apple (AAPL) to Meta Platforms (META) to Alphabet (GOOG, GOOGL) and beyond. — In investing, it’s okay to … Read more

These Things Sometimes Take Time

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Image: The QQQ, which tracks the Nasdaq-100 Index, including Apple, Alphabet, and Microsoft has been a tremendous generator of wealth. Image Source: TradingView By Brian Nelson, CFA After the huge collapse in the markets in 2020, and the huge rebound in 2021, followed by a large retracement in 2022, we think things are going to be boring in 2023. They are likely going to be so boring that many investors will lose interest at the exact time that they should be most interested–when markets are well off their highs and uncertainty is near its peak.  Dollar Cost Averaging Dollar cost averaging is among the most powerful drivers behind long-term returns. Measuring returns from prior peak to prior peak is often … Read more

The Fed ‘Can’t Stop, Won’t Stop’ Until Labor Market Feels More Pain

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  Image: Prices for private label brands at Aldi are considerably lower than those of branded products. The consumer staples sector, however, remains fully-priced with a 21+ forward earnings multiple, and many constituents hold large net debt positions. We believe the sticking point for the Fed is not groceries or gasoline prices, but rather the labor markets, which remain very strong, despite layoffs. Image Source: Valuentum By Brian Nelson, CFA We’ve yet to see the worst of job cuts, in our view. The rapid shift in the global economy mid-2022 was profound, as many companies were still building in anticipation of increased demand during the first half of the year to the point where demand growth started to dry up, … Read more

Serious Question: What Are You Looking At?

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Image: Stocks with the largest 52-week losses, according to YahooFinance. By Brian Nelson, CFA Thank goodness that you’re subscribed to a service that didn’t include any of the above as top ideas in their simulated newsletter portfolios. Many were chasing returns in 2021 and are now left holding the bag this year, but we stuck to our methodology and processes, and we didn’t expose members to tremendous risks. That’s what it’s all about.  With that said, let’s talk about how we successfully navigated a number of these terrible ideas in the Exclusive publication, a monthly resource that includes an income idea, a capital appreciation idea, and a short idea consideration, released to members each month on the 8th. Exclusive Long Ideas … Read more

We’ve Suspended Coverage of Stocks in the Disruptive Innovation Industry

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Order the Exclusive publication here to gain access to idea generation that covers some of the most innovative stocks. As a member to the Exclusive publication, you’ll receive one income idea, one capital appreciation idea, and one short idea consideration each month! Order today >> — We’ve suspended coverage of stocks in the ‘Disruptive Innovation’ industry. The ‘Disruptive Innovation’ industry is unique in almost every way. The companies included don’t necessarily share a similar traditional industry or sector make-up, but they do share one big thing in common: They continue to disrupt the traditional way of doing things. Carvana is changing how consumers buy used cars, Roku is leading the streaming charge against linear TV, Teradyne’s industrial robotics technology is … Read more

Big Changes in the Auto Industry as Chip Shortages, Supply Chain Issues, and Rising Input Costs Complicate Matters; Tesla and Ferrari Our Two Favorite Names

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Image: Ferrari’s fundamental momentum has been strong of late. Image Source: Ferrari N.V. 2022 Globe Newswire By Brian Nelson, CFA The auto industry perhaps has changed more than any other industry the past five years. First, it was Ford (F) that said it wouldn’t make passenger cars anymore, except for its iconic Mustang. Then, the European Union said that it would eventually end the internal combustion engine (ICE) by 2035. Then, Tesla (TSLA) reached over $1,200 per share and over a $1 trillion market capitalization. Can you imagine a world where Ford is not making sedans, the once modern-marvel of the internal combustion engine is dying, and where one car maker is worth as much as the next nine car … 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