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Hi everyone! — We continue to be huge believers in the concept of enterprise valuation, which emphasizes the key cash-based sources of intrinsic value–net cash on the balance sheet and strong and growing future expected free cash flows. Meta Platforms, Inc. (META) and Alphabet Inc. (GOOG) remain two of the most underpriced ideas on the market today, and we remain huge fans of their tremendous long-term investment prospects. — There are a couple things worth reminding readers, however. A good relevant rule of thumb I learned early in my career working for my first portfolio manager is that a stock’s return in the near term is driven roughly 40% by the market, 30% by the industry it operates in, and 30% … Read more

2022 Oil & Gas Market Update: “The Outlook for Crude Oil Prices Remains Quite Bullish”

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Transcript Hello, this is Callum Turcan, Associate Director of Research at Valuentum Securities. WTI and Brent have pulled back moderately from recent highs, though near-term futures remain just above $100 per barrel which is well above levels seen last year. As of early July, both WTI and Brent are in backwardation, meaning spot prices are trading at a higher price than later dated future contracts. In other words, the trajectory of future crude oil prices is expected to have a downward slope. Please note that backwardation does not mean that things are going to rapidly deteriorate for the global energy complex, as this dynamic is due to global oil inventories steadily declining over the past two years or so. Backwardation … Read more

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

Valuentum’s Dividend Growth Strategy ‘Outperforming’

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Image: The Valuentum Dividend Growth strategy has delivered thus far in 2022. With the S&P 500, as measured by the SPY, down 18.1% (negative 18.1%) thus far in 2022 and the S&P Dividend ETF (SDY) down 6.7% (negative 6.7%), the Valuentum dividend growth strategy, as measured by the hypothetical performance of the Dividend Growth Newsletter portfolio (as shown above), is down an estimated 4.6% (negative 4.6%) so far in 2022, all on a price-only basis. Though two percentage points better than the S&P High Yield Dividend Dividend Aristocrats Index doesn’t seem like much, the large cap tilt of the simulated Dividend Growth Newsletter portfolio makes such “outperformance” significant and material. The benefits of a dividend growth strategy, in general, have also … Read more

The Stock Market Is Nearing Technical Support Levels

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Image: This year has been a difficult one for equity investors, but the selling pressure that has been common in the markets may start to slow as broader indices such as the S&P 500 begin to approach technical support levels. On the S&P 500, we think there is substantial technical support in the 3,200-3,500 range, which to us suggests that further near-term downside may be limited. The S&P 500 closed at 3,674.84 on Friday, June 17, and we think fair value is much higher. By Brian Nelson, CFA  It’s been difficult to watch the stock market give up much of the gains reaped over the past year or so during the selling barrage that has occurred thus far in 2022. … Read more

Stocks Up 70%+ Since COVID-19 Pandemic Bottom, Best Ideas Outperforming So Far in 2022

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Image Source: Mike Cohen By Brian Nelson, CFA Investors are building in near worst-case scenarios for future free cash flow expectations across our coverage universe in most cases, and it may not make a lot of sense, in our view, given the resilient nature of the global economy through thick and thin. Within the discounted cash flow model that we use to derive the fair value estimates for companies in our coverage, we apply a 10-year baseline (discount) Treasury rate of 4.5%, which is still meaningfully above the current 10-year Treasury rate that is now hovering around 3.5%. What that means is that there still remains an adequate margin of safety within our analytical framework before we might grow concerned … Read more

Shares of Newsletter Portfolio Idea Exxon Mobil Are Booming Higher!

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Image Source: Newsletter portfolio idea Exxon Mobil Corporation has seen its share price boom higher over the past year. We see room for additional capital appreciation upside potential going forward. By Callum Turcan Shares of Exxon Mobil Corporation (XOM) have boomed higher over the past year, and we see room for additional capital appreciation upside potential. Our fair value estimate for Exxon Mobil sits at ~$90 per share, though in the current raw energy resources pricing environment, the top end of our fair value estimate range may prove to be a more pertinent gauge of Exxon Mobil’s intrinsic value. We are huge fans of the energy major and include Exxon Mobil in the Best Ideas Newsletter, Dividend Growth Newsletter, and … Read more

Berkshire Hathaway Is Firing on All Cylinders; Shares Surging

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Image Shown: Shares of best idea Berkshire Hathaway Class B (ticker: BRK.B) have surged higher over the past year with room to run. By Callum Turcan Those of you that have been long-time members of Valuentum (thank you by the way!) know that we are huge fans of Warren Buffett. We include Berkshire Hathaway Inc (BRK.A) (BRK.B), specifically its Class B shares (ticker: BRK.B), as an idea in the Best Ideas Newsletter portfolio. Recently, Buffett (CEO and Chairman of Berkshire) released his latest annual letter to shareholders, which included plenty of important information regarding the conglomerate’s financial performance and investing practices at-large. One of the things that stuck out in Buffett’s latest annual letter to shareholders, a topic that he … Read more

Chevron Buys Renewable Energy Group

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Image Shown: Chevron Corporation is acquiring Renewable Energy Group Inc through an all-cash deal that was announced at the end of February 2022. Image Source: Renewable Energy Group Inc – October 2020 IR Presentation By Callum Turcan On February 28, Chevron Corporation (CVX) announced it would acquire Renewable Energy Group Inc (REGI) through an all-cash transaction. The energy giant is paying $61.50 per share in cash for each share of the renewable fuel producer through a deal with a total enterprise value of $2.75 billion when including Renewable Energy Group’s $0.4 billion net cash position. During the second half of 2022, the transaction is expected to close. Overview  Renewable Energy Group produces biofuels with a heavy emphasis on biodiesel and … Read more

Valuentum Weekly: Outsized Energy Exposure Continues to Buoy Newsletter Portfolios

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Image: Light crude oil futures once traded for roughly -$40 (negative $40) during the COVID-19 crisis, but have now rocketed to more than $120 in recent trading. Image Source: TradingView. This note was emailed to members Sunday, March 6, 2022. Markets   The S&P 500, as measured by the SPY, is down 9% year-to-date, a modest pullback, in our view, particularly in light of the fantastic performance the past few years. Though not necessarily welcome, a down year every now and then for the broader market indexes and a modest bear market can only be expected, at times. The Dow Jones Industrial Average, as measured by the DIA, is down more than 7% year-to-date (not too bad), while the Nasdaq–as measured by the … Read more