CZR

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

How Some Members Use Valuentum’s Investment Services

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By Brian Nelson, CFA Thank you for your membership to Valuentum. We serve a wide variety of investors, including dividend growth investors, value investors, and pure Valuentum investors, among others. Many different types of investors and professionals use our research and financial analysis in a whole host of applications from individual stock-selection to the evaluation of closed-end funds to an overlay in a money-management setting and beyond. We wanted to make sure that you know that, if you’re a dividend growth or income investor, that there are others that use our website to utilize the Valuentum process, fair value estimates and other metrics. Similarly, if you’re a practitioner of the Valuentum system, I wanted to make sure that you are … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

Booking Holdings Is a Net-Cash-Rich, Free-Cash-Flow Generating Powerhouse!

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Image: Booking Holdings remains an asset-light, free-cash-flow generating powerhouse. By Brian Nelson, CFA On November 2, Best Ideas Newsletter portfolio holding Booking Holdings (BKNG) reported excellent third-quarter results with revenue advancing 21.3% and non-GAAP earnings per share coming in ahead of the consensus forecast. People around the world continue to book travel and accommodations as pent-up demand from the COVID-19 pandemic continues to showcase itself in Booking Holdings’ results. Gross travel bookings advanced 24% (21% on a constant-currency basis) in the quarter on a year-over-year basis, and the firm converted this strong demand into a 51% increase in net income. We like the asset-light, free-cash-flow generating nature of Booking Holdings, and we continue to believe it belongs in the Best … Read more

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

Best Idea Booking Holdings Soars!

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Image: Booking Holdings’ free cash flow conversion is about as good as it gets. The company remains a key idea in the Best Ideas Newsletter portfolio. Image Source: Booking Holdings By Brian Nelson, CFA We initiated a position in Booking Holdings (BKNG) in the Best Ideas Newsletter portfolio in June due in part to its extremely attractive valuation at that time, of which we highlighted graphically in this April 19 note. Booking Holdings’ price-to-fair value disconnect was rather large back in April following a huge fair value estimate increase around that time. Shares of the company have now surged past our fair value estimate of $3,164, as indicated in post-market trading following its fantastic second-quarter 2023 results, and we’re sticking … Read more

Walmart Warns: “Prices Are Still High and There Is Considerable Pressure on the Consumer”

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  Image Source: Mike Mozart By Brian Nelson, CFA As we wrote in “The Fed ‘Can’t Stop, Won’t Stop” in early January, the trade-down trends that we’re seeing in big box retail and with groceries, more generally, are interesting. Inflation started to accelerate with food-at-home prices moving aggressively higher in early 2022, and consumers have been trading down to better value. It probably wasn’t until egg prices soared, however — driven in part by a shortage of egg laying chickens (not just inflationary pressures) – that tipped everyday consumers to budget more cautiously, and the largest big box retailer in Walmart (WMT) is seeing this impact first-hand. Here’s what’s happening on the ground, per Walmart’s CEO Doug McMillon on the … Read more

Online Sports Betting Surges But DraftKings’ Cash Burn Continues to Intensify; We Prefer More Conservative Gaming Plays Such as Churchill Downs

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Image: Online sports betting platform DraftKings continues to burn through hundreds of millions of dollars each year. Data: SEC Filings, Seeking Alpha. By Brian Nelson, CFA Sports betting is now legal in 36 states and mobile sports betting is now legal in 26 states, and more states are expected to legalize sports betting in 2023. According to a report from Grand View Research, the global sports betting market is expected to increase at a compound annual growth rate north of 10% through 2030. In 2022 alone, it is estimated that Americans wagered roughly $80 billion betting on sports online. The NFL is among the biggest draws, and some estimate that more than 50 million American adults bet on the Super … Read more