DFS

Malkiel Balks, Yellen Talks

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Let’s first address how research in the financial industry is becoming more and more open to combining value and momentum considerations. We’ll also cover a few takeaways from the stress tests and some ‘strong’ talk from Fed Chair Janet Yellen. By Brian Nelson, CFA It was 1973, and a Princeton economist by the name of Burton Gordon Malkiel had just published A Random Walk Down Wall Street, a book that would turn into one of the most influential studies in support of the efficient markets hypothesis. The book would suggest that asset prices typically exhibit signs of a “random walk,” and as a result, an investor could not consistently outperform market averages in part due to powerful reversion-to-the-mean tendencies. Three … Read more

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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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

The Coming “Goldman Sachs Era”

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Valuentum covers recent developments in the financials sector, including hopes for a relaxation of certain prohibitive Dodd-Frank rules that, if repealed, could pave the way for improved economic returns across the banking sector during the Trump administration. A look back at the month of September 2008, and how Goldman Sachs may very well shape the financial markets during the next few years are two other areas in the piece. Financials stocks have come roaring back since Trump was elected the 45th President of the United States. We’ve participated. By Brian Nelson, CFA It’s been more than 8 years now. The month of September 2008 shaped my view of the financials and banking sector more than any other month possibly could–The … Read more

Earnings Insight – Visa

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Image source: Visa Let’s cover some ground on Visa’s (V) calendar third-quarter report, its fiscal fourth-quarter release. What management said: “We continue to deliver healthy earnings growth in the face of continued, but abating headwinds. We have begun to see the benefits from our acquisition of Visa Europe and strong cost discipline helped our results. At the same time, we are unwavering in our commitment to invest in client partnership opportunities and the further build out of our digital payments capabilities,” said Charlie Scharf, Chief Executive Officer of Visa Inc. “As we enter fiscal 2017, we are positioned well as revenue headwinds will continue to ease, we will continue to see the benefits from Visa Europe in our results, and … Read more

Podcast: Why ETFs and Roasting the Banks

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The Valuentum analyst team talks about why we don’t like the business models of banking entities, why they are currently destroying economic value, but also why the team includes exposure in the Best Ideas Newsletter portfolio. What gives? Find out in this ~9 minute podcast. If you cannot view the video, please view the transcript that follows. Tickerized for holdings in the exchange traded funds, XLF and KBE, and for various financials-oriented ETFs.  Kris Rosemann: Hello and welcome to the Valuentum Securities podcast. My name is Kris Rosemann Associate Investment Analyst at Valuentum. With me is Chris Araos and Brian Nelson President of Equity Research and ETF Analysis at Valuentum. Today, we are going to have a quick discussion over … Read more

The Banking Industry Is All About Confidence

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Image Source: 401(K) 2012 The “5 Cs of credit” — character, capacity, capital, collateral, and conditions — is a widely-followed framework and generally-accepted guideline for lending to consumers, but for corporate entities, we think another C is much more important: confidence. By Brian Nelson, CFA The financial sector, and the underlying banking industry in particular, is distinctly different than most other sectors like industrials, retail, or healthcare, for example. Unlike the latter industries, banks use money to make money (net interest income), instead of using operating assets like property, plant and equipment (PPE) and raw materials to drive revenue and resulting free cash flow. This means that continued access to money and credit is the primary source of banks’ economic returns … Read more

The Next Banking Crisis? No… Well, Not Yet.

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Image Source: Berit Watkin “Washington Mutual customers withdrew $16.7 billion in cash from the thrift in the past nine days, a huge outflow that led to the largest bank failure in U.S. history, the institution’s regulator said Friday.” — MarketWatch, September 26, 2008 By Brian Nelson, CFA Let’s get this out of the way. We’re not sensationalistic or bombastic. We’re realistic, and we love focusing on the risks of investing because an investor that knows his downside risks is a much better investor than the one that is only looking at sunshine in the rear-view mirror. I’m going to put it bluntly. We’re starting to hear of some rather serious developments in the UK following Brexit. If the UK pound hitting … Read more

Explaining the New Page 2 of the Dividend Report

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Note: Please expect the roll out of the new dividend report on valuentum.com/ to occur gradually, in conjuction with the standard industry update cycle. Summary Visa is one of the best companies in one of the best industries. Not only is the firm “everywhere you want to be,” but its high-margin business model throws off a lot of cash. Perhaps what we like best about Visa, however, is its dividend growth potential. Let’s walk through why and uncover the drivers behind its strong Dividend Cushion ratio. It’s hard to find anything wrong with Visa’s (V) business model. The company offers a secure, payment network that is accepted virtually everywhere in the United States. The firm makes money every time a Visa … Read more

Selecting Winners

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It’s hard to go wrong with exposure to the credit-card processing arena. Investors have made a lot of money in Visa (V), MasterCard (MA), Discover Financial (DFS), American Express (AXP) and Capital One (COF) during the past several years, but they’ve made the most with Best Ideas Newsletter portfolio holding Visa. Since Visa was added in November 30, 2011, the company has more than tripled, a return that is more than 50 percentage points better than MasterCard’s, more than 70 percentage points better than Discover’s, more than 120 percentage points better than Capital One’s, and about 150 percentage points better than American Express’. All have done well, but Visa has done the best. Long-time readers of Valuentum know that we’ve … Read more

eBay – PayPal Split

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Under previous but subsiding pressure from Carl Icahn and other shareholders, eBay (EBAY) announced last September that it would separate its payments business PayPal in July of this year. Now that July is here, we wanted to remind members of the split and explain what it means for the holdings in the Best Ideas Newsletter portfolio. On July 17, eBay shareholders will receive one share of PayPal under the ticker PYPL for each share of eBay owned. We will be launching coverage of PayPal shortly after it becomes an independent, publicly-traded company. The separation of eBay and PayPal will make eBay leaner and more efficient while greatly increasing the potential for expansion of PayPal within the booming mobile payments market. … Read more