EMR

Industrials Empty Tool Box Amid Tough Operating Environment

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By Kris Rosemann How far we have come from the financial abyss! The US economy is now more than seven years removed from the credit crisis that sent shockwaves through the global financial system in the latter years of the past decade. In the fourth quarter of 2008, for example, real GDP in the US tumbled more than 8%, a figure not witnessed since the double-dip recession of the 1980s, and perhaps not surpassed since the time of the Great Depression. During the Financial Crisis of 2008-2009, many industrial entities, particularly those with finance subsidiaries faced dwindling credit health, and several including General Electric (GE) and Harley-Davidson (HOG) cut their dividends to shareholders. Others such as General Motors (GM) even … Read more

Video: Are Economic Moats Priced Into Stock Prices? — You Bet They Are

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President of Equity Research Brian Nelson debunks the myth that the economic moat is not included in stock prices. Length: ~8 minutes. Tickerized for firms in the Morningstar Wide Moat ETF (MOAT), as of October 14, 2015. Brian Nelson, CFA: This is Brian Nelson from Valuentum Securities. I wanted to talk about an important concept and answer an important question. Is Warren Buffet’s economic moat priced into stock prices? Before I answer that question, I think we need to define a couple things. Return on invested capital is a measure of a business’ performance. It’s calculated as earnings before interest divided by net new investment, which is a measure of return on new invested capital. So what is the return the … Read more

Third Quarter Earnings Season Pushes Forward

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The equity markets continue to propel higher despite what we would describe to be a mixed third-quarter earnings season. Let’s walk through a number of earnings reports from popular companies reporting so far this week. Some of them we include in the newsletter portfolios. Others we don’t. But all are worth keeping tabs on. Annaly (NLY) Annaly is a mortgage REIT (mREIT) with principal business objective to generate net income for distribution to shareholders. Being critical of the mREIT business is certainly unpopular, and we understand that many retirees generate vital income streams from such investments. Bulls and bears, however, both benefit from our independent voice, and we call out risks as we see them. Annaly and American Capital Agency … Read more

October Dividend Growth Newsletter Introduction

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Dear Member, The month of September represented some tough sledding for the markets, and we think things will get worse before they get better. If you missed our write up on the seven reasons why we think we’re due for a fall, please be sure to catch up on the piece here. We made a number of changes to the Dividend Growth portfolio since the release of the previous edition of the newsletter. Let’s make sure you didn’t miss anything. For one, yesterday, we added S&P 500 SPDR put option contracts to the portfolio to protect the large gains. Specifically, we added protection in the form of 5 put option contracts on the S&P 500 (SPY), with November 22 expiration … Read more

The Dividend Dilemma

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One of the core tenets of the Valuentum process not only rests in the all-important price vs. value consideration (see Valuentum’s Brian Nelson talk about that here), but also in “letting winners run.” At first read, these two items appear to be at odds with each other. For example, we preach about getting stocks at a bargain, but yet, we don’t sell holdings when they start to move beyond our estimate of their fair value. What gives? At the Valuentum core, we prefer an entry point that corresponds to the time when shares have substantial valuation and pricing support (i.e. they have high Valuentum Buying Index ratings), and we prefer an exit point when shares have little valuation and pricing … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

The Best Ideas for 2014 and Beyond: Part II

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A portion of this article is excerpted from the January 2014 edition of the Dividend Growth Newsletter. Valuentum has two actively-managed portfolios: a Best Ideas portfolio and a Dividend Growth portfolio. Each portfolio has different goals and strategies. The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds them from a Valuentum Buying Index rating of a 9 or 10 to a rating of a 1 or 2. The goal of the portfolio is to generate a positive return each year and to exceed the performance of a broad market benchmark. The Dividend Growth portfolio seeks to find underpriced dividend growth gems that generate phenomenal levels of cash flow and have … Read more

Three Reasons Why Dividend Growth Investors Are Quite Savvy

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A version of this article appeared on our website on October 1, 2013. There are many different approaches to investing, but we think dividend growth investors are quite savvy, especially when they combine a rigorous dividend growth process in the form of the Valuentum Dividend Cushion ratio with the valuation rigors behind the Valuentum Buying Index. Let’s examine the three reasons why we think dividend growth investors are a smart group in the age of ultra-low interest rates. #1. Fool Me Once, Shame on You…Fool Me Twice, Shame on Me Today’s dividend growth crowd has seen enough. First, they witnessed the dot-com bubble (1997-2000), a period in stock market history where firms’ stock prices soared in some cases as a result … Read more