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BREAKING: UAW-GM Reaches Deal, More Coming from Valuentum Soon…

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BREAKING: UAW-GM Reaches Deal, More Coming from Valuentum Later… please note that this note was written prior to the deal announcement today. Valuentum will have more to say about the deal soon. Image Shown: Shares of General Motors Company are beginning to recover as the company is reportedly getting closer to reaching a deal with the UAW, which would end a strike that is estimated to have cost the company over $1 billion according to some analysts. By Callum Turcan As the strike of ~46,000 United Automobile Workers (“UAW”) employees at US factories run by General Motors (GM) enters its second month, it looks like the chances for a breakthrough are growing. The Wall Street Journal reported that General Motors’ … Read more

ICYMI: Interview with Valuentum’s President Brian M. Nelson, CFA

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Catch up with Valuentum’s President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles. By Brian Nelson, CFA Recently, I was interviewed by Arne Magnus Lorentzen Ulland of the blog stockles. Arne is a dividend growth investor like many of you, and I sincerely hope you enjoy the interview he put together. I’m very grateful for his interest. His questions were fantastic. We discuss why and how I incorporate independence and integrity into the service at Valuentum. We go into detail regarding why Valuentum views stocks the way it does, and how Valuentum combines enterprise valuation and the information contained in prices in its stock-selection process. I discuss the pitfalls … Read more

General Motors and the Union Strike!

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Image Source: General Motors Company – IR Presentation By Callum Turcan A holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, shares of General Motors (GM) have come under pressure over the past month from the ongoing strike that involves roughly 46,000-48,000 of its workers (primarily in the US). So far, this strike has halted production at more than 30 General Motors facilities in the US and has negatively impacted operations at various auto parts suppliers as well. The walkout is now coming up on its second month if a deal isn’t reached soon. Talks between General Motors and the Union Automobile Workers (“UAW”) union reportedly took a turn for the worse over this past weekend (ended … Read more

Carvana Seeks to Disrupt an Enormous Market

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Image Source: Carvana Co. – IR Presentation By Callum Turcan Carvana Co. (CVNA) seeks to disrupt the used car and used light truck market in the United States as a leading e-commerce platform for used automobile sales. Perhaps best known for its “car vending machines” that are located in key metropolitan areas across the US, Carvana wants to fundamentally transform the way consumers buy, sell, and ultimately ascertain the proper value for used automobiles. Please note that Carvana does not pay out a common dividend at this time and is unlikely to do so in the foreseeable future given its negative free cash flows. Industry Overview The company noted that the US used auto sales market clocked in at $764 … Read more

Hold ‘em or Fold ‘em?

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Let’s talk Cardinal Health, Hanesbrands, Ford and Verint in this piece. Our best ideas are ideas in the newsletter portfolios. Unlike other widely followed strategies, the Valuentum strategy likes to capture the entire pricing cycle on an idea. We don’t “operate” in ideas only below the ‘undervalued’ line, but we like to let our winners run to when they are overvalued and showing signs of technical/momentum deterioration. By Brian Nelson, CFA The most important quality of a Valuentum investor is patience. Once we add an idea to the newsletter portfolios, we don’t remove it once it starts to approach the lower bounds of the fair value estimate range. We generally don’t remove it at our fair value estimate either, and … Read more

Our Reports on Stocks in the Auto Making Industry

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Image Source: HRYMX Structure of the Auto Manufacturers Industry The auto manufacturers industry is characterized by high fixed costs, substantial operating leverage, and intense competition. Vehicle sales are impacted by general economic conditions, which are largely out of the control of participants, and by the cost of credit and fuel. Excess capacity, price discounting and other marketing initiatives can pressure the top line, while rising raw material and labor costs can squeeze the bottom line. Changing consumer preferences in type, model and fuel-efficiency can cause abrupt shifts in market share. The structural characteristics of the group are very poor. For our automaker coverage, please click here.

Trump “Tweet Storm” Reveals Increased Frustration with Fed, China

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— Markets are starting to look toppy. — By Brian Nelson, CFA — The markets are under heavy pressure Friday, August 23, as China escalated the trade war with new retaliatory tariffs on $75 billion worth of U.S. goods (soybeans and autos), including a 5% tariff on U.S. crude oil prices. Removing the Energy Select Sector SPDR (XLE) from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio August 14 looks to have been a savvy move. Following the much-anticipated speech from Fed Chairman Powell today, President Trump responded with a series of tweets that showed tremendous frustration with the current situation. Here is the Twitter thread, reproduced below: — As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or … Read more

Investors Aren’t Sold on Lear’s Ostensibly “Cheap” Valuation and Neither Are We

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Image Shown: While Lear Corporation appears attractive at first glance, its technical performance tells a different story. The market is concerned that the global synchronized downturn that has emerged will get worse, which would weigh on Lear’s expected financial trajectory. Global automotive sales are already coming under pressure, and there’s not much Lear, as a leading auto parts supplier, can do about that. We think the market might be right on this one. By Callum Turcan On August 16, we updated our reports for the auto parts supplier industry and those updated reports can be accessed here. Lear Corporation (LEA) stood out right away. The company supplies auto parts to customers all around the world, namely electrical power management systems … Read more

How About the New Vette? General Motors Bouncing Back

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Image Source: GM Chevrolet Next-Generation Corvette, 2020 Stingray revealed July 18 Shares of General Motors held up well in an otherwise weak market August 1 after posting a solid second quarter 2019 earnings report. By Callum Turcan A holding in both our Dividend Growth Newsletter and Best Ideas Newsletter portfolios, General Motors (GM) held up well August 1 after reporting a nice earnings beat with revenue coming in-line with consensus analyst estimates. GM’s North America division led the way, aided by its all-new Chevrolet Silverado and GMC Sierra offerings taking market share in the pickup truck market (according to third-party data cited by GM). GAAP revenue declined by 2% year-over-year and non-GAAP adjusted EBIT moved lower by 6%, but GM’s … Read more

Viewing Intrinsic Value as a Range of Outcomes: Tesla’s Margins Come Under Fire in Second Quarter, Shares Sell Off

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By Callum Turcan On July 24, Tesla Inc (TSLA) posted second quarter 2019 earnings that did not go over well with investors. For starters, the electric vehicle maker’s company-wide GAAP gross margin tanked by ~100 basis points while Tesla’s ‘Automotive’ segment’s gross margin came in at 18.9% during the quarter, down ~170 basis points from 20.6% in the same period last year. This is entirely a result of Tesla ramping up production and deliveries of the less profitable Model 3 to meet demand while production and deliveries of its higher margin Model S/X move lower. Shares of TSLA are under considerable pressure as the market adjusted its long-term view of Tesla’s gross margins and ultimately future free cash flows. Here … Read more