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Stock Market Outlook for 2021

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By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more

Nelson: The 16 Most Important Steps To Understand The Stock Market

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A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more

Which Sectors Are Leading the Market Higher? And Why Is This Important?

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Missed the ’13 Most Important Steps to Understand the Stock Market’? Click here. Demand academic evidence regarding the efficacy of the Valuentum process? Click here. Tobias J. Moskowitz and Mark Grinblatt documented the “strong and prevalent momentum effect in industry components of stock returns which accounts for much of the individual stock momentum anomaly” in their scholarly article published in the Journal of Finance, ‘Do Industries Explain Momentum’ (download here; stable link here; updated by Fraulo and Nguyen here). Moskowitz and Grinblatt also concluded that “industry momentum investment strategies, which buy stocks from past winning industries and sell stocks from past losing industries, appear highly profitable.” Such findings are consistent with the ‘Case for the Valuentum Style of Investing,’ and … Read more

Creditor Risk Aversion Rises Considerably in Energy, Metals & Mining Sectors

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Not all is well with commodity producers. Moody’s (MCO) has been very quick to point out that “the latest plunge by base metals prices and the renewed slide (in) crude oil prices are more ominous for corporate credit than was the earlier plummet by crude oil prices amid relatively steady industrial metals prices.” The credit rating agency’s industrial metals price index has dropped more than 10% in the past 20 days ending July 9, reaching levels not seen since the depths of the Financial Crisis in 2009. Moody’s industrial metals price index has fallen an incredible 25% since the same time stamp last year, something we’ve been witnessing anecdotally. The International Energy Agency recently warned that the bottom in crude oil … Read more

8 Announcements and Top Research You May Have Missed

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8 Announcements. This article was sent to members via email March 27. By Brian Nelson, CFA Hi everyone, Brian here. Trust you are doing great! Here are eight announcements I want you to be aware of: Everything we do is for our members. We’re very proud of the outperformance of the Best Ideas Newsletter portfolio, that we’ve never had a dividend cut in the Dividend Growth Newsletter portfolio, that our high-yield ideas are holding up very well, and the success rates of the Exclusive capital-appreciation ideas and short-idea considerations are running at approximately 80%. We’re proud to be your research partner. The odds of a Fed rate cut are going up as yield-curve inversion continues to threaten. The risks are more behavioral in … Read more

The Best Years Are Ahead

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By Brian Nelson, CFA — The wind is at our backs. — The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. — The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets … Read more

Valuentum: Now Bearish, We’ve Been Here Every Step of the Way

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Valuentum Has Been Here Every Step of the Way   From the COVID-19 top in February 2020 to the COVID-19 bottom to the massive bull run through the end of 2021, we’ve been here for you.    2022 started out to be a rough year, catching many by surprise.   But Valuentum stayed positive. When the markets headed south in June, Valuentum stood its ground. On June 14, Valuentum said that “we still believe stocks could make a “huge rebound” in the near term.   We reiterated our views a few days later and on June 19, we said that “investors shouldn’t panic during this bear market” and that “stocks remain an attractive proposition at the moment and a very attractive consideration … Read more

There Is Milk At The Store

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This article first appeared in the September edition of the High Yield Dividend Newsletter. For more information about this publication, please see here. “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” — Winston Churchill By Brian Nelson, CFA Very few of us could have imagined that we’d witness the bull market that began on that fateful day in March 2009 that might very well mark a generational low. In 2009, major investment banks around the globe were struggling to survive, and the fallout in the mortgage markets left the banks holding paper that nobody wanted to own, let alone buy. The global financial system … Read more

Top Research and Ideas You May Have Missed

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Is Quant Value Giving Intrinsic Value Investors a Bad Name? Surely, you don’t believe Warren Buffett’s “style” is out of favor? By Brian Nelson, CFA I need to make sure that you’re aware of something very important. The media and perhaps many investment professionals define the concept of “value” as companies with low price-to-book (P/B) ratios, and the concept of “growth” as companies with high price-to-book ratios. This definition of “value” and “growth” and their corresponding returns have been magnified in writings throughout the media and across quantitative research, even in prestigious journals. Warren Buffett has been rallying against most quantitative applications and how “growth” and “value” are defined in popular media and quantitative research for decades.  Here’s one of the Oracle’s most … Read more

South32 Is a Great Miner

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Image Shown: An overview of South32’s global asset base. We are big fans of the Australian miner. Image Source: South32 – Fiscal 2021 IR Earnings Presentation By Callum Turcan Back in 2015, the mining giant BHP Group Ltd (BHP) spun off South32 (SOUHY). Since then, South32 has seen some major changes to its asset base through a combination of acquisitions, divestments, and organic investments. We include shares of South32’s American depository receipts (‘ADRs’) as an idea in the new ESG Newsletter portfolio (more on that here). Each ADR represents five ordinary shares of South32. South32 is based in Perth, Australia, and we’re huge fans of its pristine balance sheet, stellar free cash flow generating abilities, top-notch asset base, and bright … Read more