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Fair Value Estimates Matter – Case Study: Boeing

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Image Source: Boeing’s share price converged to our estimate of intrinsic value in the summer of 2019. The plane maker continues to navigate tumultuous skies with its 737 MAX. By Brian Nelson, CFA Dow Jones Industrial Average component Boeing (BA) continues to dominate news headlines, and not for good reason. Let’s revisit our March 2019 article for some background: The news for Boeing hasn’t been this bad since the doldrums of the 787 Dreamliner build some years ago now. The 737 narrowbody, the line-up all over the news of late, is the workhorse of the industry, and Boeing’s next generation 737 MAX has been the fastest-selling plane in the aerospace giant’s history. Most countries around the globe, including the US, … Read more

In the News: Amazon, GE, Kraft-Heinz, Disney, CVS Health, Gilead

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We’re reiterating the large range of fair value outcomes for Amazon. We’re staying far away from General Electric and Kraft-Heinz. Netflix may have its back against the ropes with Disney Plus. CVS Health and Gilead were two setbacks in the newsletter portfolios in the past, but we kept losses to a minimum and new ideas more than offset the weakness. The Best Ideas Newsletter portfolio continues to do very well. By Brian Nelson, CFA Amazon (AMZN) Image Shown: Amazon has a large range of fair value outcomes, and shares are trading roughly in line with our fair value estimate. The e-commerce powerhouse’s shares have come in aggressively since it reported second-quarter results July 25. We get a lot of questions … Read more

Coca-Cola, Visa, and More from Valuentum

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Coca-Cola, Visa and More from Valuentum — Hi everyone, — Hope you’re doing great.  — Just yesterday, we closed out six more ideas in the Exclusive, four capital appreciation ideas and two short-idea considerations, for solid “gains.” The success rates in the Exclusive publication continue to be fantastic. I encourage members to upgrade, to give the Exclusive a chance, to see if the ideas may be of interest. Subscribe to the Exclusive publication here. —  Facebook’s Meteoric Rise — Image: The market doesn’t offer opportunities like this every day. I’d say we might see something so obvious, so opportunistic, maybe once every couple years. That was Facebook in late 2018. It’s now up 60%+ from its 52-week low. — We have a lot … Read more

The United Technologies-Raytheon Merger Will Create a Defense and Commercial Aerospace Giant

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Image Source: United Technologies Corporation – IR Presentation By Callum Turcan On June 9, United Technologies Corporation (UTX) and Raytheon Company (RTN) agreed to a merger of equals that if approved, will create a new giant in the aerospace & defense world. The combined company will sell anything from Patriot surface-to-air missile systems to national governments to power generation and cyber protection products for commercial aircraft. United Technologies and Raytheon hope that as a combined entity, the new company will have the scale required to be truly competitive in the commercial aerospace industry while maintaining the status of a reliable defense contractor. Both CEO’s went on CBNC together to defend the deal and explained it as “complementary” to highlight the … Read more

Markets Swooning, Expect Extreme Volatility, Finger on Put-Option Trigger

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Image shown: We notified members December 26 that we had  moved  the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to a “fully invested” position, from a 30% and 20% cash “weighting” at the high end of the range, respectively.  — No change to simulated newsletter portfolios…at this time.  — Hi everyone, — Hope you’re navigating these tumultuous markets well.   — If you recall, during the holiday season last year, we had moved the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to “fully invested.” See image above (point of the arrow). Because many members were traveling and out of the office, not all were able to read the notification until a week or two after. They were … Read more

When We Get It “Wrong” — How To Think About Our Methodology In Action

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When We Get It “Wrong” — How To Think About Our Methodology In Action Image: Chipotle (CMG) was one of our best calls in 2019.   Image: Verint (VRNT) was a controversial idea in the Best Ideas Newsletter portfolio that worked out great for members this year.   Image: Visa (V) has been the top-weighted idea in the Best Ideas Newsletter for as long as we can remember. In December 2017, when we migrated to weighting ranges for ideas in the newsletter portfolio, the company’s “weight” was 8.6%. The image above shows its performance relative to the S&P 500 (SPY) since then. Source (pdf). — Let’s talk about the newsletter portfolios, some areas where we’ve made mistakes, and how some members use our services. … Read more

Facebook Was Textbook, Intel Still About Fairly Valued After Weakness

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Image: Best Ideas Newsletter portfolio holding Facebook’s (FB) stock has advanced 56% since it bottomed in December. This is yet another textbook execution of the Valuentum Buying Index, a strong breakout of the downtrend on a significantly undervalued stock. See also the example with Apple (AAPL) on page 241 in Value Trap: Theory of Universal Valuation. — In alphabetical order by ticker symbol: ABBV, AMZN, AAL, BMY, CHDN, CL, DHR, DLR, F, HON, INTC, SBUX — AbbVie (ABBV): The branded pharmaceutical business that was spun off from Abbott (ABT) continues to tread water, with shares in a steady downtrend since peaking at the beginning of 2018. We’re not interested in this company given the concentration risk of blockbuster drug Humira, and we generally … Read more

ATTN: Advisors and Planners — Disruption Is Looming

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“With the commoditization of investment advice and intense competition from robos and other more cost-efficient solutions, growth-minded advisors want to create bespoke experiences for clients.” — WealthManagement.com By Brian Nelson, CFA Hi Valuentum members, colleagues and friends, Valuentum has a large subscriber base and is one of the most successful paid subscription financial information websites launched this decade. Over the past eight years or so, individuals, financial advisors and money managers from all over the world have subscribed to our services. We pride ourselves on independence and transparency, and we’re a champion of the investor. Today, I’d like to talk directly to our financial advisor, financial planner, and professional money-manager members. You probably already heard the news yesterday: Charles Schwab, which handles … Read more

How To Think About Our Methodology In Action

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Image shown: Chipotle (CMG) has been one of our best calls so far in 2019. No changes to simulated newsletter portfolios. Tickers mentioned: AAPL, AMZN, BRK.B, CMG, CVS, FB, GE, JPM, KMI, PYPL, V, XLNX.  Let’s talk about the newsletter portfolios, some areas where we’ve made mistakes, and how some members use our services. By Brian Nelson, CFA I love it when I get questions because it shows the engagement of our members. I appreciate that very much. Though there are other considerations, of course, the Valuentum methodology is really quite simple: dividend growth considerations aside, we like undervalued ideas that are going up, and we generally won’t remove ideas that are overvalued until their technical/momentum indicators turn over. Here’s more about our … Read more

Lockheed Martin May Be a FCF Cow But the Company Should Consider Debt Reduction Over Share Buybacks

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Image Source: Lockheed Martin By Callum Turcan Known around the world as the manufacturer of F-35 stealth fighters and Blackhawk Helicopters, Lockheed Martin Corporation (LMT) is the world’s leading defense contractor and as of this writing yields a nice 3.0%. While burdened by a significant net debt load, Lockheed Martin has consistently been a free cash flow cow enabling the firm to sport decent dividend coverage. Last year, 70% of Lockheed Martin’s net sales came from the US government, highlighting how domestic annual defense spending levels are very important to the company’s financial performance. Growing Backlog Lockheed Martin’s order backlog stood at $130.5 billion at the end of 2018, up 24% or $25.0 billion from year-end 2017 levels. The company … Read more