GEV

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Clean Energy Idea GE Vernova Reaffirms 2024 Guidance

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Image: GE Vernova shares have powered higher as of late. By Brian Nelson, CFA GE Vernova (GEV) reported mixed third quarter results on October 23 with revenue beating expectations, but GAAP earnings per share coming in lower than expected. Total revenue increased 8% (10% organically) in the third quarter with growth in both equipment and services. Total orders came in at $9.4 billion, up 17% organically, with particular strength in services (+28% organically). Adjusted EBITDA came in at $243 million on an adjusted EBITDA margin of 2.7%, up from $205 million and 2.5% in the same period a year ago. Management was positive in the press release: GE Vernova had a solid third quarter, delivering double-digit orders and continued revenue … Read more

GE Vernova Is a Great Clean Energy Idea

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Image: GE Vernova has performed well since it was spun out of GE. By Brian Nelson, CFA Clean energy giant GE Vernova (GEV) recently reported second quarter financial results with total revenue advancing 1% (up 2% organically) thanks to strong performance in services, which grew 7% (up 9% on an organic basis). Total orders came in at $11.8 billion in the quarter, exceeding revenue by 1.4x. Adjusted EBITDA came in at $0.5 billion, with an adjusted EBITDA margin of 6.4%, which was up 320 basis points on an organic basis. Management’s commentary was upbeat in the press release: GE Vernova delivered another strong quarter with EBITDA margin expansion across all segments and substantial cash improvement. Global electrification and decarbonization trends … Read more

RTX Ends Year with Record Backlog, Shares Yield ~2.4%

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By Brian Nelson, CFA Back in late January, RTX (RTX), formerly Raytheon Technologies, reported solid fourth-quarter results, beating on both the top and bottom lines. Adjusted sales advanced 10% from the prior year, while adjusted earnings per share edged 2% higher, to $1.29. For the fourth quarter, the company hauled in $4.7 billion in operating cash flow and generated $3.9 billion in free cash flow. RTX ended the year with record company backlog of $196 billion, with $118 billion attributable to commercial and the balance to defense. Image Source: RTX Management noted the firm is off to a good start in 2024 in the press release: RTX reported solid full-year results, delivering 11 percent organic sales growth and $5.5 billion in … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more

Earnings Roundup: LMT, PG, MMM, GE, JNJ, VZ

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By Brian Nelson, CFA Lockheed Martin’s (LMT) Backlog Reaches Record Highs Dividend Growth Newsletter portfolio holding Lockheed Martin reported solid fourth-quarter 2023 results January 23 that showed a beat on both the top and bottom lines, but revenue growth remained challenged in the quarter, declining on a year-over-year basis. The defense contractor continues to be shareholder-friendly, returning a nice chunk of the $6.2 billion in free cash flow it generated during 2023. Lockheed Martin ended the year with a record backlog of $160.6 billion and remains well-positioned to support the U.S. and its allies with myriad defense technologies. The company is targeting 2024 revenue in the range of $68.5-$70 billion, a modest increase from the $67.6 billion it posted in … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more