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Fed Cuts 50 Basis Points, Expect More Market Volatility Ahead

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Image Source: FOMC  The emergency 50-basis point Fed rate cut announced March 3 was largely expected by the marketplace in light of growing economic concerns due to COVID-19, but it does nothing to immunize against COVID-19 and little to stabilize the situation. We continue to monitor the situation closely, and we expect ongoing volatility in the coming days and months as the situation with COVID-19 remains fluid. Having moved to defensive positions in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio in January and having capitalized on the “crash protection” put, we are preparing for our next move. For now, we’re watching and waiting, and we encourage readers that have not yet picked up their copy of … Read more

COVID-19 Crisis Intensifies

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Image Source: CDC. Coronavirus Disease 2019 (COVID-19).  Our dearest members: — The world is being challenged today by what some including Bill Gates believe might be a “once-in-a-century pathogen.” We do not know the eventual outcome, whether the impact of this illness ends up being as profound as the Spanish Influenza of 1918-1919 (which inflicted a death toll in the tens of millions), but we maintain our view the markets have yet to come to grips with the impact of COVID-19 on economic activity and potential ramifications on the global economy and the banking system.  — What is currently a “biological” crisis may turn into an all-out global financial crisis, one that could end up worse than the 2008/2009 mortgage meltdown. Instead … Read more

Has the Stock Market Crash Begun?

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Image: CDC. Transmission electron microscopic image of an isolate from the first U.S. case of COVID-19, formerly known as 2019-nCoV. The spherical viral particles, colorized blue, contain cross-section through the viral genome, seen as black dots. Dear members: This article is our fourth update on COVID-19. The previous three installments can be found here (Feb 22), here (Feb 7) and here (Jan 31). We trust you and yours are well during this global crisis. It’s hard to turn on the television these days without hearing about COVID-19, a novel coronavirus and respiratory illness that continues to spread from person to person around the world. COVID-19 is deadly, and particularly deadly among those 60 years of age and older and those … Read more

ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Amazon Contests Microsoft Winning JEDI Contract

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By Callum Turcan Microsoft Corp (MSFT) is a longtime holding in the Dividend Growth Newsletter portfolio and on top of posting great dividend growth historically–from the start of 2010 to the start of 2020, Microsoft’s quarterly dividend rose from $0.13 per share to $0.51 per share, and we see that trajectory continuing going forward–shares of MSFT have been on an upward tear and are up ~73% over the past year as of this writing. Microsoft now trades well above the top end of our fair value estimate range. However, we let our winners run until the technicals start turning against them in a meaningful way. As of this writing, shares of MSFT yield ~1.1% on a forward-looking basis. Recent Events … Read more

Alphabet Reports Earnings and Its Fundamentals Remain Stellar

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Image Shown: Shares of Alphabet Inc Class C, a top weighted holding in our Best Ideas Newsletter portfolio, continued their upward climb in 2019 and maintained their stellar trajectory. By Callum Turcan On February 3, Alphabet (GOOG) (GOOGL) reported fourth quarter and full year earnings for 2019. The firm’s bottom-line beat consensus estimates, but Alphabet’s top-line miss sent shares modestly lower the next day on Tuesday, February 4. We continue to like Alphabet’s Class C shares as a top weighted holding in our Best Ideas Newsletter portfolio with our fair value estimate sitting at $1,440 per share of GOOG (under our base case scenario) and the top end of our fair value estimate range sitting at $1,800 per share of … Read more

Amazon Posts Blowout Earnings, Shares Back Near 2018 Highs

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Image Shown: After reporting fourth quarter earnings for 2019, shares of Amazon Inc have returned to their 2018 highs as of this writing. By Callum Turcan On January 30, Amazon Inc (AMZN) reported fourth-quarter earnings for 2019 that handily beat consensus expectations. Shares of AMZN are now trading back near their highs first reached in 2018. We like Amazon’s growth trajectory but don’t include Amazon in our newsletter portfolios due to the enormous uncertainty in the company’s key valuation drivers, which has a magnified impact on changes in its fair value estimate. That’s a product of its high operating leverage. Even a ~50 basis point difference in its expected gross margins versus its realized gross margins, for example, could have … Read more

Coronavirus May Trigger Long-Anticipated Global Recession

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Image: Wuhan New Coronavirus This was the catalyst that nobody was expecting, a novel coronavirus that nobody had in their economic models. We think global economic activity is slowing as we speak, and the spread of the virus may only accelerate in mainland China and elsewhere. Investors should keep a level head and perhaps think about adding protection to their portfolios before it becomes too expensive. By Brian Nelson, CFA How to Use Valuentum’s Investment Research Services >> We’ve walked through a number of scenarios that could trip the global economy into recession–global deflation that tips over the weakest European banks and causes contagion, global military conflict with North Korea or Iran that disrupts economic activity, increased volatility driven by … Read more

Microsoft Continues to Outperform After a Great Earnings Report

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Image Source: Microsoft Corporation – Second Quarter Fiscal 2020 IR PowerPoint Presentation By Callum Turcan A mid-weighted holding in our Dividend Growth Newsletter portfolio, Microsoft Corp (MSFT) continues to fly higher after reporting second-quarter earnings for its fiscal 2020 (period ended December 31, 2019) on January 29. Microsoft beat on both the top- and bottom-line versus consensus estimates, and shares of MSFT yield ~1.2% as of this writing. Outperformance at its cloud computing operations were largely responsible for the beat and nice forward-looking guidance. Newsletter Portfolio Commentary We continue to like Microsoft in our Dividend Growth Newsletter portfolio even though shares have run up above the top end of our fair value estimate range. The strong performance of Microsoft’s stock … Read more