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Best Ideas Newsletter Portfolio Not Bad Thus Far in 2018

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Part of what we take pride in at Valuentum is telling things how they are. If things are going great, we let you know. If things aren’t going as good as they could be, we don’t hold back. In the year of crypto and cannabis, 2018 hasn’t been the best year for the simulated Best Ideas Newsletter portfolio, but it hasn’t been bad either.  By Brian Nelson, CFA We wrote up an extensive piece on the background of the simulated Best Ideas Newsletter portfolio earlier this year, and we encourage everyone to have a read of that here (pdf). We made some changes to the goals of the newsletter portfolio prior to the beginning of this year. For starters, we … Read more

Valuentum’s Weighted Average Cost of Capital (WACC) Distribution

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The weighted average cost of capital is one of the most subjective measures in corporate finance, but it is also one of the most important ones. “The most important item over time in valuation is obviously interest rates…If interest rates are destined to be at low levels…It makes any stream of earnings from investments worth more money. The bogey is always what government bonds yield….Any investment is worth all the cash you’re going to get out between now and judgment day discounted back. The discounting back is affected by whether you choose interests rates like those of Japan or interest rates like those we had in 1982…When we had 15 percent short-term rates in 1982, it was silly to pay … Read more

Alphabet’s Top-Line Growing Nicely; Spending Also on the Rise

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Simulated Best Ideas Newsletter portfolio idea Alphabet continued its impressive top-line expansion in its second quarter of 2018, but we’re keeping a close eye on growing cost and capital spending levels. A massive ~$5.1 billion fine from the European Commission also impacted reported results in the period. [Update: Subsequent to the publishing of this article, on July 26, we raised our fair value estimate of Alphabet to $1,543.] By Kris Rosemann Google parent company Alphabet (GOOG, GOOGL) reported ongoing top-line strength in its second quarter report, released July 23, as reported revenue advanced 26% on a year-over-year basis thanks in part to a 58% jump in paid clicks on Google properties from the year-ago period. However, the second quarter was … Read more

What Are the Qualities of Highly-Rated Stocks on the Valuentum Buying Index?

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If you were a CEO, what are the 7 most important metrics to focus on to get a rating of 10 on the Valuentum Buying Index? This is a great question because it hits at the absolute heart of the most important concept of investing. Investing may be about buying a great company with a solid and growing dividend, but it most certainly is about buying a great company at a discount to intrinsic value. The difference between what someone can pay for something and what something is worth is the most important concept of investing: price versus value. The price-versus-value component is an integral part of the Valuentum Buying Index. In fact, it is the first component. After all, … Read more

Oracle’s Dividend Still Very Healthy

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Image Source: May Wong Oracle issued what is likely conservative fiscal first-quarter 2019 guidance, but the company continues to generate record amounts of operating cash flow and has a solid net cash position on the books. We’re not worried about the dividend. By Brian Nelson, CFA Oracle’s (ORCL) Dividend Cushion ratio is 4.5 at the time of this writing, meaning that, on the basis of expectations of future free cash flows relative to expected cash dividends paid, assuming a nice 12-18% annual growth rate in dividends per share over the next 5 years (as shown in its dividend report), and factoring in its net cash position on the balance sheet, we expect Oracle to cover future expected cash dividends paid … Read more

Microsoft Wins GitHub Over Alphabet

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Image Source: Microsoft deal presentation Microsoft has agreed to acquire GitHub for $7.5 billion. Competing bids may have driven the price tag higher, but Microsoft’s financial flexibility remains top-notch. By Kris Rosemann On June 4, simulated Dividend Growth Newsletter portfolio idea Microsoft (MSFT) agreed to acquire privately-held GitHub, one of the world’s leading software development platforms, for $7.5 billion in stock. We like that Microsoft isn’t taking on more debt related to this transaction, and in light of Microsoft’s buyback program, the deal is more cash-like than anything else. GitHub will continue to operate independently in providing an open platform for developers after the deal closes, which is expected by the end of 2018, similar to Microsoft’s course of action … Read more

Study: Valuentum’s Best Ideas Newsletter Portfolio

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To read the study, please click on the image to download the pdf document (pdf).

Alphabet May Need to Clean Up Its Spending

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Alphabet, the company formerly known as Google, put up decent first-quarter 2018 results with respect to the top line, but the company is facing a rising cost and capital-spending profile. The first quarter could have been a lot better, in our opinion. By Brian Nelson, CFA   On April 23, Alphabet (GOOG, GOOGL) reported relatively disappointing first-quarter 2018 results. Revenue advanced 23% on a constant-currency, year-over-year basis, but operating income increased at a more modest 6.6% pace, as Alphabet’s operating margin dipped 5 percentage points. Google’s advertising revenue did well in the period, and the company even trimmed its “Other Bets” operating loss, but operating income of $8.37 billion wasn’t nearly as good as we would have liked. Traffic acquisition … Read more

ICYMI: Valuentum’s Improved Stock and ETF Web Pages

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Valuentum has rolled out improved stock and ETF web pages on its website valuentum.com/. Now, subscribers can access key proprietary information on the stock and ETF web pages in addition to the customary stock and ETF reports. Dear reader, We have some exciting news that we can’t wait to share with you! At valuentum.com/, we have rolled out new stock and ETF pages that conveniently include a variety of our proprietary metrics from the Dividend Cushion ratio to the Economic Castle rating and beyond! There’s even mouseover functionality so you can learn about how we define the key metrics across our stock-selection and dividend growth methodologies. You’ll still have access to the stock and dividend reports on the landing pages, … Read more

Value Investors Starting to Salivate Over Facebook’s Fall

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Image Source: DonkeyHotey Facebook is becoming a value investor’s dream: a stock with fantastic free cash flow generation and balance sheet health dealing with transient headline noise. We’re waiting for shares to start to turn upward before we would consider adding to the hypothetical weighting in the simulated Best Ideas Newsletter portfolio. They look cheap! By Brian Nelson, CFA Facebook’s (FB) fall from grace has been a dream come true for many value investors looking for a company with a pristine balance sheet and tremendous free cash flow generation. By a pristine balance sheet, we mean a huge net cash position (~$41.7 billion) and no debt. By tremendous free cash flow generation, we mean that Facebook hauled in $5.4 billion … Read more