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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

Fed Rate Decision, UAW Strike Continues, Microsoft Ups Payout

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Image Source: Mike Mozart By Brian Nelson, CFA If you’re thinking like us about the ongoing Fed rate-hiking cycle, you’re probably thinking that perhaps we’ll see another rate hike or two down the road, even if the Fed pauses at today’s September 20 meeting. However, whether the Fed pauses from here on out or executes a couple more rate hikes, it really shouldn’t matter much to long-term investors. From where we stand, the conversation about interest rates should now be shifting away from worries about elevated inflation to the future positive prospects that correspond to the work that the Fed has already done. With the market-cap weighted S&P 500 (SPY) just a stone’s throw away from all-time highs, despite aggressive … Read more

The Role of Luck in Investing and How To Think About It

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Dear members: — For every Amazon (AMZN) that made it, there are hundreds, maybe thousands, from the dot-com era that didn’t. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla (TSLA), there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. — For every streaming enterprise like Netflix (NFLX), there is a Napster that failed. Most of us probably don’t even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet (GOOG, GOOGL), there’s an AltaVista or Netscape. For every Apple (AAPL), there … Read more

Apple’s Looming ‘Watch X’ Likely a Game Changer in Smartwatches

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Image Source: Wiyre Media By Brian Nelson, CFA Apple (AAPL) is expected to do a refresh of its Apple Watch this year, but the changes won’t be as significant to draw many to upgrade. However, as we look out to fiscal 2024 and fiscal 2025, exciting things could happen. According to a report from Bloomberg, the “Watch X,” marking the 10th anniversary of the rollout of the first Apple Watch, is targeted to include a blood-pressure monitoring tool, among other upgrades. Not only do we think a blood-pressure monitoring tool will drive considerable adoption from many that do not have a smartwatch, but it could also drive a huge market share shift to the device from Samsung (SSNLF) (SSGFF) and Alphabet’s … Read more

First Read: Microsoft, Alphabet Cash Components Wonderful in Calendar Q2 2023

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By Brian Nelson, CFA There are two primary cash-based sources of intrinsic value, and Microsoft (MSFT) and Alphabet (GOOG) (GOOGL) have gobs of them: net cash on the balance sheet and free cash flow. Both Microsoft and Alphabet reported calendar second-quarter results after the market close July 25, and while much will be said about their respective earnings reports, the reality is that the fundamental backdrop for both remains incredibly strong. We think both deserve a hearty weighting in the portfolio of the Best Ideas Newsletter, and we don’t plan to make any changes to our long-term fair value estimates as a result of the quarterly prints. Let’s talk about the health of Microsoft’s and Alphabet’s respective balance sheets. At … Read more

Top Dividend-Related News: MSFT, AAPL, ASML

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Image: Microsoft’s shares hit a record high in July! By Brian Nelson, CFA Microsoft’s (MSFT) shares hit an all-time high July 18 on news that it would raise prices on its Office products to account for the integration of AI into its tools. We’ve yet to test the new features that are collectively called 365 Copilot, but the new features will add $30/month to the overall price of the software, a meaningful percentage step-change that seems to be quite a needle-mover. Copilot, at the moment, will be a voluntary upgrade, but we think that over time, AI may become an entrenched feature across Microsoft’s entire product line-up, whereupon average selling prices across its customer base will meaningfully increase. AI may … Read more

Meta’s Threads Launch Immaterial to Meta But Tragic for Twitter

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Image: Threads logo. Meta has launched a Twitter-killer with its new real-time online conversation app, Threads. By Brian Nelson, CFA Big cap tech continues to innovate and encroach upon each other’s territory, and the latest example is Meta’s (META) expansion into real-time online conversation with its new app Threads that competes directly with Elon Musk’s Twitter. Consumers have been looking for an alternative to Twitter after Musk made a number of big changes to keep the bird app afloat, and Meta’s CEO Mark Zuckerberg is now pouncing on the opportunity to take share in this area. Unlike other rival platforms such as Truth Social (DWAC), users of Threads will be able leverage Instagram to log in to Threads and easily … Read more

ALERT: Big Yield Additions to Dividend Growth Newsletter Portfolio and High Yield Dividend Newsletter Portfolio

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  Image Source: Mike Cohen By Brian Nelson, CFA  With the federal funds rate standing at 5%-5.25%, the hurdle rate for yield in the Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio is much higher these days. We’re not at all worried about a recession as that was largely priced in during 2022, and we’re looking ahead to strong nominal GDP and huge opportunities within artificial intelligence [AI].  Though we may add a dividend grower that is yielding below the 5% yield threshold to the Dividend Growth Newsletter portfolio with expectations for breakneck dividend-per-share expansion in the future, these days we’re looking for a couple incremental ideas that have yields already much higher than the 5% mark to … Read more

Expect Huge Equity Returns This Decade, Much More Volatility However

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Image: Without question, the stylistic area of large cap growth has been the place to be for almost 15 years now. We think it remains the place to be. Brian Nelson, CFA The game has changed folks. The flooding of the markets with liquidity during the Great Financial Crisis [GFC] and the bailout of the banks in 2007-2009 marked the beginning of a new “regime” that we now live in. It wasn’t until the collapse of the markets during COVID-19, however, that the belief these markets would continue to move ever higher was reinforced. Where is the risk? What does “Lehman” even mean anymore? “Lehman” was not risk – “Lehman” was a generational buying opportunity. What was the worst global … Read more

ALERT: Going to “Fully Invested” in the Best Ideas Newsletter Portfolio

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Image: Since the publishing of the first edition of the book Value Trap, the stylistic area of large cap growth (SCHG) has meaningfully outperformed both the equal-weight S&P 500 (SPY) and small cap value (IWN). Summary of Best Ideas Newsletter portfolio changes UnitedHealth Group (UNH): 0% –> 4%-6% Booking Holding (BKNG): 0% –> 4%-6% Chipotle (CMG): 1%-2% –> 6%-8% Technology Select Sector SPDR (XLK): 0% –> 4%-6% By Brian Nelson, CFA With the debt-ceiling debate behind the markets, the regional banking crisis largely in the rear-view mirror, and the Fed winning the fight against inflation, a continuation of the strength in the markets as witnessed from the October 2022 lows can probably be expected. We “rode” the latest upswing with … Read more