GRPN

Valuentum’s 3 Breakthroughs in the Field of Finance and More

by

Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more

We Like the News! Buffett Scoops Up Kinder Morgan; FVE: $20

by

It looks like crude oil (USO) overproduction will continue. Dashing hopes that any rational behavior would prevail in the energy resource markets, member nations of OPEC February 16 said not that they would cut output but that they would not increase crude-oil output any further, as if the current pace of production isn’t already drowning the world in the black liquid. It turns out the rumor from last week had some basis to it, “Your Hard-Earned Money,” but it didn’t have much substance, in our view, especially since the deal hinges on cooperation from Iran, which remains dedicated to increased production to reach pre-sanction levels. We’re not reading much into the news, as Saudi Arabia, while included in the parties … Read more

The 20 Something’s Stock Portfolio

by

A version of this article appeared on our website March 31, 2015. <Our best ideas at any time are included in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.> The “20 Something’s Stock Portfolio” is the first in a series of articles where we get to the core of what many brand new investors want to do when they are first introduced to the stock market: find exciting companies that they are familiar with that will help compound their wealth over time. Other portfolios that we will share in this series include “The Ultra High Income Portfolio,” “The Economic Castle Portfolio,” “The Dividend Cushion Portfolio,” and “The Intelligent ETF Investor’s Portfolio,” among others. The series of portfolios will … Read more

We’re At New Highs Again

by

The taper came and went, and the markets don’t seem to care. The S&P 500 notched yet another high this week. The correction that we warned about came and went as well, almost as if market forces created such an event just to move higher. From my experience, the market, at the present moment, is trading almost purely on technicals. For example, once we touched the 10% official mark of a correction, we started to move higher, and once the markets started to move higher, the move accelerated. Consecutive gap ups following pull-backs have become the norm. This market has become almost a pure technical market, where traders and moving averages are taking precedent over fundamentals. This won’t last forever. The … Read more

Amazon Drops $40 Per Share

by

Amazon (AMZN) continues to focus on taking market share and damaging its competitors rather than generating large accounting profits and cash flows. The company’s cash-flow generation should improve if investments turn out to be profitable (and management turns off the expense gushers), but the company remains a low-margin retailing operation. The market has recently grown impatient with the executive suite’s lack of profit focus, and reaction to its second-quarter results, released Thursday, couldn’t have made this point more clear. For a company that boasts a market capitalization of ~$146 billion, one would think the firm is highly profitable. For Amazon, however, this just isn’t the case. We explain why the firm garners such an elevated valuation (despite meager profits) in … Read more

Valuentum Economic Castleâ„¢ Rating Update

by

Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

E-commerce Remains in Secular Expansion

by

Thursday brought a plethora of news from the e-commerce space. First, Bloomberg reported that Amazon (AMZN) is raising prices on Prime from $79 per year to $99 per year. The company was quick to note that the Prime Fresh membership fee will remain unchanged at $299, as it continues to test pricing thresholds in the marketplace. We don’t expect much customer defection as a result of the price hike—and especially nothing like that which happened to Netflix (NFLX), which lost hundreds of thousands of customers when it raised prices in 2011. Amazon’s price increase at Prime was necessary, in our view, as it faces rising content (movies) and shipping costs. With more than 20 million US Prime members, the pricing … Read more

E-commerce Exposure Still Makes Sense

by

The Census Bureau of the Department of Commerce reported Friday that it estimates US retail e-commerce sales for the third quarter, adjusted for seasonal variation, came in at 17.5% (+/- 5.8%) versus the same period a year ago. On an adjusted basis, US retail e-commerce sales, as a percent of total quarterly retail sales, have advanced to nearly 6%, up from just 2% at the beginning of 2004 (shown in image below). Both the rapid pace of US retail e-commerce sales expansion and the trend toward more transactions being completed online show no signs of slowing. Image Source: US Department of Commerce The positive data follows comScore’s (SCOR) report, released earlier this month, of a 13% increase in US desktop-based … Read more

Three Very Good Questions From Members

by

Q: Why do you use a risk free rate assumption of 4.25% when the current spot rate of the 10-year Treasury is about 2%? In our discounted cash-flow models that we use to value every non-financial operating company in our coverage universe, we match the duration of future free cash flows (from year 1 to perpetuity) with expectations of the average discount rate over this forecast horizon (from year 1 to perpetuity). We think the best way to achieve expectations of the long-term future average rate of the 10-year Treasury (risk free rate) is to use the weighted average of the historical 10-year Treasury and the current spot rate. The goal of using a weighted average risk free rate in … Read more

We Take a Deep Dive into the Future Prospects of Best Idea Google

by

Before the meteoric rise in the price of Apple (click ticker for report: ), Google (click ticker for report: ) stole most of the tech-stock headlines and, according to some, was pretty much a sure bet to become a $1,000 stock. However, looking under the hood, the company has had some turmoil during the past few years. In addition to bringing back founder Sergey Brin as the CEO, the company has created the world’s most successful mobile operating system to date (Android), a social network with over 100 million users, and failed to purchase Groupon (click ticker for report: ), which at the present seems like it was a blessing. Additionally, the company is working on cars that drive themselves, shuttered Google Wave … Read more