INSP

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Facebook: The New Internet?

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First of all, we’d like to thank you for your ongoing support and wonderful emails about the performance of the dynamic duo today: Google (GOOG) and Baidu (BIDU), two holdings in the portfolio of our Best Ideas Newsletter. We very much appreciate your kind words. Though we (and hopefully all of our members) have profited greatly from these two behemoths in the ‘Internet Content & Services Group,’ we could have done a better job alerting you to Facebook’s recent meteoric rise. Today, we’ve raised our fair value estimate of Facebook (FB) to $76 per share (the high end of the fair value range is now $93 per share) as a result of more optimistic assumptions related to the firm’s opportunity in mobile and … Read more

Stock Market Outlook for 2021

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By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more