IWF

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

What So-Called Statistical “Value Premium?”

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Image: The iShares Russell 1000 Growth ETF has outperformed the iShares Russell 1000 Value ETF by nearly 250 percentage points over the past two decades. Image Source: TradingView By Brian Nelson, CFA Quantitative analysts are trained to believe that the quantitative stylistic area of “value” outperforms (and generally should outperform) the quantitative stylistic area of “growth” over long periods of time. After all, this was one of the findings of University of Chicago Eugene Fama’s three-factor model, published in the early 1990s–that on a historical basis through the time of the publishing of the influential backtest, that stocks with high book-to-market (low price-to-book) ratios–so-called “value” stocks–outperformed those with low book-to-market (high price-to-book) ratios–so-called “growth” stocks–with emphasis placed on the work … Read more

Is It Time To Turn Bullish? Inflation Tamed?

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To download the January 2023 edition of the Best Ideas Newsletter, please click here (pdf). ——————————————— About Our Name But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant.                          — Warren Buffett, Berkshire Hathaway annual report, 1992   At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of a variety of investing disciplines in order to identify the most attractive stocks at any given time. Valuentum therefore analyzes each stock across a wide spectrum of philosophies, … Read more

Don’t Let “Them” Spin the Narrative

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By Brian Nelson, CFA Let’s call it how it is: 2022 was an absolute nightmare for the 60/40 stock/bond portfolio. During the year, the 60/40 stock/bond portfolio was down 16.9%, according to data from the Vanguard Balanced Index Fund Shares (VBIAX). During 2022, the S&P 500 (SPY) index was down 18.2%, meaning that the 60/40 stock/bond portfolio, despite allocating to 40% bonds, captured over 90% of the downside risk. Modern portfolio theory is dead: Stocks have done far better than bonds during upswings, and only slightly worse during downturns. The risk/reward for the 60/40 stock/bond portfolio just doesn’t add up anymore. Bond prices did not move inversely to stock prices during the COVID-19 meltdown, and they did not move inversely … Read more

Stock Market Locked in Technical Downtrend; Millionaires Expect More Pain in 2023

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Image: The stock market has been locked in a downtrend through all of 2022, and the latest bull trap has spoiled the Santa Claus rally. 2023 may be an equally rough year. By Brian Nelson, CFA This market just doesn’t want to go higher in the near term, and the latest bull trap wasn’t encouraging at all. We think long term investors should stay the course, but it is looking more and more like we won’t see a stock market bottom until sometime in 2023. Santa brought coal this year. The false breakout of the downtrend on December 13 was very telling. Just when investors thought the markets just might be headed for a strong Santa Claus rally and a … Read more

The Stock Market Is Nearing Technical Support Levels

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Image: This year has been a difficult one for equity investors, but the selling pressure that has been common in the markets may start to slow as broader indices such as the S&P 500 begin to approach technical support levels. On the S&P 500, we think there is substantial technical support in the 3,200-3,500 range, which to us suggests that further near-term downside may be limited. The S&P 500 closed at 3,674.84 on Friday, June 17, and we think fair value is much higher. By Brian Nelson, CFA  It’s been difficult to watch the stock market give up much of the gains reaped over the past year or so during the selling barrage that has occurred thus far in 2022. … Read more

Bitcoin, U.S. Large Cap Growth, and Technology Continue to Dominate Returns

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Image source: Seeking Alpha, retrieved November 28 —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.  The Benefits of Premium Membership Sign Up Today. First 14 days FREE!  At Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m], we strive to stand out from the crowd. Most investment research publishers fall into a few camps, whether it be value, growth, income, momentum, chartist or some variant of the aforementioned. We think each in its own right holds merit, but the combination of these approaches is even more powerful. After all, stock price movements aren’t just driven by investors of the value or … Read more

Nvidia Continues to Deliver in the Face of Global Supply Chain Crunch

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Image Source: Nvidia Corporation – September 2021 IR Presentation By Callum Turcan On November 17, Nvidia Corporation (NVDA) reported third quarter earnings for fiscal 2022 (period ended October 31, 2021) that beat both consensus top- and bottom-line estimates, and the firm provided favorable guidance covering the current fiscal quarter. The company has done a solid job navigating the ongoing shortage of semiconductor components along with other hurdles, such as logistical bottlenecks and inflationary pressures. Nvidia’s growth runway is enormous as it intends to expand into a new market within the semiconductor space, which we will cover in this note. Shares of NVDA have leapt higher during the past month as the “chip” company’s (Nvidia designs chips that are produced by … Read more

Valuentum Weekly

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Image: Bitcoin, technology and large cap growth have led the pack the past 5 years while pipeline MLPs, crude oil and energy stocks have fallen way behind. Large cap growth > small cap value. Bonds, non-US stocks continue to lag. The Valuentum Weekly is a brand-new weekly market commentary from Valuentum Securities, released each weekend in digital form. The Valuentum Weekly offers members a weekly synopsis of the markets and major events. It will be straight and to-the-point. Our goal is to deliver to you the latest information and insights. We welcome your feedback on how we can make the Valuentum Weekly as useful and as relevant for you as ever! Takeaways The markets offer investors an asymmetric risk opportunity, … Read more

This Stock Market Doesn’t Scare Me

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Dear members:   It’s amateur hour at Seeking Alpha, it seems. Most have been calling for a market crash the past week or so, but it’s hard for me to take many writers over there too seriously. Neither should you. We had the crash in February/March of this year, and the Fed/Treasury will do what it takes to prevent another one, in my view. Let me say it for the first time: This stock market doesn’t scare me.  The reality is that we finally bumped up into fair value range. It wasn’t a day or two after I sent out a market alert to you to let you know that markets are now fairly valued when we started to see some … Read more