JPM

5 Things We Learned in 2019

by

5 Things We Learned in 2019      “The further a society drifts from the truth, the more it will hate those that speak it.” — George Orwell By Brian Nelson, CFA    I’m looking at the beautiful Smoky Mountains in Tennessee as I’m writing this piece. I hope that you and yours are having a wonderful holiday season with family and friends. I wanted to share with you a few things that I think investors learned during 2019. Before I do, however, you’re probably wondering why I decided to lead in with this particular quote from Orwell. — — The quote, in some ways, is a reflection of how I think many approach truth in finance. Maybe they don’t … Read more

Economic Commentary: Marks, Dalio, and the Discount Rate

by

Image Source: Mike Cohen We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there! Brian Nelson: The concept of negative interest rates is not merely academic, but they have far-reaching implications across the global … Read more

Buffett Favorite, Bank of America a Bargain

by

“If Bank of America can continue to narrow the return on capital gap to JPMorgan, we expect its shares will grow into our $35 fair value estimate.” — Matthew Warren By Matthew Warren and Brian Nelson, CFA On October 16, Bank of America (BAC) reported third-quarter results that showed adjusted EPS of 75 cents per share, as compared to the average analyst estimate of 68 cents per share, and 66 cents in the year-ago quarter. The adjustment was for the previously announced $2.1 billion pre-tax impairment charge related to Bank of America’s investment in its merchant services joint venture from 2009, which negatively impacted EPS by 19 cents per share. The bank plans to create this capability in-house going forward. … Read more

JPMorgan Continues to Go from Strength to Strength

by

Image Source: Gideon Benari  By Matthew Warren On October 15, JPMorgan (JPM) posted third-quarter earnings of $2.68 per share, ahead of the average analyst estimate of $2.45. Revenue of $30.06 billion advanced 8.1% compared to the same period last year and $1.7 billion ahead of consensus. Basically, the company managed to overcome very muted expectations for the quarter. Return on tangible common equity continued along at a high level of 18%, versus 17% in the same quarter last year. Importantly, the overhead ratio improved to 55% from 56% last year. The balance sheet remains very strong with a common equity Tier 1 ratio of 12.3%, up slightly sequentially. Loans were flat compared to last year but were up 3% excluding loan … Read more

Economic Commentary: Robots, Value Trap, and Politics on the Markets

by

Tickerized for stocks in the DIA. Valuentum sat down for the latest installment of its periodic economic commentary, and the team tackled a wide array of topics, from robots on Wall Street, to President of Investment Research Brian Nelson’s new book Value Trap, to political influence on the markets and boyond. Let’s set the stage with a prompt from a recent Bloomberg article, “The Master of Robots…Coming for Wall Street:” “The problem is, computer-powered strategies are struggling to live up to the hype, with a Eurekahedge index of AI hedge funds lagging peers in recent years. That spells opportunity for the likes of Lopez de Prado with his outfit True Positive Technologies — a dig at the erroneous conclusions derived … Read more

ICYMI: Interview with Valuentum’s President Brian M. Nelson, CFA

by

Catch up with Valuentum’s President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles. By Brian Nelson, CFA Recently, I was interviewed by Arne Magnus Lorentzen Ulland of the blog stockles. Arne is a dividend growth investor like many of you, and I sincerely hope you enjoy the interview he put together. I’m very grateful for his interest. His questions were fantastic. We discuss why and how I incorporate independence and integrity into the service at Valuentum. We go into detail regarding why Valuentum views stocks the way it does, and how Valuentum combines enterprise valuation and the information contained in prices in its stock-selection process. I discuss the pitfalls … Read more

Economic Commentary: Apple $225+, Brokers Tumble, Auto Sales Look Tired

by

“Though all signs point to increased volatility, we maintain our view that we’re well-positioned in the newsletter portfolios, and the ideas highlighted in the Exclusive publication consider the backdrop economic conditions we closely monitor.” — Brian Nelson, CFA There has been plenty of news in the markets this week, with the Dow Jones Industrial Average (DIA) experiencing significant declines only to bounce back a bit. From where we stand, the markets look vulnerable technically, but that doesn’t mean we’re looking to change anything in the newsletter portfolios. We have some dry powder in the form of a ~10% cash weighting in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. The disappointing September ADP jobs report added to lower-than-expected ISM (Institute … Read more

Economic Roundtable: “Value” Versus “Growth” Rotation

by

Tickerized for the DIA. “This kind of trading activity could be setting the stage for a big quant fund blow up, if the kind of leverage it takes to move the markets to this magnitude was applied. All it may take is for the B/M “value” factor to continue to suffer in the coming 12-18 months–it’s possible we could see a few quant firms go belly up. My guess is that market participants are paying very close attention to this activity, and if they “smell blood,” things could get ugly.” – Brian Nelson, CFA Earlier this week, the markets experienced significant internal “rotation,” as cyclicals and “value” stocks materially outperformed their defensive and “growth” counterparts, all the while the broader … Read more

Thought Piece: The Hidden Advantage

by

As activist investing proliferates, investors are becoming more and more familiar with celebrity investing gurus such as Carl Icahn and David Einhorn. Let’s examine how these investing giants have carved out a unique structural advantage over mom-and-pop investors. This article was originally published in June 2014. By Brian Nelson, CFA Wouldn’t it be great to load up on options and then announce to the world that you’ve done so, thereby generating tremendous gains as other investors pile into the stock driving its price higher? I think most investors either believe that such behavior is mere fantasy, or would love to have this significant influence for their own use, assuming it was legal. Perhaps to your surprise, this behavior is neither … Read more

In the News: Amazon, GE, Kraft-Heinz, Disney, CVS Health, Gilead

by

We’re reiterating the large range of fair value outcomes for Amazon. We’re staying far away from General Electric and Kraft-Heinz. Netflix may have its back against the ropes with Disney Plus. CVS Health and Gilead were two setbacks in the newsletter portfolios in the past, but we kept losses to a minimum and new ideas more than offset the weakness. The Best Ideas Newsletter portfolio continues to do very well. By Brian Nelson, CFA Amazon (AMZN) Image Shown: Amazon has a large range of fair value outcomes, and shares are trading roughly in line with our fair value estimate. The e-commerce powerhouse’s shares have come in aggressively since it reported second-quarter results July 25. We get a lot of questions … Read more