LMT

Bullets: Recapping the Crash, Where Are We Now?

by

Image: The S&P 500 has only retraced a small part of its decline since the top in February 2020. By Brian Nelson, CFA In August 2019, Valuentum took a cautious bent on the markets, removing the Financial Select Sector SPDR (XLF) and the Energy Select Sector SPDR (XLE), raising cash at the time. Financials and energy have been material underperformers during the swoon, with the Fed/Treasury launching more stimulus than the Great Financial Crisis and Saudi Arabia/Russia continuing their oil-price war. Here’s what we said in August 2019: August 2019: There are myriad risks as we near the end of this now-decade long bull market: a US-China trade/currency war, slowing global economic growth (Germany’s economic growth turned negative during the … Read more

Attack COVID-19 With Forward-Looking, Expected Data

by

President of Investment Research at Valuentum Brian Nelson shares his financial wisdom in detailing how the world must attack COVID-19 with forward-looking expected data (not backward-looking, empirical data) as the global economy faces what could become the worst business environment since the Great Depression, irrespective of government fiscal stimulus. — Editor’s note: Brian emphasizes the importance of “expert analysis” over “backward-looking analysis,” and we would like to clarify that he is not giving personalized advice. 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. Brian Nelson owns shares in SPY and SCHG. Some … Read more

Boeing’s Fall from Grace

by

Image: Boeing was added to the Dividend Growth Newsletter portfolio January 27, 2017, and removed March 16, 2018, prior to the unfortunate accidents that have claimed the lives of hundreds of people. We warned readers to stay far away of Boeing’s stock days before its huge collapse. The rating agencies have slashed Boeing’s credit rating, and the firm has now suspended its dividend.  By Brian Nelson, CFA We received a comment from a guest about Boeing, and we wanted to clarify our prior research calls on the company. Boeing’s (BA) fall from grace has been largely documented in our prior writings here (March 11, 2020) and here (January 23, 2020), so we won’t spend much time recapping the series of … Read more

Boeing Down 15%, Turbulence Still Ahead

by

Image: Boeing’s shares have faced a perfect storm of negatives. We’re still not interested. By Brian Nelson, CFA I couldn’t have told you in any clearer terms in our January 23 note about my thoughts on Boeing, “Why *NOW* Do You Care About Boeing’s Stock” — “In no, way shape or form should you *now* (January 23) be interested in Boeing’s stock.” Here were my concluding thoughts in that note: I’ve written about working on resetting investors’ mental models, and getting investors to use our research in a forward-looking capacity. What I’m saying is that now (January 23) is not the time to evaluate our work on Boeing. Many months ago was the time to have had the Boeing “conversation.” If … Read more

Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?

by

Image Source: Value Trap: Theory of Universal Valuation From Value Trap: “The banking sector was not the only sector that faced considerable selling pressure during the Financial Crisis of the late 2000s, of course. Other companies that required funding to maintain their business operations faced severe liquidity risk, or a situation where refinancing, or rolling over debt, might be difficult to do on fair terms, making such financing prohibitive in some cases. Those that faced outsize debt maturities during the most severe months of the credit crunch faced a real threat of Chapter 11 restructuring had the lending environment completely seized. In thinking about share prices as a range of probable fair value outcomes, equity prices tend to face pressure as … Read more

Buffett Makes Another “Unforced Error” in Airlines

by

Image Source: Value Trap: Theory of Universal Valuation By Callum Turcan The commercial passenger airline industry is nearly impossible, to downright impossible, to generate meaningful shareholder value in. Specifically as it relates to the US, since the Airline Deregulation Act of 1978 (which among other things allowed airlines to set their own routes without always needing to seek regulatory approval which in turn greatly increased competition, lowered fares, and saw a boom in travelers and miles traveled) various airlines have gone under (such as Pan Am in 1991 and Delta Air Lines (DAL) in 2005 along with others) as competitive advantages once created by government barriers no longer existed. This is true globally as well, as rising competition from private … Read more

A ~0.1% Probability Since 1896

by

Image Source: Wikipedia Commons   By Brian Nelson, CFA It was mid-June 2015, and our team released our case on why the midstream MLP space would collapse. To us, it just made sense. We’ve been practicing enterprise valuation for a long time, and to this day, we’ve updated over 20,000+ discounted cash flow models. I used to head up the methodology and valuation infrastructure of a department of over 100 analysts across several continents and all sectors when I used to work at Morningstar. Baptism by fire as they say. This was about 10 years ago now. Since our call in mid-June 2015 through March 2, 2020, on a price basis, the S&P 500 (SPY) has advanced 46%, while the Alerian MLP … Read more

Fed Cuts 50 Basis Points, Expect More Market Volatility Ahead

by

Image Source: FOMC  The emergency 50-basis point Fed rate cut announced March 3 was largely expected by the marketplace in light of growing economic concerns due to COVID-19, but it does nothing to immunize against COVID-19 and little to stabilize the situation. We continue to monitor the situation closely, and we expect ongoing volatility in the coming days and months as the situation with COVID-19 remains fluid. Having moved to defensive positions in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio in January and having capitalized on the “crash protection” put, we are preparing for our next move. For now, we’re watching and waiting, and we encourage readers that have not yet picked up their copy of … Read more

Analyzing Parsons: A Defense, Intelligence, and Critical Infrastructure Solutions Company

by

Image Source: Parsons Corporation – February 2020 IR Presentation By Callum Turcan Parsons Corporation (PSN) is a provider of technical design, engineering, and software solutions to markets within the realm of defense, intelligence, threat detection and mitigation, cybersecurity, critical and transportation infrastructure, mobility solutions, connected communities, and more. The company went public in May 2019 and has since used those IPO proceeds to fund its growth story, including the acquisition of OGSystems during the first half of 2019 (which focuses on “geospatial intelligence, big data analytics, and threat mitigation”) and QSR in the second half of 2019 (which “specializes in radio frequency spectrum survey, record and playback; signals intelligence; and electronic warfare missions”). The company continues to generate value with … Read more

COVID-19 Crisis Intensifies

by

Image Source: CDC. Coronavirus Disease 2019 (COVID-19).  Our dearest members: — The world is being challenged today by what some including Bill Gates believe might be a “once-in-a-century pathogen.” We do not know the eventual outcome, whether the impact of this illness ends up being as profound as the Spanish Influenza of 1918-1919 (which inflicted a death toll in the tens of millions), but we maintain our view the markets have yet to come to grips with the impact of COVID-19 on economic activity and potential ramifications on the global economy and the banking system.  — What is currently a “biological” crisis may turn into an all-out global financial crisis, one that could end up worse than the 2008/2009 mortgage meltdown. Instead … Read more