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ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Our Reports on Stocks in the Dollar Store and Department Store Industries

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Structure of the Multiline Retail (discount) and Department Store Industries The retail discount store industry provides consumable basic needs to customers primarily in the low- and middle-income brackets. More than one third of the industry’s customers live in households that earn less than $20,000 per year, making the group’s results counter-cyclical–as more households generate lower income due to poor economic conditions, store growth and same-store-sales opportunities increase. Still, competition is fierce among constituents and with many other retailers, including grocery stores. But given the niche low-price strategy of participants and their counter-cyclical nature, we like the group. The department store industry faces intense pressure from online retail and fierce competition from smaller retailers and discounters. Firms in the industry tend … Read more

Resetting Your Mental Model

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Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds

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Image: President of Investment Research Brian Nelson, CFA By Brian Nelson, CFA A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception. Though the book focuses more on the life and times of founder Jim Simons and dedicated only a page or two to the fall of Long-Term Capital Management (LTCM), another quant fund that went belly-up during the late 1990s, it was nonetheless a thoroughly interesting and enjoyable read. But why I am bringing up one of the most successful quant … Read more

Dollar General Remains in Command

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Image Source: Mike Mozart By Brian Nelson, CFA Dollar General (DG) is a holding in the Best Ideas Newsletter portfolio. The company reported strong third-quarter results December 5 that showed better performance than rival Dollar Tree (DLTR). Discount retail continues to feel the ill-effects of tariffs that are raising cost of goods sold, but Dollar General is taking the headwinds in stride. During its most recently reported quarter, Dollar General posted same-store sales growth of 4.6%, helping to drive overall net sales up nearly 9%. Operating profit advanced more than 11%, diluted earnings per share nearly 13%, and year-to-date operating cash flow nearly 10%, as the firm returned more than $480 million to shareholders through buybacks and dividends in the … Read more

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

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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

The Valuentum Strategy in Action: Why We Are Letting BIN Holding Dollar General Run Higher

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Image Shown: Best Ideas Newsletter holding Dollar General Corporation (DG) jumped up after posting great performance during the second quarter of its fiscal 2019 on August 29. The company has trounced the market return since it was added to the Best Ideas Newsletter in April 2017. We are letting this winner run higher. By Callum Turcan On August 29, our favorite discount retailer Dollar General (DG) posted second quarter FY2019 earnings (ended August 2) that saw shares of this Best Ideas Newsletter portfolio holding fly higher after the report. GAAP net sales rose by 8.4% year-over-year and same-store sales were up 4.0% during the quarter, which we strongly appreciate, as Dollar General continues to showcase why flexibility and convenience are … Read more

No Recession At Walmart; Estee Lauder Not Cheap

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Image Source: Mike Mozart Walmart’s results were quite reassuring regarding the health of the economy. There are also pockets of significant strength, with prestige beauty being catapulted by a “selfie generation.”  By Brian Nelson, CFA No Recession At Walmart Following what can best be described as “carnage” across the retail sector when Macy’s reported August 14, Walmart (WMT) eased some of the concerns in the retail sector when the bellwether reported August 15. Although Amazon (AMZN) seems to get most of the attention when it comes to assessing the health of the consumer, Walmart remains twice as large, as measured by revenue. Walmart generated ~$514 billion in revenue during its last fiscal year, while Amazon hauled in ~$233 billion. If the … Read more

Macy’s Cuts Guidance, Dividend Cut Could Be on the Horizon

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Image Source: Macy’s Inc – IR Presentation By Callum Turcan Retailers (XRT, RTH) have been struggling as the e-commerce shift has stressed margins and hurt foot traffic at stores and malls all across America. Macy’s Inc (M) had fared better than most, but that’s beginning to change. The company reported second quarter FY2019 earnings on August 14 which came with a guidance cut that saw shares of Macy’s plummet below their late-2017 lows. While Macy’s recovered throughout the trading day, the market is clearly signaling that investors are expecting more pain is ahead. As of this writing, shares of Macy’s yield ~9.0%, a major red flag. Guidance Cut Management cut earnings guidance for the full fiscal year while keeping estimates … Read more