META

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: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

Fed Rate Decision, UAW Strike Continues, Microsoft Ups Payout

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Image Source: Mike Mozart By Brian Nelson, CFA If you’re thinking like us about the ongoing Fed rate-hiking cycle, you’re probably thinking that perhaps we’ll see another rate hike or two down the road, even if the Fed pauses at today’s September 20 meeting. However, whether the Fed pauses from here on out or executes a couple more rate hikes, it really shouldn’t matter much to long-term investors. From where we stand, the conversation about interest rates should now be shifting away from worries about elevated inflation to the future positive prospects that correspond to the work that the Fed has already done. With the market-cap weighted S&P 500 (SPY) just a stone’s throw away from all-time highs, despite aggressive … Read more

The Role of Luck in Investing and How To Think About It

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Dear members: — For every Amazon (AMZN) that made it, there are hundreds, maybe thousands, from the dot-com era that didn’t. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla (TSLA), there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. — For every streaming enterprise like Netflix (NFLX), there is a Napster that failed. Most of us probably don’t even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet (GOOG, GOOGL), there’s an AltaVista or Netscape. For every Apple (AAPL), there … Read more

Report Updates — Did You Throw the Baby Out with the Bathwater?

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Hi everyone: Brian here. I hope you are having a nice Labor Day holiday weekend.  We wanted to bring your attention to a number of stock report updates. Both Alibaba (BABA) and Korn/Ferry (KFY) have registered one of the highest ratings (9) on the Valuentum Buying Index. To garner such a high rating, a company would have to be considered undervalued on a discounted cash-flow basis, undervalued on a relative value basis, as well as exhibiting strong technical/momentum indicators. Alibaba looks like it could pop quite a bit from current levels after technically basing for months, and while risks related to the name are tremendously high given rising U.S.-China tensions, shares sure look undervalued to us. Korn/Ferry’s shares also look … Read more

A New Computing Era Has Begun — Nvidia Delivers Yet Again

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By Brian Nelson, CFA When we first wrote that Nvidia (NVDA) would power this market higher back in May, the firm had just put up one of the most prolific earnings beats I had ever seen. I’d have to go back almost 20 years to the invention of Apple’s iPod click-wheel technology to remember something that came close. Well, on August 23, Nvidia just put up another monster quarter, this one the second of its fiscal year 2024, beating top-line and bottom-line consensus estimates by a huge margin for the period ending July 30. We’ve raised our fair value estimate of Nvidia considerably following the blockbuster second-quarter performance and third-quarter outlook, released today, and the race is on to adopt … Read more

Meta’s Threads Launch Immaterial to Meta But Tragic for Twitter

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Image: Threads logo. Meta has launched a Twitter-killer with its new real-time online conversation app, Threads. By Brian Nelson, CFA Big cap tech continues to innovate and encroach upon each other’s territory, and the latest example is Meta’s (META) expansion into real-time online conversation with its new app Threads that competes directly with Elon Musk’s Twitter. Consumers have been looking for an alternative to Twitter after Musk made a number of big changes to keep the bird app afloat, and Meta’s CEO Mark Zuckerberg is now pouncing on the opportunity to take share in this area. Unlike other rival platforms such as Truth Social (DWAC), users of Threads will be able leverage Instagram to log in to Threads and easily … Read more

Expect Huge Equity Returns This Decade, Much More Volatility However

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Image: Without question, the stylistic area of large cap growth has been the place to be for almost 15 years now. We think it remains the place to be. Brian Nelson, CFA The game has changed folks. The flooding of the markets with liquidity during the Great Financial Crisis [GFC] and the bailout of the banks in 2007-2009 marked the beginning of a new “regime” that we now live in. It wasn’t until the collapse of the markets during COVID-19, however, that the belief these markets would continue to move ever higher was reinforced. Where is the risk? What does “Lehman” even mean anymore? “Lehman” was not risk – “Lehman” was a generational buying opportunity. What was the worst global … Read more

Apple’s ‘Vision Pro’ Not in Our Valuation Model; Expect Upside

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Image: Apple released its first major product since the Apple Watch in the Vision Pro on June 5. The device opens the door to the era of spatial computing and is priced at $3,499. By Brian Nelson, CFA Apple (AAPL) unveiled its Vision Pro at the company’s Worldwide Developers Conference on June 5. We were impressed with the new major product launch, its first since the release of the Apple Watch nearly a decade ago but estimating the total market opportunity for a $3,499 device is a difficult one. The Vision Pro will be available in early 2024 and will compete in many areas with the Meta (META) Quest, and we expect Apple’s annual numbers come next year to be … Read more

ALERT: Going to “Fully Invested” in the Best Ideas Newsletter Portfolio

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Image: Since the publishing of the first edition of the book Value Trap, the stylistic area of large cap growth (SCHG) has meaningfully outperformed both the equal-weight S&P 500 (SPY) and small cap value (IWN). Summary of Best Ideas Newsletter portfolio changes UnitedHealth Group (UNH): 0% –> 4%-6% Booking Holding (BKNG): 0% –> 4%-6% Chipotle (CMG): 1%-2% –> 6%-8% Technology Select Sector SPDR (XLK): 0% –> 4%-6% By Brian Nelson, CFA With the debt-ceiling debate behind the markets, the regional banking crisis largely in the rear-view mirror, and the Fed winning the fight against inflation, a continuation of the strength in the markets as witnessed from the October 2022 lows can probably be expected. We “rode” the latest upswing with … Read more