META

Nvidia Rockets Higher to Propel Large Cap Growth

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Image: Nvidia powers higher after releasing better-than-expected second-quarter fiscal 2024 guidance. The company continues to be a driver behind the outperformance of large cap growth as a stylistic area. By Brian Nelson, CFA We haven’t seen a quarterly guidance beat like this since Synaptics (SYNA) put up a monster quarter when Apple (AAPL) started using its innovative click-wheel technology in the first-generation iPod, almost 20 years ago. Nvidia Corp.’s (NVDA) outlook for the second quarter of its fiscal 2024 was phenomenal thanks to tremendous interest in its chips that power artificial intelligence [AI]. We expect a material increase in our fair value estimate of Nvidia, but shares remain quite pricey, in our view. Revenue during Nvidia’s fiscal second quarter is … Read more

Call Me Unconcerned

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Image: Large cap growth has dominated returns the past five years. The Best Ideas Newsletter portfolio continues to have significant exposure to this area. By Brian Nelson, CFA When it comes to the financial markets, the debt ceiling debate is nothing to worry about. Countries (sovereigns) cannot generally default on debt that is denominated in their own currency. The concern that there will be any sort of calamity if the U.S. government doesn’t raise the debt ceiling is far overblown, in our view. The political will of the U.S. to pay its debt will only resolve itself in time, and any risk premium built into Treasuries as a result of the debt ceiling showdown will be fleeting. Of course, nobody … Read more

Nice! — NASDAQ-100 Follows Through on Breakout

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Image: NASDAQ-100 breaks through August 2022 resistance. NOW READ: There Are No Free ‘Income’ Lunches ———- It’s Here!  The Second Edition of Value Trap! Order today!   —– Tickerized for holdings in the QQQ. Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.         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 … Read more

Earnings Roundup

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By Brian Nelson, CFA PayPal Holdings (PYPL) best days may be behind it. We’re not sure why there is so much consumer backlash against the company, but we think the fallout not only has impacted the company’s business fundamentals but also its stock. PayPal’s fall from grace started when rumors began to swirl about its potential interest in Pinterest (PINS), and we no longer can get behind the firm’s shares. As with Meta Platforms (META), we were burned pretty bad last year with PayPal, and while the newsletter portfolios did quite well on a relative basis during 2022, it’s hard to swallow that two of our favorite ideas just didn’t live up to expectations. In any case, PayPal’s shares are … Read more

Case Study: How to Assess Earnings Quality

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By Brian Nelson, CFA Let’s first become acquainted with why assessing earnings quality is important. According to the Research Foundation of the CFA Institute:  Understanding the quality of earnings is an essential part of processing and interpreting information. A high-quality earnings number will (1) reflect current operating performance, (2) be a good indicator of future operating performance, (3) and fairly annuitize the intrinsic value of the company.  At Valuentum, there are five basic areas that we evaluate to assess the quality of a firm’s earnings: a) is the company’s earnings growth driven by higher-quality revenue expansion or lower-quality cost-cutting measures (can the trajectory of earnings be sustained with continued revenue increases because cost-cutting, by definition, is a finite activity?); b) … Read more

Meta Platforms Surges Back to Fair Value Estimate

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Image: Meta Platforms’ shares continue to recover from its massive fallout in 2022. We’re sticking with our $225 fair value estimate following the company’s first-quarter 2023 earnings report. By Brian Nelson, CFA Meta Platforms (META), formerly Facebook, has surged back to our discounted cash-flow-derived fair value estimate. Year-to-date in 2023, the social media behemoth’s shares have almost doubled, and while we are pleased with the company’s share-price comeback, we don’t envision making any material changes to our $225 per-share fair value estimate following the company’s first-quarter 2023 report, which we thought was just okay. Meta Platforms’ shares remain significantly below the $380+ highs that were reached in August 2021. We’re happy to see the pop in Meta’s stock during the … Read more

Cost Cutting Drives Fair Value Increase of Meta Platforms

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To download Meta Platform’s 16-page stock report (pdf) >> ———- It’s Here!  The Second Edition of Value Trap! Order today!   —– Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.  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.

ICYMI: How Big Is Your “Too Hard” Bucket?

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Dear members: — I wrote a note about the role of luck in investing, and luck is certainly not to be underestimated when it comes to the long-term success of a company. Even minor changes in the history of the path of successful companies would have relegated them to mere footnotes in the annals of time. — Amazon (AMZN), as probably the best example, may not have made it past the dot-com bust without some timely financing just before the dot-com crash in 2000, while other companies may have looked a whole lot different today had just a few things not gone their way, from Apple (AAPL) to Meta Platforms (META) to Alphabet (GOOG, GOOGL) and beyond. — In investing, it’s okay to … Read more

ICYMI: As Expected, Stock Pickers Trounce the Indexes When It Matters

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Image: Charles Dickens. Image Source: Public Domain  “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” — Charles Dickens, A Tale of Two Cities By Brian Nelson, CFA It was the best of times with respect to relative “outperformance,” it was the worst of times with respect to absolute “performance.” During 2022, that is. If all that our readers were focused on last year were our missteps in Meta … Read more

Meta’s Free Cash Flow Generation Has Returned, But TikTok Has Permanently Changed the Competitive Landscape

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Image: Meta Platforms’ free cash flow has bounced back a bit, but the firm’s top-line growth remains challenged as it transitions away from a secular growth powerhouse into a cyclical story with encroaching competition. Image Source: Meta Platforms By Brian Nelson, CFA As we outlined in our introductory note in the February edition of the Dividend Growth Newsletter (pdf), the Federal Reserve is slowing its pace of benchmark rate increases as signs of inflation start to slow. Though there may still be pockets of input cost pressures, particularly with respect to prices at the pump and food-at-home expenses, for the most part, the negative wealth effect from falling asset prices around the globe is successfully working itself through the system. … Read more