MORN

Quants and High-Frequency Trading the Real Cause of the GameStop Frenzy?

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  Image: The cause of the GameStop trading frenzy remains largely unclassified as it appears to us that quant and high-frequency trading played a much bigger role in the market disruption than what is being reported. By Brian Nelson, CFA Third-quarter 2021 earnings season has been thrust upon a marketplace that has been preoccupied with talk over supply chain disruptions, increasing inflation expectations, unfortunate distractions from trading activity by key officials at the Fed, and Chinese regulatory unease. We think these items had largely been the key reasons for the pullback in the markets in recent weeks. However, with news that President Biden seems to continue to support Jerome Powell as Fed Chief (we’ll know for sure in February) and … Read more

The Investment Case for More Gender Diversity

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Image: The Impact Shares’ YWCA Women’s Empowerment ETF (WOMN) has trounced the S&P 500 since inception, while the SPDR SSGA Gender Diversity Index ETF (SHE) has bested the quantitatively-hailed small cap value ETF over the same time period. By Valuentum Analysts There has been a plethora of research over the years regarding the value of diversity on teams, in corporate boardrooms, and across asset management. The CFA Institute defines diversity as “the spectrum of human attributes, perspectives, identities, and backgrounds,” and notes that “the discussion around motivations for pursuing diversity in investment management often revolves around two main areas: ‘the business case for diversity’ (i.e., with more diverse perspectives, business outcomes will improve) and ‘because it is the right thing … Read more

Normalizing our Fair Value Estimates for the Money Center Banks

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Image Source: Mike Cohen By Brian Nelson, CFA In March, during the depths of the COVID-19 meltdown, we trimmed our fair value estimates for many financials and money center banks. The reasoning was rather straightforward. Our base-case projections for the group were lowered as a result of our expectations of a global economic recession. We factored in higher credit losses due to our anticipation of slowing economic activity that would be triggered by consumers staying at home to avoid COVID-19. We also considered the impact of net interest margin (“NIM”) compression that would result from expectations of a sustained ominous inverted yield curve, and in light of heightened uncertainty regarding the fatality rate of the virus itself (at the time), … Read more

June Dividend Growth Newsletter & Intrinsic Value Investing

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“But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant.“  —                — Warren Buffett, Berkshire Hathaway annual report, 1992 — By Brian Nelson, CFA — To add our new options commentary to your membership, please register here ($500/year). — Hi everyone!  — We remain unequivocally bullish on the markets and intrinsic value investing. We believe value today rests within companies that have strong net cash positions (all cash less short- and long-term debt) and solid expected future free cash flows … Read more

Video: A Call for More Policy Action in a Post COVID-19 World

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Image: There may no longer be any basis for believing in efficient markets. Investors were bidding up the price of the wrong company because of confusion over its ticker symbol. This is just one example of how markets are inefficient.  Bailouts coupled with Fed and Treasury stimulus from COVID-19 will have profound implications on investment behavior, with expectations for indexing and quantitative strategies to continue to proliferate. New rules may be required to ensure that investors’ interests are truly being put first. President of Valuentum Brian Nelson presents a call to action. To watch the video >> Tickerized for the following: AMTD, BLK, DNB, FDS, IBKR, LPLA, MCO, MORN, NTRS, RJF, SCHW, SPGI, TRI, TROW, VALU –— Valuentum members have … 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

Dividend Increases/Decreases for the Week Ending December 14

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Below we provide a list of firms that raised their dividends during the week ending December 14. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week AES (AES): now $0.1365 per share quarterly dividend, was $0.13. Albany (AIN): now $0.18 per share quarterly dividend, was $0.17. AT&T (T): now $0.51 per share quarterly dividend, was $0.50. Balchem (BCPC): now $0.47 per share quarterly dividend, was $0.42. C.H. Robinson Worldwide (CHRW): now $0.50 per share quarterly dividend, was $0.46. CenterPoint (CNP): now $0.2875 per share quarterly dividend, was $0.2775. CNB Community Bancorp (CNBB): … Read more

Valuentum’s Weighted Average Cost of Capital (WACC) Distribution

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The weighted average cost of capital is one of the most subjective measures in corporate finance, but it is also one of the most important ones. “The most important item over time in valuation is obviously interest rates…If interest rates are destined to be at low levels…It makes any stream of earnings from investments worth more money. The bogey is always what government bonds yield….Any investment is worth all the cash you’re going to get out between now and judgment day discounted back. The discounting back is affected by whether you choose interests rates like those of Japan or interest rates like those we had in 1982…When we had 15 percent short-term rates in 1982, it was silly to pay … Read more

What Are the Qualities of Highly-Rated Stocks on the Valuentum Buying Index?

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If you were a CEO, what are the 7 most important metrics to focus on to get a rating of 10 on the Valuentum Buying Index? This is a great question because it hits at the absolute heart of the most important concept of investing. Investing may be about buying a great company with a solid and growing dividend, but it most certainly is about buying a great company at a discount to intrinsic value. The difference between what someone can pay for something and what something is worth is the most important concept of investing: price versus value. The price-versus-value component is an integral part of the Valuentum Buying Index. In fact, it is the first component. After all, … Read more

Our Stock Reports on Securities Research Firms

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Image Source: Andreas Poike Structure of the Securities Research Industry The securities research industry has become increasingly competitive, with a large number of rivals in the individual, advisor, and institutional markets. However, barriers to success for new entrants in the individual market are incredibly high, if not impossible, while the advisor market continues to be dominated by entrenched providers with deep ties. The institutional market is shielded to new rivals thanks to talent and capital costs, offering established players an attractive position. Licensed research and data can be a high-return means of generating sustainable, recurring business. We like the group’s structure. Our final ratings and analysis for the group can be found here.