MSFT

The Valuentum Team Talks Powell Speech and Threat of Global Recession

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Last week, China issued retaliatory tariffs on US goods, and Trump responded in kind, escalating trade tensions. Caught in the middle of this US-China trade war is the Fed, however. Let’s sit down with the Valuentum team and kick things off with our thoughts on Fed Chairman Powell’s speech, Challenges for Monetary Policy issued August 23 in Jackson Hole, WY. Our latest Economic Roundtable can be accessed here. Matthew Warren: Powell is certainly leaving the door open for cuts if needed. To me, it’s largely pushing on a string. I don’t think cost of capital is the problem. Capital is already cheap. Mortgages aren’t even following the 10-year (TLT, TBT) down fully. Banks (XLF) won’t take credit card rates down … Read more

What’s on the Valuentum Team’s Mind?

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Let’s get the Valuentum team’s thoughts on recent developments. No changes to newsletter portfolios. Last Friday, August 16, Bank of America (BAC) CEO Brian Moynihan said in a Bloomberg interview, “We have nothing to fear about a recession right now except for fear of recession.” We sat down with the Valuentum team to get their thoughts. Let’s go around the horn. Callum Turcan: Interesting take, and I get why he thinks that way. The feedback loop of recession fears prompting businesses to invest less which in turn hurts consumer spending by weakening wage growth/employment growth rates thus leading to additional reductions in business investment. However, I think we are past the point of fear being the main enemy. Poor industrial … Read more

Our Reports on Stocks in the Software Industry

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Structure of the Software Industry Firms that serve the mature software markets—or those consisting of basic business applications—have powerful distribution channels, large installed bases, and fortress balance sheets. These entrenched competitors benefit from significant customer switching costs, which make it nearly impossible for new entrants to gain a foothold. Participants generally benefit from high-margin license revenue and generate significant returns on investment. Still, the shift to cloud computing has created both opportunities and challenges, and the enterprise software landscape continues to evolve. We like the group. We’ve optimized our tehnology coverage. To access the reports, please select here.

Thought Piece: The Hidden Advantage

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As activist investing proliferates, investors are becoming more and more familiar with celebrity investing gurus such as Carl Icahn and David Einhorn. Let’s examine how these investing giants have carved out a unique structural advantage over mom-and-pop investors. This article was originally published in June 2014. By Brian Nelson, CFA Wouldn’t it be great to load up on options and then announce to the world that you’ve done so, thereby generating tremendous gains as other investors pile into the stock driving its price higher? I think most investors either believe that such behavior is mere fantasy, or would love to have this significant influence for their own use, assuming it was legal. Perhaps to your surprise, this behavior is neither … Read more

Join the Conversation on the Market Plunge

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The Valuentum team shares its thoughts on the recent surge in volatility and collapse in interest rates amid a trade and currency war between two of the largest economies in the world, the US and China. No changes to the newsletter portfolios at this time. During the past few days, the US (SPY, DIA) and China (FXI, MCHI) have escalated a trade war, turning it into a currency war, the latter allowing its yuan to drop to lower levels against the U.S. dollar. The US has now labeled China a “currency manipulator,” and China has responded by suspending U.S. agricultural purchases. China is one of the largest buyers of U.S. agricultural goods. The Valuentum team builds on its previous conversation … Read more

Microsoft Posts a Great Quarter to Round Out a Great Fiscal Year

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Image Source: Microsoft Corporation — IR Presentation We remain very optimistic on Microsoft’s future dividend growth trajectory, and we would like to note the upper end of our fair value estimate range stands at $154 per share of Microsoft. The market at-large seems largely supportive of Microsoft’s latest earnings, and so are we. By Callum Turcan Microsoft Corp (MSFT) is included in Valuentum’s simulated Dividend Growth Newsletter portfolio, and the company reported solid fourth-quarter FY2019 results on July 18, sending shares higher by a couple percent the next day. Revenue rose 12% year-over-year, a growth rate that moves up ~200 basis points when excluding negative foreign currency headwinds, while Microsoft’s adjusted non-GAAP EPS climbed 21% to $1.37. Microsoft’s adjusted EPS … Read more

New Highs! The December Call Has Been Well-Rewarded

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Image shown: Valuentum’s Dividend Growth Newsletter portfolio. Since inception, the newsletter portfolio has *never* had a constituent that experienced a dividend cut. We moved to weighting ranges beginning in 2018.   “The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.” – Warren Buffett (2018) By Brian Nelson, CFA While others are celebrating, we know better. This market could come down upon itself like nothing else. But for now. We breathe a sigh of relief. A company, Valuentum, that emphasizes the importance of timing and then delivers on that cold December 26 day to move to all-in in the newsletter portfolios is something remarkable (see image below). We cannot go back to … Read more

Markets Swooning, Expect Extreme Volatility, Finger on Put-Option Trigger

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Image shown: We notified members December 26 that we had  moved  the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to a “fully invested” position, from a 30% and 20% cash “weighting” at the high end of the range, respectively.  — No change to simulated newsletter portfolios…at this time.  — Hi everyone, — Hope you’re navigating these tumultuous markets well.   — If you recall, during the holiday season last year, we had moved the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to “fully invested.” See image above (point of the arrow). Because many members were traveling and out of the office, not all were able to read the notification until a week or two after. They were … Read more

Facebook Surges! Microsoft, Visa, PayPal Quarterly Reports Solid

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Facebook did not disappoint after the close April 24. Shares are surging after hours. We continue to value the company at nearly $230 per share. — Facebook Delivers in First Quarter, Sets $3 Billion Dollar Legal Expense — We’ve been pounding the table on Facebook (FB) since adding an additional 3 percentage points of “exposure” to the Best Ideas Newsletter portfolio in the low $160s in July 2017, and we further added to the company in the newsletter portfolio with shares under $140 each near the December 2018 bottom when we went to “fully invested.” As we have said this entire time, the sell off in Facebook last summer has been a gift to long-term investors!  — Facebook’s total revenue advanced 26% on … Read more

This Chart Changes Everything Quant

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Image shown: Russell 3000 Value Divided by Russell 3000 Growth since September 1993, roughly one year after the publishing of the influential three-factor model. By Brian Nelson, CFA Recently, I wrote up my views on whether quant value is giving value investing a bad name. You can read that note here. The chart above changes everything quant. The chart is not so much about value and growth as it is about highlighting the hazards of extrapolating anything quantitative finance into the future. For those that don’t know why this chart is important, let me provide some background. The entire field of factor investing has been built on the idea that ambiguous and sometimes impractical metrics and data can be used to carve out … Read more