MSFT

In the News: MSFT, AAPL, SAVE, ALB

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Image: Microsoft and Apple have been strong performers the past several years, with Microsoft recently surpassing Apple’s market capitalization to become the largest entity in the S&P 500. By Brian Nelson, CFA The start of trading in 2024 hasn’t been tracking the way that we like, but it’s way too early to sound the alarm on any sort of correction. The employment markets remain very healthy, both as it relates to unemployment and wage gains, while inflation looks to be largely under control, with the market expecting a number of rate cuts during 2024. We continue to like the areas of big cap tech and large cap growth in the current market environment. Microsoft (MSFT) is now the largest company … Read more

In the News: Apple, Nvidia, ANSYS

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By Brian Nelson, CFA The first week of trading in the new year wasn’t very welcome, but we think it is far too early to draw any conclusions about how the rest of the year will be. The Dow Jones Industrial Average (DIA), S&P 500 (SPY), and NASDAQ (QQQ) faced selling pressure in the first week due in part to investors waiting until the new year to book the huge gains garnered during 2023. The market continues to digest critical employment data, as it watches movements in the 10-year Treasury closely, a key benchmark rate for asset pricing that now stands just north of 4%. Many bulls are saying 2024 may be a difficult year after the worst start in … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

ICYMI — Video: Our Top Stocks for 2024

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Video: Valuentum’s President of Investment Research Brian Nelson walks through the success of Valuentum’s newsletter suite, the state of the economy and markets, and offers his favorite idea for each sector. Tune into this must-watch video. ———- 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, RSP, SCHG, QQQ, and VOO. Some of the other 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 … Read more

Brief Note: Just How Good Has Our Stock Selection Been?

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By Brian Nelson, CFA I was taken aback by a recent report from UBS that outlined “the top contributors to the S&P 500 from about two years ago to today.” In a simulated securities portfolio, the Best Ideas Newsletter portfolio, of 18 ideas that also includes several ETFs, we’ve managed to hit the board 7 out of the 20, and 9 including Exxon Mobil (XOM) and Chevron (CVX), the latter two we removed in March following their big runs last year. Here were the top 20 contributors, with simulated Best Ideas Newsletter portfolio holdings highlighted in red (XOM and CVX are highlighted in green): Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Eli Lilly (LLY), Broadcom (AVGO), Exxon Mobil, Berkshire Hathaway (BRK.B), … Read more

5 Stocks to Consider Buying

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By Brian Nelson, CFA Stock prices and returns are a function of a company’s net cash on its books and future expectations of free cash flow. No matter what qualitative dynamic one considers in an investment, it must materialize within the discounted cash flow model to have any value. Maybe you love the management and corporate governance of a company? This may show up in a lower discount rate applied to future expected cash flows, as they may be more dependable. What about the brand of a firm? Well, the brand is implicitly valued within how much future free cash flows a company will generate. Pick another qualitative factor. Whatever it may be, it finds its way into the discounted … Read more

Nvidia’s Shares Could Run Higher Even More!

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Image: Nvidia has been a market darling, and the firm’s equity looks to have further upside potential on the basis of our valuation. By Brian Nelson, CFA On November 21, market darling Nvidia Corp. (NVDA) reported excellent fiscal third quarter results for the period ending October 29 that showcased the power behind the revolution in artificial intelligence. The company’s revenue hit a record, advancing more than three-fold on a year-over-year basis thanks to strength in its Data Center business. Its non-GAAP earnings were up six-fold from the year-ago period, and the firm continues to haul in tremendous free cash flow. We’ve raised our fair value estimate of Nvidia to $606 per share, and we think the company’s shares could continue … Read more

The Dividend Growth Newsletter Portfolio’s Outperformance

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The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. Note: This article corrects the degree of outperformance of the simulated Dividend Growth Newsletter portfolio, as of the date of the calculation (~3.6% –> ~9.4%). By Brian Nelson, CFA Excluding dividends, we estimate that the simulated Dividend Growth Newsletter portfolio is down roughly 4.9% through the interim session October 30 from the beginning of 2022, beating the … Read more

3 Net-Cash-Rich, Free-Cash-Flow Generating, Secular Growth Powerhouses

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Image: Shares of Microsoft, Alphabet, and Meta Platforms have trounced the market return so far in 2023. By Brian Nelson, CFA We continue to reiterate that the key components of a company’s valuation are the following: net cash on the balance sheet and future expected free cash flows. These two cash-based sources of intrinsic value generally account for almost all of the value of a firm. There are some exceptions, where contingent liabilities and a more complicated capital structure come into play, but when it comes to simplifying what drives share prices, that’s about it. It’s probably no wonder then that we love net-cash-rich, free-cash-flow, secular growth powerhouses, and it’s also probably no wonder why these companies have grown into … Read more

Brief Take: Microsoft Blows Past Expectations in Q1 Fiscal 2024

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Image Source: Mike Mozart By Brian Nelson, CFA Microsoft (MSFT) hasn’t been a tech dinosaur for many years now, and its first-quarter fiscal 2024 (calendar third quarter 2023) results continued to show just how well the tech giant has adapted to the new economy–from the cloud to gaming to personal computing and, of course, to getting a lead in artificial intelligence [AI] with its investment in OpenAI (ChatGPT). During its fiscal first quarter, Microsoft’s revenue advanced 12% in constant currency, while operating income leapt 24% holding foreign exchange constant—breakneck levels of expansion. Azure and other cloud services sales advanced 28% on a year-over-year basis holding currency constant. The high end of our fair value estimate for shares stands at $368, and … Read more