MTUM

Don’t Let “Them” Spin the Narrative

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By Brian Nelson, CFA Let’s call it how it is: 2022 was an absolute nightmare for the 60/40 stock/bond portfolio. During the year, the 60/40 stock/bond portfolio was down 16.9%, according to data from the Vanguard Balanced Index Fund Shares (VBIAX). During 2022, the S&P 500 (SPY) index was down 18.2%, meaning that the 60/40 stock/bond portfolio, despite allocating to 40% bonds, captured over 90% of the downside risk. Modern portfolio theory is dead: Stocks have done far better than bonds during upswings, and only slightly worse during downturns. The risk/reward for the 60/40 stock/bond portfolio just doesn’t add up anymore. Bond prices did not move inversely to stock prices during the COVID-19 meltdown, and they did not move inversely … Read more

Loving Stocks Here! Meta and Alphabet Setting Up Nicely for Long Term Investors!

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  Image: Nelson still remains bullish. We wouldn’t be surprised to see the markets make new highs as they have done time and time again over the stock market’s storied history of bull and bear markets, crashes and rip-your-face off rallies, and economic booms and recessions! There are myriad risks, but we’re not overthinking this market. We like stocks for the long haul. “The active versus passive over-benchmarking plague is hurting investor returns, and flawed measures of risk are disguising the underperformance.” — Brian Nelson, CFA Dear members: Latest thoughts on Meta Platforms >> Latest thoughts on Alphabet >>  One of the hardest parts of investing is keeping your head when others around you are running for the exits. That’s … Read more

The Stock Market Is Nearing Technical Support Levels

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Image: This year has been a difficult one for equity investors, but the selling pressure that has been common in the markets may start to slow as broader indices such as the S&P 500 begin to approach technical support levels. On the S&P 500, we think there is substantial technical support in the 3,200-3,500 range, which to us suggests that further near-term downside may be limited. The S&P 500 closed at 3,674.84 on Friday, June 17, and we think fair value is much higher. By Brian Nelson, CFA  It’s been difficult to watch the stock market give up much of the gains reaped over the past year or so during the selling barrage that has occurred thus far in 2022. … Read more

Bitcoin, U.S. Large Cap Growth, and Technology Continue to Dominate Returns

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Image source: Seeking Alpha, retrieved November 28 —– 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.  The Benefits of Premium Membership Sign Up Today. First 14 days FREE!  At Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m], we strive to stand out from the crowd. Most investment research publishers fall into a few camps, whether it be value, growth, income, momentum, chartist or some variant of the aforementioned. We think each in its own right holds merit, but the combination of these approaches is even more powerful. After all, stock price movements aren’t just driven by investors of the value or … Read more

Valuentum Weekly

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Image: Bitcoin, technology and large cap growth have led the pack the past 5 years while pipeline MLPs, crude oil and energy stocks have fallen way behind. Large cap growth > small cap value. Bonds, non-US stocks continue to lag. The Valuentum Weekly is a brand-new weekly market commentary from Valuentum Securities, released each weekend in digital form. The Valuentum Weekly offers members a weekly synopsis of the markets and major events. It will be straight and to-the-point. Our goal is to deliver to you the latest information and insights. We welcome your feedback on how we can make the Valuentum Weekly as useful and as relevant for you as ever! Takeaways The markets offer investors an asymmetric risk opportunity, … Read more

Experience and Judgment

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Hi everyone: — I think you and I would both agree that there’s far too much noise out there. For every investor that believes one thing, another investor might believe the complete opposite. From those pushing market-tracking index funds to those seeking to outperform the market, there’s no shortage of paths for an investor to pursue either. There are day-trading aficionados with huge followings on social media and factor-based investing gurus highlighting “science” as the secret to stock market outperformance–and just about everything in between. — A number of years ago while I was looking to hire someone on our sales staff at Valuentum, the view came up that research was a commodity. It was weird because, in my view, … Read more

Excerpt from ‘Value Trap’ 2nd Edition: MPT Sounds a Lot Like “Empty”

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The second edition of President of Investment Research Brian Nelson’s book ‘Value Trap’ will be released in the coming weeks. Here is a short excerpt to whet your appetite: — … — Enterprise valuation, or the discounted cash-flow framework, remains at the center of finance, in my view, and the core of what we do at Valuentum. The process and its key cash-based components helped deliver a suite of outperforming equity considerations at a time when modern portfolio theory (MPT) and diversification benefits were breaking down. Both stocks and bonds, for example, dropped aggressively in unison during the COVID-19 crisis, and the popular U.S. 60-40 stock/bond portfolio “suffered one of its worst performances since the 1960s” during the first quarter … Read more

2018 Starts Out with a Bang!

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Image Shown: An ETF that measures momentum (MTUM) has done considerably better than the S&P 500 since the beginning of 2017. Among its top 5 holdings are Microsoft (MSFT), Apple (AAPL), Boeing (BA)—newsletter holdings that have had excellent value characteristics along the way. Visa (V) is also included in its top 10 holdings.

Even some the most bullish and optimistic investors have been surprised by the resiliency of today’s market environment. Why does it seem appropriate to remind members that the stock market doesn’t always go straight up with almost no volatility?

Economic Roundtable: Quant Quake, Quac-cidental Correlation

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Image Source: Anders Sandberg.  Last week, the markets may have revealed that internals aren’t all that healthy. Major equity markets experienced a “rotation” that reminded many investors of the “quant quake” from August 2007. As Valuentum’s Brian Nelson wrote in Value Trap, “just a few bad days in the market caused a rapid unwinding of many quant long-short strategies (back then). Goldman’s chief financial officer said at the time that the firm was witnessing ‘25-standard deviation moves, several days in a row.’” On the surface, markets last week seemed relatively calm, but as the episode in 2007 revealed the activity last week may just be the calm before the storm. Many are pointing to overcrowded trades in betting against certain … Read more