PG

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

‘Value Trap’ Shoots and Scores!

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Author Brian Nelson is the President of Investment Research at Valuentum. In his role, he has updated and overseen over 20,000 discounted cash flow models during the past 10 years. Prior to Valuentum, he worked as the Director of Methodology at Morningstar, a large independent research firm in Chicago, developing the company’s discounted cash-flow model used to derive the fair value estimates for the company’s coverage universe. Key Takeaways Based on how we interpret the latest from Fama/French, a new study released a couple weeks ago, the long-advertised quant value factor, the book-to-market (B/M) ratio, may not have even existed. By extension, in our view, it reinforces our thesis that many quant value factors that are based on traditional valuation … 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

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds

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Image: President of Investment Research Brian Nelson, CFA By Brian Nelson, CFA A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception. Though the book focuses more on the life and times of founder Jim Simons and dedicated only a page or two to the fall of Long-Term Capital Management (LTCM), another quant fund that went belly-up during the late 1990s, it was nonetheless a thoroughly interesting and enjoyable read. But why I am bringing up one of the most successful quant … Read more

5 Things We Learned in 2019

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5 Things We Learned in 2019      “The further a society drifts from the truth, the more it will hate those that speak it.” — George Orwell By Brian Nelson, CFA    I’m looking at the beautiful Smoky Mountains in Tennessee as I’m writing this piece. I hope that you and yours are having a wonderful holiday season with family and friends. I wanted to share with you a few things that I think investors learned during 2019. Before I do, however, you’re probably wondering why I decided to lead in with this particular quote from Orwell. — — The quote, in some ways, is a reflection of how I think many approach truth in finance. Maybe they don’t … Read more

Economic Commentary: Marks, Dalio, and the Discount Rate

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Image Source: Mike Cohen We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there! Brian Nelson: The concept of negative interest rates is not merely academic, but they have far-reaching implications across the global … Read more

Procter & Gamble Appears Overvalued

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Image Shown: Shares of Procter & Gamble have been on an epic run since mid-2018, and we think shares have gotten ahead of themselves here. By Callum Turcan Consumer staples giant Procter & Gamble (PG) is a solid company that generates sizable and consistent free cash flows. However, in our view, shares of PG have gotten way ahead of themselves due to a “flight to quality” that has seen the market bid up P&G’s share price from the low $70s in April 2018 to almost $120 as of this writing. Shares of PG now yield 2.5% as of this writing and trade well above the top end of our fair value estimate range of $101 per share. Please note P&G … Read more

Nostalgia?

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Valuentum’s November Dividend Growth Newsletter! 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.— Today is Dividend Growth Newsletter day!  — As I think back over the many years we’ve managed the Dividend Growth Newsletter portfolio, it has been an incredibly rewarding experience to be able to help so many dividend growth investors, not only in finding big winners, but also in avoiding big losers. If you recall, many dividend growth investors were swept away by the MLP craze years ago, and we saved our membership, perhaps in impeccable fashion. Who remembers? — From “getting out” of General Electric … Read more

Johnson & Johnson’s Talc Problems Hit Another Bump

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Image Shown: Johnson & Johnson’s embattled ‘Baby Care’ segment performed poorly during the third quarter of 2019. Image Source: Johnson & Johnson – IR Presentation. By Callum Turcan Johnson & Johnson (JNJ) was back in the news Friday October 18 when the company announced it was voluntarily recalling “a single lot” of its embattled Johnson’s Baby Powder product in the US due to alleged asbestos contamination risks. The US Food and Drug Administration tested a single bottle from this lot, according to Johnson & Johnson, with the federal regulator noting that sub-trace levels (no greater than 0.00002%) of chrysotile asbestos had been detected in the bottle. Johnson & Johnson plans to vigorously contest these allegations and maintains that its talc … Read more

Johnson & Johnson Raises Full-Year Guidance Yet Again

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Image Shown: Shares of Johnson & Johnson climbed higher on October 15 after reporting a nice third quarter earnings report and raising guidance for the full year. By Callum Turcan On October 15, Best Ideas Newsletter and Dividend Growth Newsletter holding Johnson & Johnson (JNJ) reported third-quarter 2019 earnings that were positively received by the market. The healthcare giant once again boosted full-year non-GAAP sales and EPS guidance, which we appreciate, on the back of solid performance at its ‘Pharmaceuticals’ and ‘Medical Devices’ segments. Please note that Johnson & Johnson had already raised its guidance for 2019 twice before this latest increase, which we covered in this July 2019 piece here and this April 2019 piece here. During the third … Read more