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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

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

Berkshire’s Stake in Apple Has Been a Boon for Shareholders

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By Brian Nelson, CFA Warren Buffett is one of the greatest qualitative teachers of the discounted cash-flow (DCF) model, also known as enterprise valuation, without saying as much. He doesn’t like dividends in part because he knows they are a reduction to the intrinsic value of Berkshire Hathaway (BRK.A) (BRK.B). He understands that there are not really “value” and “growth” stocks because growth is but a component of valuation. An entity that is growing free cash flow at a pace much larger than that of another company should warrant a higher valuation multiple, of course. Valuation multiples tell us very little about a company’s intrinsic value. That’s what the DCF is for. Image: Apple has been a blessing for Berkshire Hathaway. Image … Read more

Pet Insurer Trupanion’s Business Facing Numerous Challenges; Short Interest at 35%+

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Image: Trupanion may be growing its top line like a weed, but its operating losses have been growing, too. Image Source: Trupanion 10-K. By Brian Nelson, CFA Trupanion, Inc. (TRUP) offers medical insurance for cats and dogs across the U.S, Canada, Europe, Puerto Rico, and Australia. The company generates revenue primarily from subscription-based insurance fees, and the firm prices its offerings to achieve a target margin that seeks to balance the costs of pets with less-expensive veterinary expenses with the costs of pets that have more-expensive veterinary expenses. As with any insurer, Trupanion’s actuarial team is a big value driver to its operations, and the firm has been collecting pet health data for over 20 years to finetune its pricing … Read more

CFA Institute Blog: “Hide-‘Til-Maturity” Accounting

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The Silicon Valley Bank collapse recalls the tussle over the accounting for financial instruments after the global financial crisis [GFC] in 2009, particularly the debate about whether some financial instruments should be carried at amortized cost (held-to-maturity, HTM) rather than at fair value (available-for-sale, AFS), or what is referred to as the “mixed measurement model.”  — Sandy Peters, CPA, CFA To read the article on the CFA Institute Blog >> —– Related: 4 Very Good Reasons Why We Don’t Like Dividends of Banking Stocks Banks & Money Centers: AXP, BAC, BBT, BK, C, DFS, FITB, GS, HBC, JPM, KEY, MS, NTRS, PNC, RF, STI, TFC, USB, WFC Valuentum does not believe the long-term dividend health of any financial institution can be accurately … Read more

Exclusive Call: What To Expect From Valuentum in 2023

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Video: 2022 was a successful year by almost every measure from the simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio to the simulated High Yield Dividend Newsletter portfolio and Exclusive publication and beyond. There were some disappointments in 2022, of course, but the year showed the value of a Valuentum membership. Join President of Investment Research Brian Nelson on this year’s Exclusive conference call to learn what to expect from Valuentum in 2023. Cheers! Transcript President of Investment Research Brian Nelson: Happy Holidays everyone! I hope that you are enjoying this special time of year with family and friends, and I wish you all a wonderful 2023! I just wanted to take a few minutes to recap … Read more

2022 Showcased the Value of a Valuentum Membership

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In bull markets, almost everyone is a winner. But 2022 was different. This year was a big test for Valuentum, and we passed with flying colors. We delivered across the board during the year from ideas in the Exclusive publication and the efficacy of the dividend growth methodology to the resilience of high yield ideas and simulated Best Ideas Newsletter portfolio relative performance–despite setbacks from Meta Platforms, PayPal, and beyond. Tune in to the latest video installment from Valuentum. Thanks for listening! Tickerized for holdings in the SPY. ——————————————— About Our Name 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” … Read more

Market Whipsaw: Crypto Collapse and a Lower-than-Expected Inflation Print

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Image: Uncertainty in the cryptocurrency markets has surged with concerns over the liquidity of a key exchange. Investors are weighing the spillover effects of crypto with the view that the pace of inflation may have peaked. — By Brian Nelson, CFA — The U.S. equity market continues to be highly volatile as it whipsaws between concerns over the health and sustainability of cryptocurrency and optimism over lower-than-feared inflation readings. We maintain our bearish/defensive stance on equities, but at the same time, we continue to be “fully-invested” across the simulated newsletter portfolios in part because we don’t want to miss out on days like today, November 10, when the markets are soaring ~2.5%-5.5% depending on which index you are monitoring. We’re also … Read more

Something New!

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Hi everyone: To stay true to our mission, you’ll find something new regarding our methodology. In the coming weeks, you’ll see this table in our work going forward. We just wanted to let you know. We appreciate your membership very much!   ——————————————— About Our Name 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 At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of … Read more