SYF

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

JPMorgan Chase’s Return on Capital Shines in Second Quarter

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Image Source: Hakan Dahlstrom By Brian Nelson, CFA On July 12, JPMorgan Chase (JPM) reported second quarter results that beat expectations on the top line, but came up a bit short on the bottom line. Managed net revenue came in at $51.0 billion, up 20%, while the company’s provision for credit losses swelled to $3.05 billion. Net income was $18.15 billion in the quarter, resulting in earnings per share of $6.12. Net income excluding significant items of $13.1 billion was $4.40 per share. Return on common equity was 23% in the quarter, while return on common equity was 28%. CEO Jamie Dimon’s commentary on the quarter is found below: The Firm performed well in the second quarter, generating net income of … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … 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: 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

Visa’s Q1 Fiscal 2023 Solid, Puts Up 64%+ Operating Margin

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Image: Visa is a free cash flow generating powerhouse and is insulated from rising delinquency and charge offs, unlike others in the credit card space. Image Source: Visa By Brian Nelson, CFA On January 26, Best Ideas Newsletter portfolio holding Visa (V) reported excellent first-quarter fiscal 2023 results. Net revenues advanced 12% in the quarter, and Visa leveraged that top-line expansion into 17% growth in non-GAAP net income. The company’s operating margin for the period came in at an impressive 64.1%, a decline from last year’s quarter but still a sight to see. Non-GAAP earnings per share leapt 21%, to $2.18, which came in better than the consensus estimate. Shares of Visa have jumped more than 11% so far in … Read more

Consumers Feeling the Pinch; S&P 500 Bounces Off Technical Resistance; Elasticities Breaking Down for Staples Stocks

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By Brian Nelson, CFA Microsoft Corp. (MSFT) is the latest big tech company to announce big job cuts. The company that is still working to close its deal with Activision (ATVI) announced that it would slash 10,000 jobs, or about 4.5% of its workforce. The unemployment rate in the U.S. stands at just 3.5%, as recorded in December 2022, so even though we’re witnessing quite a number of layoffs in Silicon Valley, the labor markets are still very, very healthy. Those being laid off are finding jobs rather quickly, too. According to the WSJ, “about 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search.” Businesses have been … 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