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Nelson: I Have Been Wrong About the Prospect of Near-Term Inflationary-Driven Earnings Tailwinds

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Transcript During the past several weeks, we’ve grown increasingly concerned about the health of consumer-tied entities across not only the consumer staples but also the consumer discretionary spaces. Many consumer staples entities, while raising prices, aren’t raising them fast enough to drive operating-income and bottom-line expansion, while many consumer-discretionary companies are facing higher freight and logistics costs and weaker performance in China, perhaps best revealed by Nike’s most recently-reported quarter, where inventory advanced 23% compared to the prior-year period. The tell-tale sign about the health of the consumer may be Amazon (AMZN) Prime Day, which is coming up on July 12-13, but based on many of the reports we’ve monitored this past earnings season, even if sales are strong on … Read more

Consumer Staples Struggling with Higher Inflationary Costs, Group Hits 52-Week Lows

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Image: The Vanguard Consumer Staples ETF (VDC) has notched a new 52-week low, and investors should note that we don’t think consumer staples entities are immune to an environment of higher inflation, where their price increases may not be fully absorbed by the consumer. Due to the commoditization of many of the goods produced in the consumer staples space, we think the consumer may instead trade down to off-brands or white label (“store brand”) products than pay up for branded merchandise. By Brian Nelson, CFA On June 10, the U.S. Bureau of Labor Statistics released its Consumer Price Index Summary for May showing inflation continues at an elevated pace, “with the indexes for shelter, gasoline, and food being the largest … Read more

Weekly: Why We Missed Big on T and FB; Overpriced Staples, Our Call To Action; and More!

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In this Valuentum Weekly, in video form, President of Investment Research Brian Nelson, CFA, explains why Valuentum missed big on T and FB, how volatility on names with huge market caps is spiking recklessly, and why the call to action in the book Value Trap remains as relevant as ever given current incentives. ———- 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.    Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE. … Read more

Undervalued PINS, SNAP Rallying; FB Incredibly Mispriced, and Refreshed Consumer Discretionary Reports

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Image: Valuentum’s Periodic Screener, February 4.  — By Valuentum Analysts — Two of the most undervalued stocks in our coverage Pinterest, Inc. (PINS) and Snap Inc. (SNAP) are indicated to rally hard February 4 after issuing positive earnings reports, providing further evidence of the importance of the discounted cash flow process and the magnet that intrinsic value estimates are to stock prices. Pinterest is indicated up ~14%, while Snap is indicated up ~47% based on the latest information we have. — The refreshed Valuentum periodic data screener is now available for download on our website (it can be found in the ‘Stock Screens’ section in the left column of our website). The periodic data screener, which also includes updated fair value estimates on … Read more

Don’t Throw the Baby Out with the Bathwater

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Image: Erica Nicol Takeaways: Junk tech should continue to collapse, but the stylistic area of large cap growth and big cap tech should remain resilient. Moderately elevated levels of inflation coupled with interest rates hovering at all-time lows isn’t a terrible combination. In fact, it’s not bad at all. The markets are digesting the huge gains of the past few years so far in 2022, and the excesses in ARKK funds, crypto, SPACs, and meme stocks are being rid from the system. Our best ideas are “outperforming” the very benchmarks that are outperforming everyone else. The BIN portfolio is down 6.4% and the DGN portfolio is down 3.2% year to date. The SPY is down 7.8%, while the average investor … Read more

Hard Work and the Trust That Binds

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Image Source: Terry Johnson By Brian Nelson, CFA We’ll have our traditional Valuentum Weekly email coming out on Sunday, and I’m excited to say our team is putting the finishing touches on our technology industry update, so we’ll have a whole bunch of fresh reports for you to look at Sunday evening/Monday morning. It’s easy to forget how much we’ve been through the past two years. Often, we forget how helpful the warning that markets were going to crash was the weekend before they did on February 22, 2020, “Is a Stock Market Crash Coming? – Coronavirus Update and P/E Ratios,” how we thought dollar-cost-averaging made sense at the bottom in March 2020, and how we went “all-in” in April … Read more

Conagra Brands Facing Major Inflationary Headwinds

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Image Shown: Conagra Brands Inc recently reduced its full-year guidance for fiscal 2022 in the face of major inflationary headwinds. Image Source: Conagra Brands Inc – Fourth Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan On July 13, the company behind the Slim Jim, Duncan Hines, Gardein brands (among other), Conagra Brands Inc (CAG), reported fourth quarter earnings for fiscal 2021 (period ended May 30, 2021) that beat both consensus top- and bottom-line estimates. However, its guidance for fiscal 2022 came in a bit light in the face of major inflationary headwinds which saw shares sell off initially after the report was published. Please note that its fiscal 2020 was a 53 week reporting period while its fiscal … Read more

Kroger Raises Guidance After Solid Earnings Report

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Image Source: Kroger Co – First Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan Grocers are facing tough year-over-year comparisons due to the pantry stockpiling dynamic seen in 2020 in the wake of the coronavirus (‘COVID-19’) pandemic, though demand for consumer staples products remains healthy. On June 17, Kroger Co (KR) reported first quarter earnings for fiscal 2021 (period ended May 22, 2021) that beat both consensus top- and bottom-line estimates. Kroger’s management team also noted how the grocer views the current inflationary landscape, which we will cover in this note. Earnings Update and Guidance Boost Though Kroger’s same-store sales fell by 4.1% in the fiscal first quarter, on a two-year stack basis (the sum of its same-store … Read more

ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline

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ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline — — In this 40+ minute video jam-packed with must-watch content, Valuentum’s President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He’ll talk about which companies Valuentum likes and why, and which areas he’s avoiding. This and more in Valuentum’s 2020 Exclusive conference call.   Note: This video was originally published August 2, 2020.    To watch the video >>   The Theory of Universal Valuation —– Valuentum members have access to our 16-page stock reports, … Read more

Walmart’s E-Commerce Growth Supports Long Term Dividend Strength

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Image Source: Mike Mozart By Brian Nelson, CFA On Tuesday, May 18, Walmart (WMT) reported first-quarter 2022 results for the 13-week period ended April 30, 2021. Leading the charge was a 37%, 47%, and 49% leap in e-commerce sales in its Walmart U.S., Sam’s Club, and Walmart International segments, respectively, with management noting that sales through its online channel have “more than doubled over the last two years.” Walmart continues to embrace e-commerce and omni-channel capabilities, and that bodes well for the long-term sustainability of its dividend payout, in our view. Walmart’s shares yield ~1.5% at the time of this writing, and they have years of dividend growth ahead of them, in our view. As one of the largest big … Read more