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How Some Members Use Valuentum’s Investment Services

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By Brian Nelson, CFA Thank you for your membership to Valuentum. We serve a wide variety of investors, including dividend growth investors, value investors, and pure Valuentum investors, among others. Many different types of investors and professionals use our research and financial analysis in a whole host of applications from individual stock-selection to the evaluation of closed-end funds to an overlay in a money-management setting and beyond. We wanted to make sure that you know that, if you’re a dividend growth or income investor, that there are others that use our website to utilize the Valuentum process, fair value estimates and other metrics. Similarly, if you’re a practitioner of the Valuentum system, I wanted to make sure that you are … 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

Chipotle Sees Bigger Unit Growth Opportunity in North America, Continued Pricing Power

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Image: Chipotle’s shares look like they are poised to break out of a downtrend on news that its long-term unit restaurant opportunity is bigger than expected and that its pricing power remains intact. By Brian Nelson, CFA Chipotle Mexican Grill, Inc. (CMG) and Domino’s Pizza Inc. (DPZ) are two of our favorite restaurant ideas, with the former and Yum Brands’ (YUM) helping to drive restaurant stocks higher after the market’s reaction to their respective calendar fourth-quarter reports during the trading session February 9, 2022. Year-to-date, the AdvisorShares Restaurant ETF (EATZ) has held up better than most other investable areas, down modestly, and we think the relative strength is a big win for investors in the restaurant sector in light of … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Chicken Sandwich Wars Heating Up In the US

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Image Shown: Rivals in the quick-service restaurant space are aggressively competing for share in the fast-growing premium chicken sandwich category following Popeyes’ considerable success the past couple years. Source: Images/logos property of the respective companies. By Callum Turcan and Brian Nelson, CFA Nothing has been the same in the fast-food industry since Popeyes launched its first nationwide chicken sandwich August 12, 2019. The release of the delicious chicken sandwich from the company named after Gene Hackman’s character Popeye Doyle in the 1971 film The French Connection may even have changed the fast-food industry as we know it. Popeyes’ “tender all-white meat chicken breast fillet, marinated in (its) authentic blend of Louisiana seasonings, then hand battered and breaded in (its) all … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Comps Accelerate and Margins Expand in Chipotle’s Third Quarter

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Image Source: Mike Mozart The once beaten down fast casual restaurant chain Chipotle is back to delivering solid comparable restaurant sales growth thanks to menu price increases, and restaurant level operating margin expanded significantly as lower marketing and promotional spending was required to appease cautious consumers. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Chipotle (CMG) reported 8.6% year-over-year revenue growth in the third quarter of 2018, results released October 25, driven by new store openings and a 4.4% increase in comparable restaurant sales. Average check moved higher from the year-ago period due in part to a 3.8% effective menu price increase but was partially offset by a 1.1% decline in comparable restaurant transactions. This weakness in traffic was … Read more

Restaurant Traffic Down, Chipotle Still a Favorite Idea

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Image Source: Chipotle (page 89 of 160) In late April of this year, we added Chipotle to the simulated Best Ideas Newsletter portfolio. By Brian Nelson, CFA We like Chipotle (CMG) for three primary reasons: 1) in CEO Brian Niccol, the company has a new bold visionary at the helm and he is hiring top talent to fill gaps, 2) buyouts in the restaurant space will only offer support for shares as the fast-casual segment remains a key focus area for private equity (here and here), and 3) Chipotle has been plagued with so many health issues (“foodborne illnesses”) in the past that, even with the recent bounce in shares, the market’s expectations are still rather low. Though our fair value … Read more

Dividend Increases/Decreases for the Week January 29

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Below we provide a list of firms that raised their dividends during the week ending January 29. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week 1st Source (SRCE): now $0.29 per share quarterly dividend, was $0.28. Air Products and Chemicals (APD): now $1.50 per share quarterly dividend, was $1.34. Allegiance Bancshares (ABTX): now $0.12 per share quarterly dividend, was $0.10. Anthem (ANTM): now $1.13 per share quarterly dividend, was $0.95. Apartment Income REIT (AIRC): now $0.43 per share quarterly dividend, was $0.41. Archer-Daniels-Midland (ADM): now $0.37 per share quarterly dividend, was … Read more

Stock Market Outlook for 2021

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By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more