TMUS

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more

AT&T’s Love Affair with Debt

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Image Source: Mike Mozart AT&T’s free cash flow performance during 2016 was solid, and the company’s outlook for 2017 wasn’t bad. What concerns us the most, however, is the company’s unwieldly debt load, which will only be exacerbated by the Time Warner deal. Income investors should take note. By Brian Nelson, CFA On January 25, AT&T (T) wrapped up 2016 with a rather solid fourth-quarter report, and full-year results weren’t bad. We have no qualms with AT&T, but as with Verizon (VZ), we worry the company has stretched its balance sheet too far this late into the economic cycle. Contributions from AT&T’s acquisition of DIRECTV and gains in IP services and video helped drive consolidated revenues 11.6% higher during 2016, … Read more

Utilities and Telecoms to Benefit Most from Corporate Tax Reduction?

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Image Source: Michael Vadon By Kris Rosemann and Brian Nelson, CFA Speculation over which sectors may be the biggest beneficiaries of the incoming Trump administration has been running rampant in recent weeks, and we’ve received questions from members pertaining to this topic, specifically with respect to the utilities and telecom sectors. In fact, an article in the Financial Times, released mid-November, tabbed the utilities (XLU) and telecom (XTL) spaces as two sectors that may be able to generate outsize earnings improvements thanks to a reduced corporate income tax. But will they truly benefit over the long haul? Let’s walk through our take on the impact a potential reduction in corporate tax rates may provide these two areas. It may not all be … Read more

Image: Returns Following the Trump Victory

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To download the table for easier viewing, please select the link . Financials: Trump’s Treasury Secretary choice Steven Mnuchin wants to repeal most of the burdensome Dodd-Frank legislation. A steepening yield curve is helping banks and may drive improved net interest margins in coming periods. Goldman Sachs is ripping higher, leading the Dow’s charge.   Crude Oil: The world is moving to a better balance in supply/demand dynamics in the energy markets. OPEC is talking, has agreed to cuts, and expectations for improved economic growth are helping energy resource pricing. High-beta companies such as Continental Resources are rallying hard.   Energy: Capital spending cuts are bolstering free cash flow in the upstream space as energy resource pricing improves. Reduced regulations could help … Read more

AT&T Targeting Disruption in Transformational Merger

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Key Takeaways AT&T has agreed to acquire Time Warner for $85.4 billion in cash and stock in a deal that is expected to close by the end of 2017. Strict regulatory scrutiny can be expected. The deal has the potential to disrupt the traditional pay-TV industry while setting AT&T apart from its competitors in the wireless telecom industry, where growth has become sparse for the firm. The telecom industry is maturing, and price-slashing competition has changed the game as network differentiation has largely become a thing of the past. We’re not fans of the debt that will come with the completion of the deal, but the prospects of what the combined entities could produce are certainly interesting. We view the … Read more

Apple V. Samsung

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Image Source: Lr43_L1000009 By Kris Rosemann Samsung’s (SSNLF) issues with its Galaxy Note 7 smartphone began in late August when the firm postponed shipments of the smartphone due to product quality testing. The event was not a major issue, as early demand for the device had outpaced supply, already causing shipment delays to some markets. Shortly after the delay was announced, claims of the smartphones’ batteries exploding surfaced, and Samsung subsequently announced it would recall Galaxy Note 7s across the globe. The recall announcement only began the saga of despair for the Galaxy Note 7 series. One week later, the FAA issued a warning that the devices could be an airborne fire hazard and suggested consumers refrain from using the smartphones … Read more

Apple’s Brand as Strong as Ever

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By Kris Rosemann Recent quarterly performance had some naysayers doubting the true power of Apple (AAPL). The second quarter of fiscal 2016 (calendar first quarter) marked the first decline in sales in a quarter in thirteen years due largely to pressure on iPhone sales, and the third quarter of the fiscal year continued the year-over-year sales weakness. As Apple hosted its company event September 7, shares remained under pressure as many anticipated ongoing weakness in demand for the iPhone, even with a new iteration being introduced. The declines continued in the days immediately after due in part to the firm’s decision not to release first-weekend estimates of pre-order sales volumes. Management indicated that it believes the measure is a meaningless … Read more

Verizon Warns, AT&T and Sprint Sell Off

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The telecom services industry is in a pricing war, and we want no part of it. From outlining how AT&T’s (T) best dividend growth years are behind it (see its dividend report ) and revealing Verizon’s (VZ) potentially prohibitive debt load (see here) to Sprint’s (S) cutthroat pricing behavior and T-Mobile’s (TMUS) aggressive marketing, we’ve been pounding the table on how the telecom services industry is a mess right now. Verizon announced in a warning December 8 that the operating environment is not getting any better, and in our view, it may not for some time: As (Verizon) is accelerating the upgrades of high-quality customers to 4G, total retail postpaid disconnects are trending higher both sequentially and year over year … Read more

M&A Environment Cracks: Sprint and Fox

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One of the most important concepts for any investor to accept is the following: price is different than value. Price is what you pay for shares of a company. Price is driven by buying and selling and the collective monetary-driven outcome of all investors’ opinions. Price can be influenced by dividend payments, news, rumors and other dynamics that influence the buying and selling of stock. Value, on the other, is based purely on future expectations of a company’s entire future free cash flow stream (and the firm’s non-operating, excess net cash on the balance sheet). Value considers a company’s competitive advantages (patents, intellectual property, network effect and the like) and compresses these complex qualitative variables into a future free cash … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more