TREX

Things Are Bad Out There

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“I don’t like this market one bit, but we have to endure. Markets will rise again, but there will be a lot more pain to come in the near term. We think the base case is that we get a very bad recession in 2023. We’ve yet to pull the trigger on put option ideas in the simulated newsletter portfolios, but we expect things to get worse before they get better. For readers seeking ongoing option ideas each month, please consider subscribing to our options commentary here.” – Brian Nelson, CFA By Brian Nelson, CFA Things are bad out there, and there’s probably no better way to say it. On September 28, Bloomberg reported that Apple Inc. (AAPL) is now … Read more

U.S. Housing Market Showing Signs of Weakness

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Image Shown: The US housing market is starting to show signs of weakness. Companies involved in the home building business in the US are starting to feel the heat, with the iShares US Home Construction ETF down ~30% year-to-date as of early September 2022 on a price-only basis. By Callum Turcan The national U.S. housing market has been on fire during the past few years. Sharp increases in U.S. housing prices are now contending with rising mortgage rates, which is prompting the question, are U.S. housing prices heading for a crash? Affordability issues are rampant, with many households now priced out of the market, and signs of weakness are emerging in the U.S. housing market. Background The Federal Reserve is … Read more

We’ve Suspended Coverage of Stocks in the Disruptive Innovation Industry

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Order the Exclusive publication here to gain access to idea generation that covers some of the most innovative stocks. As a member to the Exclusive publication, you’ll receive one income idea, one capital appreciation idea, and one short idea consideration each month! Order today >> — We’ve suspended coverage of stocks in the ‘Disruptive Innovation’ industry. The ‘Disruptive Innovation’ industry is unique in almost every way. The companies included don’t necessarily share a similar traditional industry or sector make-up, but they do share one big thing in common: They continue to disrupt the traditional way of doing things. Carvana is changing how consumers buy used cars, Roku is leading the streaming charge against linear TV, Teradyne’s industrial robotics technology is … Read more

Large Cap Growth Has More Room To Run

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“The stylistic area of large cap growth has been one of our favorite areas because of the strong net cash rich, free cash flow generating, secular growth powerhouses that make up much of the space. The image is a rundown of the key Valuentum statistics for the top 15 holdings of the Schwab U.S. Large Cap Growth ETF (SCHG). We believe where large cap growth goes, so does the broader market, considering the hefty weightings of some of these stocks in other broad-based indices. Based on the high end of our fair value estimate range for this group of bellwethers, the broader U.S. markets still have room to run, to the tune of 7%+, despite the many highs already reached … Read more

Home Depot Shows the Home Has Never Been More Important

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Image Source: Home Depot. By Brian Nelson, CFA On Tuesday, February 23, Home Depot (HD) reported fiscal fourth-quarter 2021 results (period ending January 31, 2021) that came in better than consensus estimates across the board. Not only did the top- and bottom- lines beat, but comparable store sales growth of 24.5% exceeded even some of the most optimistic forecasts for the home improvement retailer during the period. The average ticket price and the number of transactions advanced, while both professional (“Pro”) and Do-It-Yourself (“DIY”) customer revenue increased at a double-digit pace in the quarter. Home Depot also raised its dividend 10% and now yields ~2.5% on a forward-looking basis ($6.60 per-share dividend on an annualized basis). We continue to like … Read more

Zillow Continues to Disrupt Real Estate Market

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Image Source: Zillow Group Inc – May 2020 IR Presentation By Callum Turcan Record low interest rates for mortgages in the US, largely a product of the Fed’s monetary stimulus measures (quantitative easing and near-zero interest rates), has gone a long way in stimulating demand for homes. According to the US Census Bureau, the national homeownership rate stood at 67.4% in the second quarter of 2020, up ~260 basis points from the same period the prior year. For reference, the domestic homeownership rate has been steadily climbing higher since 2015-2016 (when homeownership rates were in the low-60s% range) according to data provided by the US Census Bureau. Homeownership rates peaked in 2005-2006 at the high-60s% level before sliding significantly lower … Read more

Housing Market Very Strong But To “Face Two Contradicting Challenges”

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Image Shown: The iShares US Home Construction ETF (ITB) has advanced ~ 24% year-to-date, according to data from YahooFinance. “Housing indicators may be leveling off,” per S&P Corelogic, and the threat of rising interest rates looms (as it has for years), but we like the fundamental strength that we’re seeing from the homebuilders of late, which has translated into strong equity performance. By Brian Nelson, CFA We’ve been bullish on the US housing market recovery since early 2012, and we’ve pointed to several factors as to why–including improved affordability, investment by both individuals and investors, falling unemployment, improved household formation, limited inventory, and more recently, the wealth effect that a rising stock market provides. Things continue to be on the … Read more

Prepared Remarks From Nelson Exclusive Conference Call June 30

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Read President of Investment Research Brian Nelson’s prepared remarks for the yearly roundup conference call, held for Nelson Exclusive members. If you would like to subscribe to the Nelson Exclusive publication, please learn more about the publication here. The Nelson Exclusive publication does not reflect real performance. Performance is hypothetical and does not represent actual trading. Ladies and Gentlemen, Thank you very much for joining us on the first conference call for members of the Nelson Exclusive publication. The first year of the publication has surely been an exciting one for all involved. When I first wrote the introductory letter of the Nelson Exclusive on July 1, 2016, we were well-aware the market had laid down the gauntlet for this publication. … Read more

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

Nelson: The 16 Most Important Steps To Understand The Stock Market

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A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more