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Video: Quants! You’re NOT Measuring VALUE and Nelson’s Theory of Universal Value

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President of Investment Research Brian Nelson defines the concept of universal value and shows how quantitative statistical methods are inextricably linked to those of fundamental, financial, business-model related analysis. Value does not exist in respective process vacuums! Value is universal. Find out why. Running time: ~10 minutes.  Tickerized for Valuentum’s stock and ETF coverage universe. Transcript Hi this is Brian Nelson from Valuentum Securities, and this is the tenth edition of a series that I call “Off the Cuff,” where I get in front of the camera and I talk for ten minutes. This is what we have to talk about today. We have to talk about this concept: The Theory of Universal Value. Value does not exist in vacuums … Read more

A “Terrible” Negative Alpha-Generating “Trade” and More

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Let’s walk through some of the news before the Thanksgiving holiday, and one of the bigger missteps we made during 2017. By Brian Nelson, CFA I’d like to run through the news before many of you take a break for the Thanksgiving holiday. Thanks again for your attention. It means the world to our team that you see and understand the things that we’re doing, the great calls we make with our top-weighted ideas (see here and here), the extensive valuation processes we perform with respect to the discounted cash-flow process (see here), and how we provide that in downloadable pdf form (see here) – and we’re here to talk about our expectations! You can get reports from anybody, of … Read more

AT&T’s 5% Dividend Yield: Is It Sustainable?

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Image Source: Mike Mozart The question on everyone’s minds: Is AT&T’s dividend sustainable? By Brian Nelson, CFA AT&T (T) has been on a spending spree. Its agreement to acquire Time Warner (TWX), the merger with DirecTV, and wireless acquisitions in Mexico are just a few tie-ups the company has pursued in recent years. Regardless of what you think about the incremental financial risk associated with a larger balance sheet, AT&T has increased its quarterly dividend for 30+ consecutive years and has frequently returned $20+ billion to shareholders annually through dividends and share buybacks. The company’s Dividend Cushion ratio is 0 (which isn’t great), but let’s put some color around that number. Per AT&T’s dividend report: Key Strengths AT&T has paid … Read more

Discovery-Scripps Joining Forces to Take on the Changing Digital Media Landscape

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Image Source: Lwp Kommunikáció Discovery Communications has agreed to acquire Scripps Networks, but will it be enough for the two to remain competitive in the rapidly evolving–and consolidating–media landscape? By Kris Rosemann The cable TV industry is not what it was only a few short years ago, and Discovery Communications (DISCA) finally getting its hands on the assets of Scripps Networks (SNI) is only further evidence of this. Both companies have had a relative amount of success in delivering compelling programming to targeted audiences in years past via traditional pay-TV channels, but the days of tuning in to Shark Week on The Discovery Channel through your local cable provider are fading fast. The cord-cutting revolution is one that has been well-covered … 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

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

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’s iPhone Update Cycle and the Netflix Rumor

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By Brian Nelson, CFA Have we finally reached the limits when it comes to enhancing the functionality of the smartphone? Many are speculating this to be true, if Apple’s (AAPL) decision to now “take three years between full-model changes of its iPhone devices, a year longer than the current cycle,” is true, as reported by the Nikkei Asian Review May 31. The report comes a mere month after Apple’s first-quarter internal unit sales metrics left much to be desired, “Apple: Nowhere To Run, Nowhere To Hide (April 2016),” where unit sales of the iPhone dropped 16% and where iPad performance was even worse. A logical read-through from the news of a more prolonged update cycle may be that the iPhone … Read more

You Can Change Your Mind!

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By Brian Nelson, CFA It looks like the energy master limited partnership (AMLP, AMZ) space has been catching a bid the past few days. It’s so important, however, to keep things in perspective, and the best way to do so is to look at an intermediate-term chart of the group, which remains under considerable stress, “Bye Bye Energy MLPs, Part II (Jan 2016)” The market wants some of the most beaten down equities to rally, including Energy Transfer Equity (ETE) and Energy Transfer Partners (ETP), which have fallen devastatingly from their respective peaks of $35 and near-$70 per share, respectively. If you’re not looking at charts, you’re leaving a lot of free information on the table. Energy master limited partnerships, … Read more