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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

ALERT: Going to “Fully Invested” in the Best Ideas Newsletter Portfolio

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Image: Since the publishing of the first edition of the book Value Trap, the stylistic area of large cap growth (SCHG) has meaningfully outperformed both the equal-weight S&P 500 (SPY) and small cap value (IWN). Summary of Best Ideas Newsletter portfolio changes UnitedHealth Group (UNH): 0% –> 4%-6% Booking Holding (BKNG): 0% –> 4%-6% Chipotle (CMG): 1%-2% –> 6%-8% Technology Select Sector SPDR (XLK): 0% –> 4%-6% By Brian Nelson, CFA With the debt-ceiling debate behind the markets, the regional banking crisis largely in the rear-view mirror, and the Fed winning the fight against inflation, a continuation of the strength in the markets as witnessed from the October 2022 lows can probably be expected. We “rode” the latest upswing with … Read more

Long Live Apple and Large Cap Growth!

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Image: Since the release of the book Value Trap in December 2018, an ETF that tracks large cap growth (SCHG) has outperformed not only the S&P 500 (SPY), but also the areas of dividend growth (SDY) and small cap value (IWN) by sizable margins. By Brian Nelson, CFA We explained in part why we don’t like the dividends of banking firms in this note here, and we’re starting to see dividend cuts in the regional banking space, with PacWest Bancorp (PACW) as the latest banking entity to slash its quarterly payout. Right now, executives in the regional bank arena seem to be like deer caught in headlights, and we’re even seeing banking deals fall apart. The proposed deal between Toronto-Dominion … Read more

How the Payment of a Dividend Impacts Intrinsic Value Estimation

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  “Dividends are a transfer of cash to the shareholders that the shareholders already owned.” By Brian Nelson, CFA Many investors use the strategy of dividend growth investing as a means to generate increasing income in their retirement portfolios to stay ahead of inflation, or as a means to grow an income stream in the decades before retirement. Though we think such a strategy has tremendous merit, we think it’s important for readers to understand the mechanics of how a cash dividend payment impacts the valuation (intrinsic worth) of a company. How the Payment of a Dividend Impacts Valuation (Intrinsic Worth) In this article, let’s walk through the valuation adjustments we perform when a company pays a dividend to hammer … Read more

Quick Take: Fed Raises 25 Basis Points; This Banking Crisis Is Far from Over

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Image: FOMC Chairman Powell answers a reporter’s question at the March 20, 2019 press conference. By Brian Nelson, CFA On March 22, 2023, the Federal Reserve raised its benchmark rate 25 basis points, to the range of 4.75%-5%, a move that we think reflects a government agency that is now more or less a deer caught in headlights–given the nascent regional banking crisis in the United States. The bottom line is that the U.S. banking system does not have enough cash on hand to redeem all deposits (it never has), and with respect to U.S. banks, deposit insurance is only up to $250,000 per depositor, per FDIC-insured bank, per ownership category. The U.S. public has grown concerned, and that may … Read more

ALERT: We’re ‘Raising Cash’ in the Newsletter Portfolios

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Image: American Union Bank, New York City. April 26, 1932. Public Domain “We firmly believe that an investment in a bank must come with the acknowledgement of the distinct possibility that another financial crisis may occur at an unknown time in the future. Why? Banks do not keep a 100% reserve against deposits. Our good friend George Bailey knew this very well when he tried to discourage Bedford Falls residents from making a “run” on the famous and beloved Building and Loan.” – Brian Nelson, CFA, September 4, 2013   SUMMARY OF CHANGES Best Ideas Newsletter Portfolio Johnson & Johnson (JNJ): 4%-6% à 0% Exxon Mobil (XOM): 4%-6% à 0% Chevron (CVX) 3%-5% à 0% Dollar General (DG): 3%-5% à 0% Korn/Ferry (KFY): 1%-2% à 0% … 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

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.

Fed Might Slow After All, Bank Reports Just Okay

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Image shown: The yield curve is flattening. Source: Federal Reserve Bank, St. Louis. The biggest question with Fed policy is whether the FOMC will purposefully cause an inversion in the yield curve. If it thinks the market is manipulating long rates to influence its policy, it may very well go forward with rate hikes. If it doesn’t, it may very well slow the pace of rate hikes or even pause them. The behavioral implications of a yield-curve inversion may be more significant than the inversion, itself, however. No Changes to Simulated Newsletter portfolios Brian Nelson, CFA On January 10, President and CEO of the Federal Reserve Bank of St. Louis, James Bullard offered a number of perspectives on 2019 monetary policy. … Read more

Dividend Increases/Decreases for the Week Ending January 26

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Below we provide a list of firms that raised/lowered their dividends during the week ending January 26. 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 3M (MMM): now $1.36 per share quarterly dividend, was $1.17. AGCO (AGCO): now $0.15 per share quarterly dividend, was $0.14. Air Products and Chemicals (APD): now $1.10 per share quarterly dividend, was $0.95. Alaska Air (ALK): now $0.32 per share quarterly dividend, was $0.30. ALLETE (ALE): now $0.56 per share quarterly dividend, was $0.535. Alliance Data Systems (ADS): now $0.57 per share quarterly dividend, was $0.52. … Read more