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Economic Commentary: Marks, Dalio, and the Discount Rate

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Image Source: Mike Cohen We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there! Brian Nelson: The concept of negative interest rates is not merely academic, but they have far-reaching implications across the global … Read more

Our Reports on Stocks in the Financial Tech Services Industry

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Image Source: frankieleon Structure of the Financial Tech Services Industry The financial tech services industry is primarily composed of firms that generate revenue by charging fees to customers for providing transaction processing and other payment-related services. Constituents operate in a rapidly-evolving legal/regulatory environment, particularly with respect to interchange fees, data protection, and information security. Several participants benefit from a significant competitive advantage – the network effect. As more consumers use credit/debit cards, more merchants accept them, thereby creating a virtuous cycle. The industry is one of the most attractive in our coverage. We’ve optimized our tehnology coverage. To access the reports, please select here.

Portfolio Holdings Intel and Visa Hit It Out of the Park

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Image Shown: Shares of Intel Corporation leapt higher on Friday October 25 as the market digested its solid earnings report and guidance for this quarter. By Callum Turcan Intel One of our favorite Dividend Growth Newsletter and Best Ideas Newsletter portfolios holdings, Intel Corporation (INTC), posted third quarter fiscal 2019 earnings (period ended September 28) on October 24 that handily beat consensus top and bottom line estimates. Revenue in the third quarter on a GAAP basis came in at $19.2 billion, flat year-over-year, which management noted was $1.2 billion higher than guidance issued out in July. This outperformance was driven by Intel’s ‘data-centric’ offerings, with sales up 6% year-over-year, as Intel Xeon processors for data centers sold well. Additionally, Intel … Read more

An Update on Facebook’s Libra as Roughly Two Dozen Members Sign On

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Image Shown: Facebook has room to run higher, with or without Libra. While several large financial technology and payment processing firms have recently made it clear they no longer want to be a part of the nascent Libra Association, that didn’t stop roughly two dozen members from signing the group’s charter in Geneva, Switzerland, on October 15. We really must stress that our discounted free cash flow models for Facebook don’t take in account the upside its proposed asset-back cryptocurrency Libra might generate. This opportunity represents pure upside to our forecasts, and we continue to like Facebook as a top holding in our Best Ideas Newsletter portfolio. By Callum Turcan Regulatory and political fears have apparently scared off several companies … Read more

Economic Commentary: Robots, Value Trap, and Politics on the Markets

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Tickerized for stocks in the DIA. Valuentum sat down for the latest installment of its periodic economic commentary, and the team tackled a wide array of topics, from robots on Wall Street, to President of Investment Research Brian Nelson’s new book Value Trap, to political influence on the markets and boyond. Let’s set the stage with a prompt from a recent Bloomberg article, “The Master of Robots…Coming for Wall Street:” “The problem is, computer-powered strategies are struggling to live up to the hype, with a Eurekahedge index of AI hedge funds lagging peers in recent years. That spells opportunity for the likes of Lopez de Prado with his outfit True Positive Technologies — a dig at the erroneous conclusions derived … Read more

ICYMI: Interview with Valuentum’s President Brian M. Nelson, CFA

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Catch up with Valuentum’s President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles. By Brian Nelson, CFA Recently, I was interviewed by Arne Magnus Lorentzen Ulland of the blog stockles. Arne is a dividend growth investor like many of you, and I sincerely hope you enjoy the interview he put together. I’m very grateful for his interest. His questions were fantastic. We discuss why and how I incorporate independence and integrity into the service at Valuentum. We go into detail regarding why Valuentum views stocks the way it does, and how Valuentum combines enterprise valuation and the information contained in prices in its stock-selection process. I discuss the pitfalls … Read more

Economic Commentary: Apple $225+, Brokers Tumble, Auto Sales Look Tired

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“Though all signs point to increased volatility, we maintain our view that we’re well-positioned in the newsletter portfolios, and the ideas highlighted in the Exclusive publication consider the backdrop economic conditions we closely monitor.” — Brian Nelson, CFA There has been plenty of news in the markets this week, with the Dow Jones Industrial Average (DIA) experiencing significant declines only to bounce back a bit. From where we stand, the markets look vulnerable technically, but that doesn’t mean we’re looking to change anything in the newsletter portfolios. We have some dry powder in the form of a ~10% cash weighting in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. The disappointing September ADP jobs report added to lower-than-expected ISM (Institute … Read more

Best Ideas Newsletter Portfolio Holding PayPal Can Thrive in a Post-eBay World

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Image Source: PayPal Holdings Inc – IR Presentation By Callum Turcan We continue to like Best Ideas Newsletter portfolio holding PayPal Holdings (PYPL) as a way to gain exposure to the very attractive payment processing and financial technology industry, complementing our top-weighted Visa Inc (V) holding. Our fair value estimate stands at $125 per share of PYPL, and we love its ability to generate shareholder value (indicated by PayPal’s Very Attractive Economic Castle rating). The company does not pay out a common dividend at this time, however; if PayPal did, it could be a significant one given its strong free cash flows. From 2016-2018, PayPal’s annual free cash flows averaged $3.0 billion as the firm is very capex-lite (relatively speaking, … Read more

Economic Roundtable: “Value” Versus “Growth” Rotation

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Tickerized for the DIA. “This kind of trading activity could be setting the stage for a big quant fund blow up, if the kind of leverage it takes to move the markets to this magnitude was applied. All it may take is for the B/M “value” factor to continue to suffer in the coming 12-18 months–it’s possible we could see a few quant firms go belly up. My guess is that market participants are paying very close attention to this activity, and if they “smell blood,” things could get ugly.” – Brian Nelson, CFA Earlier this week, the markets experienced significant internal “rotation,” as cyclicals and “value” stocks materially outperformed their defensive and “growth” counterparts, all the while the broader … Read more

Why We Like BIN Holding Visa So Much

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Image Source: Visa Inc – 2018 Annual Report By Callum Turcan One of our favorite holdings in the Best Ideas Newsletter portfolio is Visa (V), which has been included in the portfolio since November 2011 (see BIN transaction log here). Visa’s growth story is straightforward. The company is a secular growth play on the emergence of a global cashless society, one that is increasingly relying on debit and credit cards for most transactions. We think there’s still an enormous amount of room left to go on this front, especially in emerging and developing markets. We assign Visa a fair value estimate of $182/share (updated in the middle of August) and the top end of our fair value estimate range sits … Read more