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Earnings Roundup: V, INTC, HUM, PYPL

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By Brian Nelson, CFA Visa (V) Operating and Free Cash Flow Margins Remain Robust, Consumer Spending Remains Resilient Image: Visa’s operating margins are phenomenal. Image Source: Visa On January 25, top-weighted Best Ideas Newsletter portfolio holding Visa reported excellent first-quarter fiscal 2024 results that beat on the top and bottom lines. Net revenues advanced 9% on a year-over-year basis, while the firm was able to drive non-GAAP net income 8% higher and non-GAAP earnings per share 11% higher. In the quarter, payments volume advanced 8%, cross-border volume advanced 16%, and processed transactions increased 9%, all on a year-over-year basis. The company’s operating margin came in at an impressive 69% in the quarter, and it hauled in ~$3.35 billion in free … Read more

Best Ideas Visa, Alphabet Hit 52-Week Highs

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Image: The top weightings in Valuentum’s Best Ideas Newsletter portfolio just hit 52-week highs. By Brian Nelson, CFA We’re reiterating our view that investors should stay aggressive with their allocations to equities, “12 Reasons to Stay Aggressive in 2024,” and our top two weightings in the Best Ideas Newsletter portfolio, Visa (V) and Alphabet (GOOG) just hit 52-week highs. These are two of our favorite names on the marketplace, with targeted weightings of 10%-12% of portfolio construction seeking long-term capital appreciation. During the past year, Visa’s shares are up nearly 20%, while Alphabet’s shares are up more than 60%. Position sizing, or the weighting ranges we assign to each company within a newsletter portfolio, is important as it is another way to … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

Brief Note: Just How Good Has Our Stock Selection Been?

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By Brian Nelson, CFA I was taken aback by a recent report from UBS that outlined “the top contributors to the S&P 500 from about two years ago to today.” In a simulated securities portfolio, the Best Ideas Newsletter portfolio, of 18 ideas that also includes several ETFs, we’ve managed to hit the board 7 out of the 20, and 9 including Exxon Mobil (XOM) and Chevron (CVX), the latter two we removed in March following their big runs last year. Here were the top 20 contributors, with simulated Best Ideas Newsletter portfolio holdings highlighted in red (XOM and CVX are highlighted in green): Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Eli Lilly (LLY), Broadcom (AVGO), Exxon Mobil, Berkshire Hathaway (BRK.B), … Read more

There Will Be Volatility

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By Brian Nelson, CFA Last year, 2022, was a big test for equity investors, and the downside volatility that we witnessed during the year wasn’t comfortable, to say the least. Following the COVID-19 crash and rebound during 2020, and then the market surge in 2021, it wouldn’t be a stretch to say many investors’ heads are probably still spinning from all the volatility witnessed to start this decade. That said, part of what we’ve been warning about the past few years with respect to the equity market, especially in Value Trap, is that the proliferation of price-agnostic trading (e.g. quant, machine/algorithmic trading, etc.) will only lead to more and more market volatility, so while we were somewhat surprised by last … Read more

Report Updates: Amazon Registers the Lowest Rating on Our Scale

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Select the company’s link below to access their stock webpage where their 16-page stock report (pdf) can be downloaded. The stock webpage also houses the company’s dividend report (pdf), where applicable, as well as the latest company/industry commentary and news.    Albemarle (ALB) Amazon.com (AMZN) Applied Materials (AMAT) Cisco (CSCO) Halliburton (HAL) Lam Research (LRCX) Phillips 66 (PSX) Visa (V) CVS Health (CVS) Intuitive Surgical (ISRG) AbbVie (ABBV) Bristol-Myers Squibb (BMY) Gilead Sciences (GILD) Pfizer (PFE) Abbott (ABT) Oracle (ORCL) Archer-Daniels-Midland (ADM) Fresh Del Monte (FDP) Kraft Heinz (KHC) Lancaster Colony (LANC) McCormick (MKC) Molson Coors (TAP) Smucker (SJM) Sysco (SYY) ———- It’s Here!  The Second Edition of Value Trap! Order today!   —– Brian Nelson owns shares in SPY, SCHG, QQQ, … Read more

Details Regarding Visa’s Exchange Offer

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By Brian Nelson, CFA Best Ideas Newsletter portfolio holding Visa Inc. (V) has a number of different common stock and preferred share classes. Investors in Visa generally hold its class A common stock that is traded on the NYSE, but the credit card giant also has class B and class C common stock as well as series A, series B, and series C preferred stock that are tied to the value of its class A common shares. Due to prior litigation corresponding to its initial public offering and 2007 capital restructuring, Visa has both a U.S. retrospective responsibility plan and a European retrospective responsibility plan, and pursuant to the terms of these plans, the company’s class B and class C … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

ESG Issues Plague Discover

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Image: Discover’s shares have faced pressure due to a card misclassification issue and the resignation of CEO Roger Hochschild. Discover Financial’s (DFS) shares have faced a difficult 52-week stretch as corporate news hasn’t been great. The company’s equity is down nearly 14%, while the S&P 500 (SPY) is up more than 8% over the same time stretch. Though Discover has the potential to bounce back from the troubles it has encountered, the firm has certainly been in hot water since it disclosed a card product misclassification. From its press release on July 19: Beginning around mid-2007, Discover incorrectly classified certain credit card accounts into our highest merchant and merchant acquirer pricing tier. Incremental revenue resulting from this card product misclassification … Read more

Subscribe to the Valuentum ESG Newsletter!

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*BONUS* Included in the ESG Newsletter is an ESG-focused simulated newsletter portfolio! Subscribe today. ESG Newsletter $1,000.00 Pay now “The investing landscape has changed dramatically over the past decade and part of that transformation has involved US households placing a much greater emphasis on “ethical” and “sustainable” investing strategies. A decade ago, funds managed with Environmental, Social, and Governance (‘ESG’) standards in mind were a small part of the investing universe at-large, but that is no longer the case. Data from Morningstar notes that US funds considered “sustainable” reported $21.5 billion in net inflows during the first quarter of 2021, up from $20.5 billion in net inflows in the fourth quarter of 2020 and roughly five times greater than the … Read more