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ICYMI: The PayPal Wave Recedes, We Still Like Shares

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This article was originally published November 10, 2021. The fair value estimate has been updated in this version. Video: PayPal By Brian Nelson, CFA We knew something wasn’t quite lining up at digital-payments provider PayPal (PYPL) when the rumor mill started to turn with reports it was interested in scooping up Pinterest (PINS) for a pretty penny. PayPal has since put to rest rumors about buying Pinterest, but it left investors with a sour outlook when it issued third-quarter 2021 results November 8. Though the market wasn’t happy with the forecast for the fourth quarter of 2021 and into 2022, the company continues to grow revenue at a robust pace, and we expect several key initiatives to drive sustainable top-line … Read more

Asset Allocators Fail, Advisors Should Pick Stocks, Save Investors $34 Billion Annually

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  Image: The area of large cap growth has trounced that of the 60/40 stock/bond portfolio for more than a decade. Image Source: Morningstar. By Brian Nelson, CFA We’ve all heard the stories. Professional stock pickers can’t beat a bunch of monkeys throwing darts at the pages of the WSJ. A cows’ investment decisions are just as good as the pros’. Stock prices reflect all available information so not even professionals have an edge (e.g. the efficient markets hypothesis). Most professionals can’t outperform their respective benchmarks, so how could mom and pop? Look at this from one of today’s bloggers: The traditional argument, which you’ve probably heard many times before, goes as follows: since most people (even the professionals) can’t … Read more

Hut 8 Mining Is an Interesting Play on Cryptocurrencies

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Image Source: Hut 8 Mining Corporation – November 2021 IR Presentation By Callum Turcan Hut 8 Mining Corporation (HUT) is headquartered in Toronto, Canada (in the province of Ontario), and “mines” digital assets from two operations in Alberta, Canada (in the city of Medicine Hat and town of Drumheller). The firm is in the process of developing a third mining operation in Ontario, Canada, at the small city of North Bay, having secured a long-term power purchase agreement with Validus Power Corp. Overview  Though Hut 8 Mining mines for both bitcoin (BITO) and ether, two of the most popular cryptocurrencies, when it mines for Ether it historically has preferred to get paid in bitcoin. Hut 8 Mining has built up … Read more

Hard Work and the Trust That Binds

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Image Source: Terry Johnson By Brian Nelson, CFA We’ll have our traditional Valuentum Weekly email coming out on Sunday, and I’m excited to say our team is putting the finishing touches on our technology industry update, so we’ll have a whole bunch of fresh reports for you to look at Sunday evening/Monday morning. It’s easy to forget how much we’ve been through the past two years. Often, we forget how helpful the warning that markets were going to crash was the weekend before they did on February 22, 2020, “Is a Stock Market Crash Coming? – Coronavirus Update and P/E Ratios,” how we thought dollar-cost-averaging made sense at the bottom in March 2020, and how we went “all-in” in April … 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

FinTech Stocks Still Attractive, Market Overreacting to Visa’s Cross-Border Travel Outlook

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Image: Visa continues to rake in the free cash flow. Though its outlook is clouded somewhat by recovering cross-border travel transaction volumes, we still like its asset-light, free-cash-flow rich business model. By Brian Nelson, CFA It’s easy to lose sight of everyday life when we hear stories about the latest and greatest cryptocurrency or the next iteration of yet another ETF that centers on one theme or another, but when we take a step back, almost all of us are still using and continuing to use one of a few payment options. Maybe it’s your Visa (V) Card, your Mastercard (MA), Discover (DFS) Card, American Express (AXP) Card, Capital One Financial (COH) Card or perhaps PayPal (PYPL), Stripe, or Square … Read more

I Don’t Know How Lucky I Am, Do You?

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Image: The category of large cap growth (SCHG) has outperformed a 60/40 stock/bond rebalanced portfolio (VBIAX) by ~310 percentage points the past 10 years. Image Source: Morningstar. By Brian Nelson, CFA Hi everyone. I hope you all are doing well. It’s been a while since I wrote a personal message, but today, I thought it would be worthwhile to share my ever-evolving opinion on the world of financial markets. First, let me start with Facebook (FB). Hopefully, I set your expectations very low for the social media giant’s third-quarter report because this one is a long-term holding. Shares are dirt cheap, and while sentiment has moved against it, we’re going to “hold” strong in the Best Ideas Newsletter portfolio (1). … Read more

Best Idea Visa on the Rebound, Generating Gobs of Free Cash Flow

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Image Shown: Visa Inc is a stellar free cash flow generator and is included as an idea in our Best Ideas Newsletter portfolio. Image Source: Visa Inc – Third Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan We’re huge fans of the payment processing and payment solutions space. This industry is supported by secular growth tailwinds due to the global shift away from cash-to-card and card-not-present (e.g. online purchases) purchase options, and the ongoing proliferation of e-commerce. Furthermore, companies in this space benefit immensely from the network effect, which creates an economic moat for their business.  These companies are incredibly lucrative with relatively high operating margins and impressive free-cash-flow generating abilities, aided by their relatively modest capital expenditure … Read more

The Investment Case for More Gender Diversity

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Image: The Impact Shares’ YWCA Women’s Empowerment ETF (WOMN) has trounced the S&P 500 since inception, while the SPDR SSGA Gender Diversity Index ETF (SHE) has bested the quantitatively-hailed small cap value ETF over the same time period. By Valuentum Analysts There has been a plethora of research over the years regarding the value of diversity on teams, in corporate boardrooms, and across asset management. The CFA Institute defines diversity as “the spectrum of human attributes, perspectives, identities, and backgrounds,” and notes that “the discussion around motivations for pursuing diversity in investment management often revolves around two main areas: ‘the business case for diversity’ (i.e., with more diverse perspectives, business outcomes will improve) and ‘because it is the right thing … Read more

Best Idea PayPal Is a Tremendous Enterprise with Ample Capital Appreciation Upside

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Image Source: PayPal Holdings Inc – 2021 Investor Day Presentation By Callum Turcan PayPal Holdings Inc (PYPL) is a stellar enterprise, and we view the fintech company’s capital appreciation upside quite favorably, which is why we include shares of PYPL as an idea in the Best Ideas Newsletter portfolio with a significant ‘weighting.’ Shares of PYPL have been on a steady upward climb of late, and investors continue to warm up to the name. Expansive Offerings Creates Sizable Synergies PayPal put up stellar performance during the first half of 2021. Its number of active accounts rose to 403 million at the end of June 2021 from 377 million at the end of December 2020, while its payment transactions per active … Read more