VGK

1Q 2023 Earnings Coming in Better Than Feared Thus Far

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By Brian Nelson, CFA We’ve been receiving questions about the companies that we are looking to add to the Best Ideas Newsletter to replace the ones we recently removed, and I can say that we’re strongly considering adding Booking Holding (BKNG) and adding to the existing “position” in Chipotle (CMG) following their first-quarter 2023 results. We recently raised our fair value estimate for Booking Holding significantly (now $3,091; was $2,147 per share), and we expect a huge fair value increase at Chipotle in the coming weeks. Booking Holding will report its first-quarter 2023 earnings in early May, while Chipotle will report first-quarter 2023 results on April 25. We have several other ideas in mind to add to the Best Ideas … Read more

Don’t Let “Them” Spin the Narrative

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By Brian Nelson, CFA Let’s call it how it is: 2022 was an absolute nightmare for the 60/40 stock/bond portfolio. During the year, the 60/40 stock/bond portfolio was down 16.9%, according to data from the Vanguard Balanced Index Fund Shares (VBIAX). During 2022, the S&P 500 (SPY) index was down 18.2%, meaning that the 60/40 stock/bond portfolio, despite allocating to 40% bonds, captured over 90% of the downside risk. Modern portfolio theory is dead: Stocks have done far better than bonds during upswings, and only slightly worse during downturns. The risk/reward for the 60/40 stock/bond portfolio just doesn’t add up anymore. Bond prices did not move inversely to stock prices during the COVID-19 meltdown, and they did not move inversely … Read more

The Stock Market Is Nearing Technical Support Levels

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Image: This year has been a difficult one for equity investors, but the selling pressure that has been common in the markets may start to slow as broader indices such as the S&P 500 begin to approach technical support levels. On the S&P 500, we think there is substantial technical support in the 3,200-3,500 range, which to us suggests that further near-term downside may be limited. The S&P 500 closed at 3,674.84 on Friday, June 17, and we think fair value is much higher. By Brian Nelson, CFA  It’s been difficult to watch the stock market give up much of the gains reaped over the past year or so during the selling barrage that has occurred thus far in 2022. … Read more

Bitcoin, U.S. Large Cap Growth, and Technology Continue to Dominate Returns

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Image source: Seeking Alpha, retrieved November 28 —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.  The Benefits of Premium Membership Sign Up Today. First 14 days FREE!  At Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m], we strive to stand out from the crowd. Most investment research publishers fall into a few camps, whether it be value, growth, income, momentum, chartist or some variant of the aforementioned. We think each in its own right holds merit, but the combination of these approaches is even more powerful. After all, stock price movements aren’t just driven by investors of the value or … Read more

Valuentum Weekly

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Image: Bitcoin, technology and large cap growth have led the pack the past 5 years while pipeline MLPs, crude oil and energy stocks have fallen way behind. Large cap growth > small cap value. Bonds, non-US stocks continue to lag. The Valuentum Weekly is a brand-new weekly market commentary from Valuentum Securities, released each weekend in digital form. The Valuentum Weekly offers members a weekly synopsis of the markets and major events. It will be straight and to-the-point. Our goal is to deliver to you the latest information and insights. We welcome your feedback on how we can make the Valuentum Weekly as useful and as relevant for you as ever! Takeaways The markets offer investors an asymmetric risk opportunity, … Read more

Excerpt from ‘Value Trap’ 2nd Edition: MPT Sounds a Lot Like “Empty”

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The second edition of President of Investment Research Brian Nelson’s book ‘Value Trap’ will be released in the coming weeks. Here is a short excerpt to whet your appetite: — … — Enterprise valuation, or the discounted cash-flow framework, remains at the center of finance, in my view, and the core of what we do at Valuentum. The process and its key cash-based components helped deliver a suite of outperforming equity considerations at a time when modern portfolio theory (MPT) and diversification benefits were breaking down. Both stocks and bonds, for example, dropped aggressively in unison during the COVID-19 crisis, and the popular U.S. 60-40 stock/bond portfolio “suffered one of its worst performances since the 1960s” during the first quarter … Read more

Santander Remains Well-Capitalized

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Europe is overbanked with too much capacity, which means little or no earnings power for many of the players involved, including Santander Europe. We’re paying close attention to the key banking players in Europe to assess the likelihood of a global financial contagion that may accompany the global pandemic that has become COVID-19. By Matthew Warren Banco Santander (SAN) reported tough first-quarter results April 28, with total income (the IFRS equivalent of GAAP revenue) down 2% and attributable profit down 82% to EUR 331 million. Profit before the provision build would have been up 1%, so clearly the expectations for upcoming bad debts are what really sunk the quarterly results, which one can see in the below graphic. Image Source: Santander … Read more

US Fiscal Stimulus and Emergency Spending Update

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Image Source: Pictures of Money By Callum Turcan On Thursday, April 9, the US Senate is set to hold a vote on whether to add additional funding towards helping small- and medium-sized businesses (‘SMBs’) on top of the $350 billion allocated towards a loan/grant program that was included in the recently passed $2+ trillion Coronavirus Aid, Relief, and Economic Security Act (‘CARES Act’). Members who want to read our commentary on the CARES Act are encouraged to check out this article here, and for additional commentary, check out our ‘Recapping the Crash’ note here and one of our latest videos here. We sincerely hope everyone and their loved ones stay safe during the ongoing coronavirus (‘COVID-19’) pandemic. Pivoting back to … Read more

Banking Entities: The Technicals Tell the Story

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Image: The Financial Select Sector SPDR ETF has experienced a tremendous amount of pain in recent weeks. From Value Trap: “It’s likely we will have another financial crisis at some point in the future, the magnitude and duration of which are the only questions. My primary reason for this view is not to be a doomsayer, but rests on the human emotions of greed and fear and the nature of a banking entity’s business model, which does not hold a 100% reserve against deposits. Our good friend George Bailey, played by actor Jimmy Stewart, in the movie It’s a Wonderful Life knew this very well when he tried to discourage Bedford Falls residents from making a “run” on the beloved … Read more

Fed Cuts 100 Basis Points, Launches More QE

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“Now, stocks and other assets are being sold, some indiscriminately. It is truly becoming a stock pickers market as opposed to a quant-led and index-led market. It takes a different kind of bravery to buy on massive down days and one must have conviction in their research that the company will not go away if massive downside scenarios do in fact emerge.” – Matthew Warren. In this piece, we cover our assessment of what the global markets might be facing in a bull-case, base-case, and bear-case scenario. Our base case is a substantial recession in the US and a financial crisis of some unknown magnitude. By Matthew Warren The tremendous (mostly downside) volatility in all asset markets globally during the … Read more