VLO

Nelson: I Have Been Wrong About the Prospect of Near-Term Inflationary-Driven Earnings Tailwinds

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Transcript During the past several weeks, we’ve grown increasingly concerned about the health of consumer-tied entities across not only the consumer staples but also the consumer discretionary spaces. Many consumer staples entities, while raising prices, aren’t raising them fast enough to drive operating-income and bottom-line expansion, while many consumer-discretionary companies are facing higher freight and logistics costs and weaker performance in China, perhaps best revealed by Nike’s most recently-reported quarter, where inventory advanced 23% compared to the prior-year period. The tell-tale sign about the health of the consumer may be Amazon (AMZN) Prime Day, which is coming up on July 12-13, but based on many of the reports we’ve monitored this past earnings season, even if sales are strong on … Read more

High Yield: Diversified Refiner Phillips 66 A Good Replacement for Broad Consumer Staples Exposure

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Image Source: Phillips 66 Investor Update May 2022 By Valuentum Analysts Phillips 66 (PSX) is a top-notch operator in the downstream space with impressive refining and petrochemical assets supported by various midstream operations. Its investment-grade credit rating (A3/BBB+), with stable outlooks, better enables Phillips 66 to tap capital markets at attractive rates, something that we especially like when considering new ideas in the high yield dividend arena. A growing global middle class and a growing global population supports Phillip 66’s longer term outlook for refined product demand. We like the company as one of our newest high yield dividend considerations. Phillips 66’s near-term outlook is supported by the ongoing recovery in the global thirst for refined petroleum and petrochemical products as … Read more

Evaluating the Exposure of Chevron and Exxon Mobil to Russia’s Energy Industry

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Image Shown: Shares of Chevron Corporation (blue line) and Exxon Mobil Corporation (orange line) have skyrocketed over the past six months. By Callum Turcan In the wake of Russia invading Ukraine (again) in February 2022, geopolitical tensions between the West and Russia have reached levels last seen during the height of the Cold War. At the beginning of March 2022, near term WTI and Brent futures were trading north of $100 per barrel while liquified natural gas (‘LNG’) spot prices and European natural gas prices remained incredibly expensive. The supply-demand dynamics for crude oil and natural gas were already tight before this crisis, and in light of the expansive sanctions programs enacted by the West and some of its allies … Read more

Don’t Throw the Baby Out with the Bathwater

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Image: Erica Nicol Takeaways: Junk tech should continue to collapse, but the stylistic area of large cap growth and big cap tech should remain resilient. Moderately elevated levels of inflation coupled with interest rates hovering at all-time lows isn’t a terrible combination. In fact, it’s not bad at all. The markets are digesting the huge gains of the past few years so far in 2022, and the excesses in ARKK funds, crypto, SPACs, and meme stocks are being rid from the system. Our best ideas are “outperforming” the very benchmarks that are outperforming everyone else. The BIN portfolio is down 6.4% and the DGN portfolio is down 3.2% year to date. The SPY is down 7.8%, while the average investor … Read more

Valuentum’s Theses on Best Ideas Chevron and Exxon Mobil Playing Out

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By Callum Turcan Raw energy resources pricing has surged higher during the past year with room to run. The global energy complex is on the rebound as demand for crude oil and refined petroleum products is steadily recovering from the worst of the coronavirus (‘COVID-19’) pandemic. As demand for electricity and heating needs held up well during the pandemic, liquified natural gas prices (‘LNG’) put up a strong year in 2021 and remain elevated. The OPEC+ cartel is committed to slowly phasing out its crude oil supply curtailment agreement first enacted in 2020, effectively limiting growth in global oil supplies at a time when demand is rebounding at a brisk pace. We view the near-term outlook for the global energy … Read more

High Yielding Philips 66 Has a Solid Plan in Place to Reward Its Shareholders

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Image Shown: An overview of Phillip 66’s expansive asset base. Image Source: Phillips 66 – November 2021 IR Presentation By Callum Turcan Demand for diesel and gasoline has largely recovered from the worst of the coronavirus (‘COVID-19’) pandemic, though kerosene demand (jet fuel) has a way to go given depressed levels of international travel. The refining giant Phillips 66 (PSX) took advantage of the rebound seen over the past year to pare down its debt levels on a consolidated basis. At the end of December 2020, Phillips 66 had $13.4 billion in net debt (inclusive of short-term debt) on a consolidated basis, which fell down to $12.0 billion in net debt (inclusive of short-term debt) at the end of September … 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

Microsoft’s Dividend Is Rock Solid But Why?

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Image Shown: Valuentum’s Dividend Report on Microsoft. The Dividend Cushion Ratio Deconstruction reveals the numerator and denominator of the Dividend Cushion ratio for Microsoft. At the core, the larger the numerator, or the healthier a company’s balance sheet and future free cash flow generation, relative to the denominator, or a company’s cash dividend obligations, the more durable the dividend. In the context of the Dividend Cushion ratio, Microsoft’s numerator is larger than its denominator suggesting strong dividend coverage in the future. The Dividend Cushion Ratio Deconstruction image puts sources of free cash in the context of financial obligations next to expected cash dividend payments over the next 5 years on a side-by-side comparison. Because the Dividend Cushion ratio and many … Read more

ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline

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ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline — — In this 40+ minute video jam-packed with must-watch content, Valuentum’s President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He’ll talk about which companies Valuentum likes and why, and which areas he’s avoiding. This and more in Valuentum’s 2020 Exclusive conference call.   Note: This video was originally published August 2, 2020.    To watch the video >>   The Theory of Universal Valuation —– Valuentum members have access to our 16-page stock reports, … Read more

Energy Earnings Roundup: CVX and XOM

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Image Source: Exxon Mobil Corporation – 2020 IR Presentation In ticker by alphabetical order: CVX, XOM By Callum Turcan Several integrated oil and gas companies recently reported earnings for the final quarter of 2020, and as expected, these were brutal reports. The coronavirus (‘COVID-19’) pandemic weighed negatively on global demand for raw energy resources (crude oil, natural gas, natural gas liquids), refined petroleum products (gasoline, diesel, kerosene), and certain petrochemicals last year which created massive headwinds for the oil and gas industry across the board. Subdued raw energy resources pricing and lackluster refined petroleum product demand were the two big obstacles for the industry as those dynamics severely weakened the economics of upstream (involved in the extraction of raw energy … Read more