WBA

Growing Competitive Pressures, Leverage Drive Our Reduced Fair Value Estimate of CVS Health (Walgreens, Too)

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By Callum Turcan On November 9, we reduced our fair value estimate of CVS Health Corporation (CVS) (which operates pharmacies, walk-in medical clinics, retail centers, and a large health insurance business). Our new fair value estimate is $55 per share, down from $73 per share previously. CVS Health’s 52-week share price range has been $52-$77, and the company yields 2.7% at the time of this writing. We recently wrote an article here explaining some of the major broad-based drivers behind why fair value estimates can, do, and should change over time as future expectations change. From our perspective, CVS Health’s near- and medium-term outlook has become increasingly stressed. Though investors have bid up shares of CVS in the wake of … Read more

UnitedHealth Remains on Our Radar for Dividend Growth Newsletter Portfolio

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Image: On a price-only basis, from the beginning of 2008, UnitedHealth’s shares have advanced ~600%, while the S&P 500 has increased ~150%. The measurement period covers both the Obama and Trump administrations. By Brian Nelson, CFA UnitedHealth Group (UNH) is a name that we don’t dedicate a lot of resources to, as we tend to prefer diversified exposure to the healthcare arena in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio via the Healthcare Select Sector SPDR (XLV)–UnitedHealth Group is a ~8% weighting in the ETF at the time of this writing. Nonetheless, this Dow Jones Industrial Average (DIA) component has been under material accumulation of late based on its pricing action. Year-to-date, on a price-only basis, … Read more

ICYMI — Dividend Growth Strategies Struggle

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Image: A large cap growth ETF (orange) has significantly outperformed an ETF tied to a dividend growth strategy, the SPDR S&P Dividend ETF (SDY), which mirrors the total return performance of the S&P High Yield Dividend Aristocrats Index. — By Brian Nelson, CFA — To no surprise to many members, several dividend growth strategies have faced tremendous pressure during 2020. The Journal recently wrote a piece on the topic, but from our perspective, the problem with many dividend growth strategies is that they tend to be balance-sheet agnostic and pay little attention to traditional free cash flow expectations, focusing only on the yield itself, sometimes dismissing future fundamentals in favor of historical growth trends and the inferior EPS-based dividend payout ratio. — In many dividend-targeted … Read more

Nelson: I’m Not Worried About This Market

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Dear members: — First of all, I wanted to share a heartfelt thank you to all that sent kind words regarding the passing of my brother. My inbox was overflowing with your love and kindness. Len was a great person and my best friend. Without him, I don’t think Valuentum would have come into existence. Your words have been very comforting to me and my family during this difficult time. Thank you again. — With that said, I continue to be bullish on the markets over the long haul. We maintain our view that longer-duration enterprise free cash flows are worth more than they were prior to the COVID-19 market collapse, and valuation adjustments are being reset higher as a … Read more

Third-Level Thinking and “Keynesian Convergence”

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Image: The analytical process of the Valuentum Buying Index rating system.  By Brian Nelson, CFA In the 2011 book, The Most Important Thing, co-founder of asset management firm Oaktree Capital Management, Howard Marks, divided stock market analytics into two levels of thinking, first-level and second-level. Marks used a few examples to explain the difference between these two levels of thinking: First-level thinking says, “It’s a good company; let’s buy the stock.” Second level thinking says, “It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.” First-level thinking says, “The outlook calls for low growth and rising inflation. Let’s dump our stocks.” Second-level thinking says, “The outlook stinks, but … Read more

Macy’s Is Treading Water for Now

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Image Shown: Shares of Macy’s Inc have flatlined since crashing during the first three months of calendar year 2020 as investors await signs of the embattled retailer’s turnaround strategy taking hold. By Callum Turcan On September 2, embattled retailer Macy’s Inc (M) reported second quarter fiscal 2020 earnings (period ended August 1, 2020) that saw the firm’s comparable sales drop 34.7% year-over-year at stores owned by Macy’s due primarily to physical store closures brought on by the ongoing coronavirus (‘COVID-19’) pandemic. The year-over-year decline in comparable sales deepened to 35.1% when including stores owned and licensed by Macy’s. Digital sales offered some reprieve as those were up 53% year-over-year last fiscal quarter, with digital sales as a percentage of the … Read more

3 Lessons in Portfolio Management Over 10 Years

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Dear members: — We’re finally getting a pause in the rapid ascent of the markets on September 3rd. Though headlines may look scary and momentum/volatility investors could start to pile on to the downside, a modest retracement is actually a good thing. We continue to focus on the long haul with our processes, and we’re viewing the sell-off as profit taking, for the most part. — In the near term, the markets will also have to digest some speculators betting on mean reversion between “value” (cyclical) versus “growth” (secular), but we maintain the view that the value-versus-growth conversation is largely nonsense (see block quotes below), and mean reversion is something akin to the gamblers’ fallacy, in my humble opinion. Investors should also continue … Read more

Valuentum Website Overview

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Overview of the key features of valuentum.com/ (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information. The Benefits of Premium Membership >> Subscribe Now!

Target Posts Stellar Comparable Store Growth, Digital Investments Lead the Way

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Image Source: Target Corporation – May 2013 IR Presentation By Callum Turcan Elevated demand for consumers staples products and rebounding consumer discretionary sales helped Target Corporation (TGT) report record comparable store sales growth in the second quarter of fiscal 2020 (period ended August 1, 2020), which were up 24.3% year-over-year. Digital comparable sales were up a whopping 195% year-over-year as same-day delivery services grew by 273%, with Target citing strength at its curbside pickup, order online/pickup in-store and home delivery options. Please note Target generates virtually all of its revenues in the US. Market Share Gains and Digital Investments The uplift in US consumer spending power from the Coronavirus Aid, Relief, and Economic Security Act (‘CARES Act’), particularly the direct … Read more

Amazon Secures Big Win in the Online Grocery Market

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Image Shown: Shares of Amazon have surged over the past year. Compared to their March 2020 lows, shares of AMZN have almost doubled as of this writing on August 10, 2020. By Callum Turcan On July 30, Amazon (AMZN) reported second-quarter earnings for 2020 that beat consensus top- and bottom-line estimates by a mile. As of this writing, shares of AMZN have almost doubled since hitting their March 2020 lows as Amazon’s lines of business were well-prepared to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic, assisted by the firm’s pristine balance sheet. Earnings Overview Amazon grew its GAAP net revenues by 40% year-over-year in the second quarter of 2020, which hit $88.9 billion on the back … Read more