WBA

ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG

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Image source: Centers for Disease Control and Prevention.  ALERT: Adding Market Crash ‘Protection,’ Removing MSFT, BKNG — Changes to newsletter portfolios — We’re adding out-of-the-money put options to both the Dividend Growth Newsletter portfolio and Best Ideas Newsletter portfolio. — We’re removing Microsoft from the Dividend Growth Newsletter portfolio. — We’re removing Booking Holdings from the Best Ideas Newsletter portfolio. — By Brian Nelson, CFA — We’re making some moves in the newsletter portfolios today.  — The Dow Jones Industrial Average (DIA) is currently indicated down 900+ points in pre-market trading during the session Monday, February 24. We laid out a thesis where the US markets could experience a “crash,” and we encourage you to read that take here, “Is a … Read more

Is a Stock Market Crash Coming? — Coronavirus Update and P/E Ratios

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Image Source: World Health Organization, Coronavirus disease 2019 (COVID-19), Situation Report — 32 We don’t think this is the environment to put new capital to work, and we remain highly cautious of what COVID-19 means for global economic growth not just in the first quarter of 2020 but for the rest of this year (maybe longer). Right now, the US markets are not really factoring in anything related to COVID-19, and perhaps may be adjusting to China’s stimulus in artificially propping up the markets as if the outbreak is somehow a “positive thing.” With the S&P 500 trading at 19.0 forward earnings estimates–estimates that are likely too high given the evidence we are seeing with respect to a slowdown due … Read more

Walmart Reports Fourth Quarter Results, Raises Dividend

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Image Source: Valuentum By Brian Nelson, CFA On February 18, global brick-and-mortar retail bellwether Walmart (WMT) reported mixed fourth-quarter fiscal 2020 results (ends January 31, 2020) that showed revenue advancing 2.1% and non-GAAP earnings per share of $1.38 missing the consensus forecast. We await the filing of the firm’s 10-K to roll our valuation model forward, but we do not expect to make any material changes to our fair value estimate at this time, which stands at $109 per share. The stock is trading hands at ~$118 per share at the moment. Walmart’s US comparable store sales growth, on a two-year stacked basis, came in at 6%, which is solid in our view, but the most recent quarterly pace (+1.9%) … Read more

‘Value Trap’ Shoots and Scores!

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Author Brian Nelson is the President of Investment Research at Valuentum. In his role, he has updated and overseen over 20,000 discounted cash flow models during the past 10 years. Prior to Valuentum, he worked as the Director of Methodology at Morningstar, a large independent research firm in Chicago, developing the company’s discounted cash-flow model used to derive the fair value estimates for the company’s coverage universe. Key Takeaways Based on how we interpret the latest from Fama/French, a new study released a couple weeks ago, the long-advertised quant value factor, the book-to-market (B/M) ratio, may not have even existed. By extension, in our view, it reinforces our thesis that many quant value factors that are based on traditional valuation … Read more

Resetting Your Mental Model

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Image Source: affen ajlfe A version of this article was originally published on our website October 6, 2013. Having the right mental model and using the right information can be the reason why you win or lose in investing. “What is the definition of timeliness? Many believe it is getting information to investors as quickly as possible after an event, or updating something every single day or week for immaterial information. I believe in a different definition of timeliness. I believe timeliness is using all information available in a mosaic approach to accurately predict the event before it even happens. Take Kinder Morgan as the latest example. We were the only ones predicting what was going to happen before it did. To investors, … Read more

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds

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Image: President of Investment Research Brian Nelson, CFA By Brian Nelson, CFA A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception. Though the book focuses more on the life and times of founder Jim Simons and dedicated only a page or two to the fall of Long-Term Capital Management (LTCM), another quant fund that went belly-up during the late 1990s, it was nonetheless a thoroughly interesting and enjoyable read. But why I am bringing up one of the most successful quant … Read more

Our Reports on Stocks in the Food Retailing Industry

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Image Source: Mike Mozart Structure of the Food Retailers Industry Firms in the mature food retailers industry generally have slim profit margins and face significant competition from brick-and-mortar locations (discount, department, drug, dollar, warehouse clubs and supermarkets) as well as Internet-based retailers (including Amazon). Though the industry is not terribly cyclical, economic conditions, disposable income, credit availability, fuel prices, and unemployment levels drive ticket size and traffic trends. Offering consumers a compelling value proposition is a must, even as higher-priced organic food offerings proliferate. We’re generally neutral on the group. We’ve reallocated our resources to cover more recession-resistant stocks. See here.

5 Things We Learned in 2019

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5 Things We Learned in 2019      “The further a society drifts from the truth, the more it will hate those that speak it.” — George Orwell By Brian Nelson, CFA    I’m looking at the beautiful Smoky Mountains in Tennessee as I’m writing this piece. I hope that you and yours are having a wonderful holiday season with family and friends. I wanted to share with you a few things that I think investors learned during 2019. Before I do, however, you’re probably wondering why I decided to lead in with this particular quote from Orwell. — — The quote, in some ways, is a reflection of how I think many approach truth in finance. Maybe they don’t … Read more

Best Buy’s Rebound Continues

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Image Shown: Best Buy Co Inc has staged an impressive rebound over the past few years. This rebound was aided by significant investments in its digital presence, recognizing the core markets Best Buy wanted to target, and ultimately comparable store sales growth.  By Callum Turcan On November 26, Best Buy (BBY) reported third quarter earnings for its fiscal 2020 (three month period ended November 2, 2019) that beat both top- and bottom-line consensus estimates. Even better, Best Buy raised its guidance for fiscal 2020, largely on the back of stronger than expected same-store sales growth. Best Buy’s update helped send shares of BBY over our fair value estimate of $76 per share, and if this outperformance is sustained, the retailer … Read more

Economic Commentary: Marks, Dalio, and the Discount Rate

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Image Source: Mike Cohen We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there! Brian Nelson: The concept of negative interest rates is not merely academic, but they have far-reaching implications across the global … Read more