XLF

Resetting Your Mental Model

by

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

Morgan Stanley Expecting Substantial Improvements

by

Morgan Stanley is guiding return on tangible equity to go from 12.9% this year to 13-15% in two years and to 15-17% in the longer term. Management was quite clear that they are using the assumption that the economy and markets move ahead at normal levels, meaning no severe recessions or booms. That said, if the company hits these goals, it will drive fundamentals ahead at a steady clip, requiring a reset higher in its valuation. By Matthew Warren Morgan Stanley (MS) put up solid fourth-quarter results, released January 16, beating the consensus of analyst earnings-per-share forecasts by a decent margin. Net revenues advanced 8% and net income applicable to Morgan Stanley common shareholders was up a modest 1%. Adjusted … Read more

Goldman Hit By Charge Related to 1MDB

by

Aside from dominating the global revenue pools for investment banking and trading, Goldman is doing other things right. The firm has rapidly gathered deposits in the US and UK over the past year, bringing in a lower cost of funds to help facilitate its balance sheet. Goldman has also built up Marcus, Apple Card, and the bank is in the process of growing its asset management business to better serve institutional clients. By Matthew Warren Goldman Sachs (GS) posted mixed fourth-quarter results, released January 15, beating consensus revenues but missing on the bottom line by a substantial amount as a result of a $1.24 billion charge related to the ongoing 1MDB (1Malaysia Development Berhad) scandal potential upcoming resolution. 1MDB is … Read more

Bank of America Gaining Share

by

We are increasing our fair value estimate of Bank of America to $40 per share, as we view the market share gains at the bank and steady loan and deposit growth to be more sustainable than we had previously envisioned. We like the bank’s solid franchise, the management team, and we like the shares here as it tries to catch up with larger peer JPMorgan. By Matthew Warren While Bank of America (BAC) put up middling results for the fourth-quarter, report released January 14 , they did come in better than analyst expectations on the top- and bottom-lines. Total net revenue was down 1% in the quarter and net income was down 4%, but large share buybacks meant that diluted … Read more

Citigroup Succeeding at Cross-Selling

by

Citigroup is finally out-earning our estimate of its cost of capital with a return on tangible common equity (ROTCE) of 12.4% in the quarter, and the shares have rallied substantially more recently as a result. Management lowered expectations for the degree of return on tangible equity improvement going into 2020, but continued improvements would be welcome, nonetheless. By Matthew Warren Citigroup (C) posted impressive fourth-quarter results January 14 with revenue up 7% and earnings per share up a whopping 34% given significant share buybacks, beating analyst consensus estimates on both the top and the bottom lines. Fixed income trading grew substantially against a weak quarter last year. As you can see in the below graphic, Citi’s revenue growth accelerated in … Read more

Wells Fargo Remains an Inefficient Bank Despite Regulatory Overhang

by

Wells has been forced to do a lot of hiring related to remediating its problems with regulators, but the problem is simply larger than that. This is an inefficient bank, which is very odd considering the massive scale that it benefits from. By Matthew Warren Well Fargo (WFC) reported terrible fourth-quarter results January 14. The company earned 60 cents per share, down from $1.21 in the same quarter last year, missing analyst consensus estimates for both the top and bottom line. While it is a messy quarter with a large litigation write down related to previous scandals and other “one time” items, the main theme is that expenses are simply too high and going in the wrong direction at Wells … Read more

JPMorgan’s Quarter Shows Higher Sustainable Growth Potential

by

“We are raising our fair value estimate of JPMorgan to $160 per share to reflect higher sustainable growth than we’d previously been expecting.” — Matt Warren By Matthew Warren JPMorgan Chase & Co (JPM) reported an impressive set of results, and in fact, a record fourth quarter, with managed net revenue up 9% and net income up 21%, beating on both the top and bottom lines versus analyst consensus estimates. The bank continues to churn out best-in-class return on tangible capital for the money center banks at 17% in the quarter. JPMorgan’s efficiency ratio came in at an impressive 56%, or 55% on an adjusted basis. For a bank with such a sizable i-bank and capital markets business (where efficiency … Read more

Dividend Growth Newsletter Portfolio Delivers Again in 2019

by

Dividend Growth Newsletter Portfolio Delivers Again in 2019   —  Note: Due to the New Year holiday, we will be releasing the January 2020 editions of the Dividend Growth Newsletter and High Yield Dividend Newsletter Thursday, January 2.  —  By Brian Nelson, CFA    Hi everyone!   I haven’t forgotten about you, our dividend growth friends. At Valuentum, we’re huge fans of dividend growth stocks, and we use our valuation expertise to augment a newsletter portfolio of some of the best dividend growers on the market. Unlike other shops and most blogs that focus more on dividend growth track records, we also like to look forward, not only in the application of the forward-looking Dividend Cushion ratio, but also as … Read more

2019: Another Market Beating Year for the Best Ideas Newsletter Portfolio!

by

2019: Another Market Beating Year for the Best Ideas Newsletter Portfolio! — Summary: — We estimate thus far the Best Ideas Newsletter portfolio return has beat the S&P 500 by 2.8 percentage points during 2019 (34.4% versus 31.6% for the S&P 500, as measured by the SPY). — Our move to overweight Apple, Facebook, and Visa worked out wonderfully for members during 2019. We continue to overweight big winners, and we credit this to our team’s conviction in our very best ideas. —  We also made quite the savvy move in rolling over a solid gain in Chipotle (60%+) into even more shares of Apple stock during the year. We’re putting some of the best ideas right in front of … Read more

Economic Commentary: Marks, Dalio, and the Discount Rate

by

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