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PayPal Expects to Double Its Annual Free Cash Flows By 2025

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Image Shown: PayPal Holdings Inc views its total addressable market across the payment processing and solutions sitting at approximately $110 trillion, an enormous opportunity that the firm is well-positioned to capitalize on. Image Source: PayPal Holdings Inc – 2021 Investor Day Presentation By Callum Turcan We continue to be huge fans of PayPal Holdings Inc (PYPL) and include shares of PYPL as a top-weighted idea in the Best Ideas Newsletter portfolio. As of this writing, shares of PYPL have surged higher by ~140% over the past year as the company’s business model has proven to be incredibly resilient in the face of the coronavirus (‘COVID-19’) pandemic. PayPal’s ability to generate meaningful free cash flows in almost any environment is supported … Read more

Fourth Quarter Bank Earnings Roundup: MS, GS, BAC, C, WFC, JPM

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Executive Summary: Though we’re generally cautious on banking business models due to the arbitrary nature of cash-flow generation within the banking system and the difficulty in valuing such entities on the basis of a free-cash-flow-to-the firm framework, we like Morgan Stanley–and its return on tangible equity of 17.7% during the fourth quarter of 2020 speaks to solid economic-value creation. Goldman’s annualized return on total equity (ROTE) was an impressive 22.5% during its fourth quarter, helping drive the full-year measure to 11.1% for 2020. Bank of America had been an idea in the Best Ideas Newsletter portfolio in the past, but we removed the company June 11, 2020. We continue to view the banking system more as utility-like serving as an extension … Read more

ALERT: We’re Still Bullish! Some Portfolio Tweaks

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By Brian Nelson, CFA Hi everybody: Trust you’re doing great, and hope you are enjoying your membership to Valuentum! We’ve received a number of questions from members during the past several weeks, and we’d like to address them briefly in this note. We will write a follow-up note in the coming days that goes into our broader outlook for 2021 and beyond. However, we want to get these takeaways to you as soon as possible, as our inboxes have been overflowing. For starters, if you haven’t read our market/analysis recap for the year 2020, please do so, “2020 Won’t Soon Be Forgotten.” Now on to the questions. First question: Is the stock market in a bubble? Answer: Absolutely not. We … Read more

Normalizing our Fair Value Estimates for the Money Center Banks

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Image Source: Mike Cohen By Brian Nelson, CFA In March, during the depths of the COVID-19 meltdown, we trimmed our fair value estimates for many financials and money center banks. The reasoning was rather straightforward. Our base-case projections for the group were lowered as a result of our expectations of a global economic recession. We factored in higher credit losses due to our anticipation of slowing economic activity that would be triggered by consumers staying at home to avoid COVID-19. We also considered the impact of net interest margin (“NIM”) compression that would result from expectations of a sustained ominous inverted yield curve, and in light of heightened uncertainty regarding the fatality rate of the virus itself (at the time), … Read more

We’re Reiterating Our $200 Fair Value Estimate for PayPal

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We continue to be big fans of PayPal. The company has a pristine balance sheet, high quality cash flow profile, impressive growth outlook, and is trading well below its fair value estimate as of this writing. Though investors initially sold off shares of PYPL following its third-quarter report November 2 due to its expected growth trajectory slowing down in the near term, we’re reiterating our fair value estimate of $200 per share as PayPal continues to deliver impressive fundamental performance. PayPal’s medium- and long-term growth outlooks remain stellar. Venmo could be a source of significant upside in the medium-term, and we are monitoring events closely. By Callum Turcan On November 2, PayPal Holdings Inc (PYPL) reported third quarter 2020 earnings … Read more

JPMorgan, Citigroup Third Quarters Not Terrible, But Still No Reason to Own Financials

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Image: Banks and financials were among the most aggressively beaten down groups during the COVID-19 crash, and the sector failed to participate meaningfully in the bounce back. The leveraged and arbitrary nature of banking business models makes them much less attractive than entities with strong net cash positions on the balance sheet and solid expected future free cash flows. Source: Kastner, David, Charles Schwab. “Schwab Sector Views: Changes Are Coming.” 18 June 2020. By Brian Nelson, CFA Better-than-feared third-quarter reports are not going to change our minds on the banking and financials sector. The group has been among the worst performing sectors amid the COVID-19 market crash and failed to bounce back meaningfully since the March bottom. Banks are being … Read more

Apple’s Growing Financial Tech Business

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Image Shown: Shares of Apple Inc, a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, have surged higher year-to-date. We see room for additional capital appreciation upside. By Callum Turcan We continue to be huge fans of Apple Inc (AAPL), and shares of the tech giant are included as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Our fair value estimate for Apple sits at $140 per share, comfortably above where shares of AAPL are trading at as of this writing, indicating there is room for meaningful capital appreciation upside. Additionally, shares of AAPL yield a modest ~0.7% as of this writing, and we view its forward-looking dividend growth trajectory quite … 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!

Berkshire Hathaway Is Finally Putting Its Enormous Cash Pile to Use

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Image Shown: Shares of Berkshire Hathaway Inc Class B are recovering from the steep pandemic-induced fall as the company has started to put its enormous cash-pile to work. By Callum Turcan On August 31, Berkshire Hathaway Inc (BRK.A) (BRK.B) announced it had  “acquired slightly more than 5% of the outstanding shares in five of the leading Japanese trading companies” and that the firm considered these to be “passive stakes.” Those positions were acquired over approximately the past year through purchases made on the Tokyo Stock Exchange. Here are the five companies in alphabetical order (by ticker): Itochu Corporation (ITOCF), Marubeni Corporation (MARUF), Mitsui & Co. Ltd. (MITSF), Mitsubishi Corporation (MSBHF), and Sumitomo Corporation (SSUMY). Berkshire As of June 30, 2020, … Read more

Alibaba Mirrors the Performance of Its Western Peers

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Image Shown: Alibaba Group Holding Limited posted strong results for the fiscal quarter ended June 30, 2020, mirroring the performance of its large-cap tech peers based in Western countries (particularly the US). Image Source: Alibaba Group Holding Limited – June Quarter 2020 Earnings Presentation By Callum Turcan At a time when US-China geopolitical tensions are rising and the Trump Administration is pushing the Chinese tech firm ByteDance to divest (at least) the US-based operations of TikTok, many Chinese tech firms are still thriving. The ongoing coronavirus (‘COVID-19’) pandemic has fundamentally altered daily life for most households around the world. Social distancing practices have aggressively driven up e-commerce demand along with demand for cloud computing offerings (as more employees work from … Read more