XLP

Systemic Risk in These Frothy Times

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Let’s talk about index investing, market valuations, and mention how a few ideas in the Best Ideas Newsletter are doing. By Brian Nelson, CFA For most investors during most parts of the economic cycle, index investing (VOO), or holding a broad basket of stocks that approximate the returns of a large market index may make a lot of sense. I have always said this from the very beginning: Individual stock selection is not for everyone. What may not be well-known, however, is that index funds have experienced multi-year periods of both outperformance and underperformance relative to actively-managed funds since the dawning of the very first index fund many decades ago. I’m worried that some investors today may not have this … Read more

I CARE

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Image Shown: The S&P 500 from early 2009 through today, June 15, 2017. By Brian Nelson, CFA There it is — the upward-sloping chart of the S&P 500 (SPY) since the March 2009 panic bottom. What a sight to see… The past 8 years have marked an incredible bull market in US equities and one for the record books in many instances. The drivers behind the multi-year rally have been many — ultra-low interest rates and their magnifying impact on equity valuations, strong earnings growth from the doldrums of the Financial Crisis, and the proliferation of passive and dividend-growth strategies de-emphasizing the price-versus-value equation. “Money,” it seems, is chasing stocks at any price, and most of the trading on exchanges … Read more

Opinion: Is Amazon Prepared to Tackle the Pharmacy Market?

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The meteoric rise of Amazon, both with respect to the breadth of its business operations and stock price, continues. On news of the rumor of its potential entry into the pharmacy market, entities speculated that may feel an impact immediately sold off. Though it’s much too early to estimate the extent of any impact Amazon’s entrance into the pharmacy market may bring, let’s take look at potential implications, courtesy of healthcare and biotech contributor Alexander J. Poulos. By Alexander J. Poulos Recent Amazon Hire Ignites Speculation Amazon (AMZN) has quietly added a leader to build an in-house Pharmacy Benefit Manager (PBM) for its employees. Mark Lyons, formerly of Premera Blue Cross, has joined the e-commerce and web services giant, and … Read more

CVS Health In The Bargain Bin? We Think So

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Image Source: Mike Mozart By Alex Poulos The stock market can be a fickle creature, bestowing its affections seemingly upon random industries. As 2016 comes to a close, the financial and energy-related names are all the rage with many pundits gushing about their prospects in 2017. I have often found when the Street is waxing eloquently about a certain sector, most of the easy gains have been made. Often, a contrarian view is necessary to generate acceptable returns. An unusual opportunity is before us in a company that operates in one of the most unloved fields of all, healthcare. CVS Health CVS Health (CVS) is generally categorized in the consumer staples (XLP) sector of the S&P 500, yet over 85% … Read more

Image: Returns Following the Trump Victory

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To download the table for easier viewing, please select the link . Financials: Trump’s Treasury Secretary choice Steven Mnuchin wants to repeal most of the burdensome Dodd-Frank legislation. A steepening yield curve is helping banks and may drive improved net interest margins in coming periods. Goldman Sachs is ripping higher, leading the Dow’s charge.   Crude Oil: The world is moving to a better balance in supply/demand dynamics in the energy markets. OPEC is talking, has agreed to cuts, and expectations for improved economic growth are helping energy resource pricing. High-beta companies such as Continental Resources are rallying hard.   Energy: Capital spending cuts are bolstering free cash flow in the upstream space as energy resource pricing improves. Reduced regulations could help … Read more

Podcast: Markets In Motion

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The Valuentum analyst team covers market moving information that is top of mind from consumer staples valuations, the political election cycle, utility valuations, energy resource pricing, biotech considerations, Brexit uncertainty and beyond. ~8 minutes. Tickerized for several consumer staples entities and ETFs, several companies in the energy sector, emerging market vehicles and more.

General Mills a Reminder of the Dividend Growth Bubble

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By Kris Rosemann We have not been shy about our concerns with the current overheated state of the market, “A Kleenex? Consumer Staples Trading At Nosebleed Levels (August 2016)”: At arguably no time in the history of the stock market have investors been willing to pay so much for each unit of earnings to capture a dividend yield of just a few percentage points. Negative interest rates across much of the world have created this scenario. In many ways, the strongest business models have become some of the most risky stocks, to no fault of their own. What do the bulls say though — as long as everybody keeps buying these steady-eddy companies to capture yield, share prices will continue … Read more

Pop the Bubbly? Everyone Is Getting Rich

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Image Source: Bryan Rosengrant “Imagine a bank that pays negative interest. In this upside-down world, borrowers get paid and savers penalized. Crazy as it sounds, several of Europe’s central banks cut key interest rates below zero in 2014, and now Japan has followed…some 500 million people in a quarter of the world economy (are) living with rates in the red.” — Bloomberg By Brian Nelson, CFA In April 1979, Paul Volcker became the Chairman of the Federal Reserve, and after a series of rate hikes, the federal funds rate reached a high of 20 points by the end of the year and into 1980. Though the move was to combat double-digit inflation at the time, it’s worth pondering what such … Read more