XLU

Systemic Risk in These Frothy Times

by

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

Best Ideas, Dividend Growth Newsletter Alerts and More

by

Image Shown: The stock price performance of Boeing. Let’s take a look at recent news from newsletter portfolio holdings. We’re also parting with a “trade” we never should have made in the first place, and we’re letting go of one of our favorite restaurants in light of deteriorating technicals. This and more… By Brian Nelson, CFA Aside from predicting the ongoing inflation of the current equity market bubble in the US so far in 2017, we also thought crude oil prices (USO) would continue their recovery. Unfortunately, this hasn’t exactly worked out, and US crude oil prices have now entered a “bear market,” now falling below $43 per barrel. Are we saying that we know where crude oil prices are … Read more

First Quarter 2017 Comes To A Close

by

“Be sure to continue to study the difference between price and value—just because a stock’s price has advanced doesn’t make it more expensive if the value of its enterprise has increased at a faster rate. If you understand this concept, you may be smarter than 99.9% of the investing population.” – Brian Nelson, CFA By Brian Nelson, CFA The first quarter of 2017 came and went. Including dividends, the S&P 500 (SPY) roared nearly 6% higher during the period thanks to solid gains from the land of technology, an area that we have liked for the longest time. The Technology Select Sector SPDR (XLK) advanced more than 10% during the period, and key technology holdings in the Dividend Growth Newsletter … Read more

Is Clean Energy Just Burning Cash?

by

Image Source: Chuck Coker Clean or renewable energy sources will undoubtedly be a part of how we generate power in the future, but how investible is the space? The answer is largely dependent on your risk tolerance. Key Takeaways: The success of the solar industry at this point in time is dependent on public policy, specifically investment tax credits, which allow participants to compete with traditional energy sources. The wind power industry is more developed than the solar industry, though many of the largest players in the industry are large utility holding companies. There are a wide range of ideas ancillary to the renewable energy movement in the areas of emissions reduction, power storage, and energy efficiency. By Kris Rosemann … Read more

Utilities and Telecoms to Benefit Most from Corporate Tax Reduction?

by

Image Source: Michael Vadon By Kris Rosemann and Brian Nelson, CFA Speculation over which sectors may be the biggest beneficiaries of the incoming Trump administration has been running rampant in recent weeks, and we’ve received questions from members pertaining to this topic, specifically with respect to the utilities and telecom sectors. In fact, an article in the Financial Times, released mid-November, tabbed the utilities (XLU) and telecom (XTL) spaces as two sectors that may be able to generate outsize earnings improvements thanks to a reduced corporate income tax. But will they truly benefit over the long haul? Let’s walk through our take on the impact a potential reduction in corporate tax rates may provide these two areas. It may not all be … Read more

Image: Returns Following the Trump Victory

by

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

by

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.

Pop the Bubbly? Everyone Is Getting Rich

by

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

Keep Calm and Carry On?

by

Image Source: War History Online, June 22 Brexit may or may not be a big problem. Time will tell. But what matters and eventually becomes its own catalyst, however, is valuation. The forward price-to-earnings multiple on S&P 500 companies (SPY) is currently ~16.5 times, above its 5-year (14.6) and 10-year averages (14.3). This is the real story. Assuming a reversion to the 10-year average multiple, for example, the S&P 500 can be considered “fairly valued” at $1,811, a drop of another 10% from ~2,000 levels. You don’t need us to tell you that the markets have practically gone straight up the past seven years from the March 2009 panic bottom through today, with the S&P 500 effectively tripling since that … Read more