XLV

In the News: Healthcare Uncertainty, Housing Confidence Drops, and Banks Reel in Risk

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Let’s take a look at some of the top stories impacting the markets, including the heightened uncertainty surrounding healthcare legislation, the drop in the NAHB Housing Market Index, and measures being taken by banks to limit exposure to risky counterparties. By Kris Rosemann Shares of health insurers and health care providers (XLV) are facing notable selling pressure December 17 after a federal judge in Texas ruled the Affordable Care Act is unconstitutional without the penalty for lack of insurance coverage, which was repealed by Congress last year. The ruling came on the evening of December 14, but it is almost certain to be appealed. The Affordable Care Act has been beleaguered for some time now, and the latest news casts … Read more

Repub: Johnson & Johnson’s Litigation Risk Manageable

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Image Source: Austin Kirk This article was previously published June 6, 2018. Let’s talk about how to think about the impact of one-time events on intrinsic value estimates. The magnitude of damages against J&J with respect to its talcum-powder products could be large, but we think the market has slowly factored in the risk of legal liabilities. Once J&J puts these troubles behind it, we think the market may once again warm up to the equity. Shares are trading at only a modest discount to our intrinsic value estimate, however. By Brian Nelson, CFA A member of ours passed along a number of articles discussing litigation risk at Johnson & Johnson (JNJ) with respect to the company’s talcum powder products, … Read more

Cardinal Health Battling Bottom-Line Headwinds

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Image Source: Global Panorama Healthcare product distributor and Dividend Aristocrat Cardinal Health has had its share price performance in 2018 dampened by a number of factors, including generic drug price deflation weighing on its ‘Pharmaceutical’ segment, struggles in its ‘Medical’ segment, and the potential for disruption within its industry. By Kris Rosemann The drug distribution industry is attractive as a result of the group’s predictable revenue streams and the strong competitive positions of a number of participants, which result from the barriers to entry that are difficult-to-replicate distribution networks, myriad regulatory compliance issues, and industry relationships. The industry currently operates as an oligopoly with McKesson (MCK), Cardinal Health (CAH), and AmerisourceBergen (ABC) collectively controlling more than 90% of the market. … Read more

Best Ideas Newsletter Portfolio Not Bad Thus Far in 2018

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Part of what we take pride in at Valuentum is telling things how they are. If things are going great, we let you know. If things aren’t going as good as they could be, we don’t hold back. In the year of crypto and cannabis, 2018 hasn’t been the best year for the simulated Best Ideas Newsletter portfolio, but it hasn’t been bad either.  By Brian Nelson, CFA We wrote up an extensive piece on the background of the simulated Best Ideas Newsletter portfolio earlier this year, and we encourage everyone to have a read of that here (pdf). We made some changes to the goals of the newsletter portfolio prior to the beginning of this year. For starters, we … Read more

The Inflating Index Fund Bubble

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Image Source: Mac.Else von Berlin The investment industry is changing fast, and we’re happy to be an instrument for change. We’ve been clamoring to make index funds free for a long time, and we’re glad to see it finally happen. Let’s cover the implications of indiscriminate buying regardless of price with the observation that the number of publicly-traded companies is vastly shrinking. How long will the inflating index fund bubble last? By Brian Nelson, CFA Those that know Valuentum know that we stand up for the individual investor, and we work our tails off to make sure that we get the individual investor the very best of information and informed judgment. The CFA Institute via its Enterprising blog showcases a … Read more

Biogen Hits a Potential Home Run

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We closely follow the progress of the clinical pipeline of companies in the pharma/biotech sector. Unlike other less product-driven industries, the pharma/biotech sector can experience wide swings in operating performance as a result of the lapsing of patent protection on key drugs, underscoring the importance of innovation to replace aging products. Biogen may have hit a home run in the critical field of Alzheimer’s, an area of tremendous untapped need. By Alexander J. Poulos Key Takeaways Biogen’s current product lineup is beginning to show its age, and a fresh injection of novel products may be necessary to jumpstart top-line revenue growth. Spinraza is a notable step in the right direction, but we fear new gene-editing therapies may disrupt Spinraza, thus … Read more

Eli Lilly Looks to Bolster Its Presence in Oncology

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We are becoming increasingly impressed with Eli Lilly as the company boasts an enviable stable of new products that should power the company well into the next decade. Lilly is through the bulk of its patent trough, in our view, and its pipeline should set the company up for years of potentially uninterrupted revenue growth. Shares are not necessarily cheap, however. By Alexander J. Poulos Key Takeaways Lilly is aggressively building its oncology portfolio, and we think a new suite of recently-approved products should help power growth into the next decade. Lilly has opened the checkbook to acquire two additional novel compounds that underscore its desire to become a player in the oncology space. We view Lilly’s appetite for deal … Read more

Study: Valuentum’s Best Ideas Newsletter Portfolio

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To read the study, please click on the image to download the pdf document (pdf).

What’s Working (or NOT Working) in Today’s Market?

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Image shown: Crude oil continues to lead gainers while consumer staples, REITs, and energy MLPs continue to get shellacked. By Kris Rosemann The stock market during the first few months of 2018 has been marked by a meaningful return to volatility. Commodity prices from crude oil (USO) to aluminum have had their moments in the sun as material supply/demand imbalances of years past continue to sort themselves out, with the help of a few key players, of course (OPEC member nations in the case of crude oil, and Chinese pollution regulations and US trade policy changes in the aluminum example). Geopolitical uncertainty is keeping both world leaders and investors on their toes as the world continues to navigate multiple denuclearization … Read more