Valuentum Exclusive Analysis for the Discerning Investor

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Apr 8, 2024

3 Dividend Growth Stocks for the Long Run
Image: Mike Mozart. There are many applications for the discounted cash-flow model. Not only does the tool help to derive a fair value estimate for a company, but the core drivers behind the intrinsic value calculation are also key drivers behind the health of a dividend payer. Stocks with a solid net cash position and also generate strong expected free cash flows more than their cash dividend obligations are in a much better position to grow their payouts in the future than stocks burdened by a net debt position and where their free cash flow comes up short. Apple, Microsoft and Dick’s Sporting Goods make the cut and are three of our favorite dividend growth stocks on the market today.

Mar 17, 2024

Latest Report Updates
Check out the latest report updates on the website.

Mar 8, 2024

Understanding Share Buybacks
Image shown: Buybacks aren't always positive for shareholders. An image showing when RadioShack bought back its own stock, just a few short years prior to filing for bankruptcy.Let’s explain how some share buybacks can be considered value-creating and some share buybacks can be considered value-destroying.

Feb 29, 2024

3 Catalysts for Apple’s Stock
Image: Apple’s shares have done quite well since the beginning of 2023. We see three positive catalysts on the horizon for Apple. First, Apple is now shifting resources from its electric car endeavor to work on generative artificial intelligence [AI]. Though an Apple Car would have been a nice deliverable later this decade, we like the move, as it relates to future iterations of the iPhone, which will likely have varying levels of AI features. This should drive a meaningful upgrade cycle across its installed base of iPhones. Second, we think Apple’s Vision Pro is another revenue driver, and recent reports indicate that demand has been higher than expected. Third, we think the Apple Watch X, the next iteration of its wearables line-up that will likely have features to measure blood pressure adn detect sleep apnea, will also drive a lot of upgrades across its installed base, in our view.

Feb 27, 2024

Berkshire Hathaway Caps Off Strong Year of Operating Earnings Growth
Image: Berkshire’s operating earnings experienced a strong advance during 2023 from last year’s levels. On February 24, Berkshire Hathaway reported strong fourth-quarter results that capped off a year where operating earnings advanced 21% on a year-over-year basis. Warren Buffett tipped his hat to his long-time partner Charlie Munger, who passed away in November of last year, crediting him as the architect of Berkshire and himself merely in charge of the “construction crew.” There weren’t many surprises in the annual report, and Buffett made several references to areas that he has long talked about in the past, including pointing investors to operating earnings, as opposed to net income, which includes unrealized capital gains that can make reported results seem more volatile. All things considered, we liked Berkshire’s update, and we continue to like the firm as an idea in the Best Ideas Newsletter portfolio.

Feb 25, 2024

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?
Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key long-term earnings growth, cash flow dynamics, and balance sheet health considerations. We remain bullish on equities for the long haul, and we think the next couple years will be incredibly strong. Our best ideas can be found in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio, ESG Newsletter portfolio, and via the Exclusive publication as well as options idea generation.

Feb 19, 2024

The Price-to-Earnings Ratio Demystified
Let's examine the price-to-earnings (P/E) ratio. The key takeaways are: 1) without using a discounted cash-flow model, the P/E ratio that should be applied to a company's future expected earnings stream can never be appropriately calculated, and by extension, 2) when investors assign an arbitrary price-to-earnings multiple to a company’s earnings (based on historical trends or industry peers or the market multiple), they are essentially making estimates for all of the drivers behind a discounted cash-flow model in one fell swoop (and sometimes hastily). As earnings for next year are often within sight and can be estimated with some confidence (though this certainly varies among firms), calculating the price-to-earnings ratio via a discounted cash-flow process, in our opinion, is of far greater importance than worrying about whether a firm will beat or miss earnings in its next fiscal year. Because the P/E ratio is a discounted cash-flow model that considers the long-term qualitative dynamics of a particular entity, cash-flow analysis remains the first and most important pillar of our Valuentum Buying Index. And finally, investors cannot ignore valuation analysis or the future. Valuation is an important driver behind stock prices, and it is based on future expectations that can only be estimated. This is just a fact of the markets.

Feb 6, 2024

Palantir’s Fourth-Quarter Results Showcase Strong Trends in Artificial Intelligence
Image: Palantir’s revenue continues to march higher, and the company’s performance continues to showcase the growing strength in artificial intelligence. Source: Palantir. We liked Palantir’s quarterly results, but we wanted to bring to members’ attention the commentary surrounding artificial intelligence [AI]: "Our results reflect both the strength of our software and the surging demand that we are seeing across industries and sectors for artificial intelligence platforms, including large language models, that are capable of integrating with the tangle of existing technical infrastructure that organizations have been constructing for years...The demand for large language models from commercial institutions in the United States continues to be unrelenting. Every part of our organization is focused on the rollout of our Artificial Intelligence Platform (AIP), which has gone from a prototype to a product in months. And our momentum with AIP is now significantly contributing to new revenue and new customers."

Feb 2, 2024

Big Cap Tech and Large Cap Growth Continue to Lead Market Higher
Image Source: Marco Pakoeningrat. We continue to like the areas of big cap tech and large cap growth as the top firms in these areas have strong cash-based sources of intrinsic value: net cash on the balance sheet and strong expected future free cash flow generation. After the close February 1, the market received the quarterly earnings reports from Meta Platforms, Amazon, and Apple, and we were pleased by the trio’s performance during the calendar fourth quarter. We maintain our long-held view that big cap tech and large cap growth will continue to lead the market higher, and we continue to overweight these areas in the newsletter portfolios.

Jan 17, 2024

In the News: MSFT, AAPL, SAVE, ALB
Image: Microsoft and Apple have been strong performers the past several years, with Microsoft recently surpassing Apple’s market capitalization to become the largest entity in the S&P 500. The start of trading in 2024 hasn’t been tracking the way that we like, but it’s way too early to sound the alarm on any sort of correction. The employment markets remain very healthy, both as it relates to unemployment and wage gains, while inflation looks to be largely under control, with the market expecting a number of rate cuts during 2024. We continue to like the areas of big cap tech and large cap growth in the current market environment.