Valuentum Exclusive Analysis for the Discerning Investor

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Oct 21, 2022

Get Excited: Dividend Growth Investors Rejoice! – More “Outperformance”
Image: Valuentum’s simulated Dividend Growth Newsletter portfolio continues to “outperform” relative to almost any dividend-paying benchmark this year! Past performance is not a guarantee of future results. This is not a real money portfolio. As of the last tally through October 19, the simulated Dividend Growth Newsletter portfolio is beating the S&P 500 Dividend ETF SPDR (SDY) by roughly ~3.2 percentage points so far in 2022 (-8.4% versus -11.6%), all the while we’ve seen some awesome dividend growth across the board, with Microsoft (MSFT), Lockheed Martin (LMT), Honeywell (HON), and Realty Income (O) recently pushing through some nice dividend increases. What’s ~3.2 percentage points on a million-dollar portfolio? ~$32,000 in capital one doesn’t have to make up when the market’s coming roaring back in the coming years – and that’s relative to a dividend growth benchmark that is “outperforming” the SPY in a big way in 2022.

Oct 20, 2022

Announcing Valuentum’s Customer Appreciation Day Winners!
Let's see who won an autographed copy of Value Trap and what they said about Valuentum's research! We applaud all of our members in their quest to preserve and generate long-term wealth. Keep going strong!

Oct 19, 2022

New Payment Option! Valuentum Research Update!
We're excited to say that we're adding additional payment flexibility at Valuentum. Many members have expressed interest in paying via other providers, and we have added Square to the mix. You can use credit or debit card or bank (ACH) to pay via invoice. With all of the goings-on in the financial technology and payments space, we wanted to continue to provide members options to pay their memberships how they want and through who they want. You can always reach out to us at info@valuentum.com.

Oct 10, 2022

Recent Fair Value Estimate Updates
Image Source: Valuentum. We’ve made a number of fair value estimate changes across our coverage universe as a result of what we expect to be substantial weakness in the global economy. Many of our fair value estimate adjustments have come in the consumer discretionary sector, but we have also made tweaks to the fair value estimates of companies in the simulated Best Ideas Newsletter portfolio. Though 2022 has been a tough year, we’ve been steady at the wheel, calling the nearly unprecedented fall in the 60/40 stock/bond portfolio this year, the mid-teens percentage weakness in the SPY following the summer rally, all the while driving “outperformance” through the latest simulated Best Ideas Newsletter portfolio update August 19. Another update will be forthcoming. This year has been tough, but it’s been a lot worse for asset allocators that missed out on the big bull market run in equities if they held a hefty allocation in bonds the past decade. Let’s keep our guards up as this market looks like it might get a lot worse before it gets better.

Sep 30, 2022

Nike’s Fundamental Backdrop Speaks of Serious Impending Global Recession
Image Source: Raul Gonzalez. Nike’s share price has been roughly cut in half this year, and its fundamental backdrop speaks of a serious impending global recession, in our view. Weak revenue performance, lower gross margins, bloated inventory, and significant troubles in China suggest even tougher times are ahead. Nike is a not included in any of the simulated newsletter portfolios, and we’d be cautious on it as well as the broader retailing industry as the U.S. enters what could be a deep recession in 2023. Things are going to get worse before they get better.

Sep 21, 2022

Fed Raises 75 Basis Points; Food Price Inflation Continues to Wreak Havoc on Consumer Budgets
Image Source: Federal Reserve. The Fed upped its key benchmark rate to the range of 3%-3.25% on September 21, but it may not be enough to stem the rise in inflation. We think the market has further room to fall.

Sep 13, 2022

Nelson Nailed Food Price Inflation Risks; Markets Heading Lower
Image Source: Liz West. The August CPI report, released September 13, showed that consumer prices advanced 8.3% on a year-over-year basis and are still accelerating, increasing 0.1 percent from July, where the pace was unchanged. Milk was up 17%, poultry up 15.9%, while eggs were up 39.8% in the August CPI report. We don’t think the market was expecting this sizable food price increase, but we were – a view that accounted for one of the reasons for our move to a more bearish stance last month.

Aug 25, 2022

Dividend Growth Idea Dick’s Sporting Goods Beats Estimates, Raises Guidance
Image Shown: Shares of Dick’s Sporting Goods Inc have been on a nice upward climb of late. The sporting goods retailer raised its full-year guidance for fiscal 2022 during its fiscal second quarter earnings report. On August 23, Dick’s Sporting Goods Inc reported second quarter earnings for fiscal 2022 (period ended July 30, 2022) that beat both consensus top- and bottom-line estimates. The sporting goods retailer also raised its full-year guidance for fiscal 2022 in conjunction with the report, after previously lowering its guidance during its fiscal first quarter earnings update in May 2022. We continue to like Dick’s Sporting Goods as an idea in the Dividend Growth Newsletter portfolio. Shares of DKS yield ~1.8% as of this writing when looking at its regular quarterly payout. The company has also paid out special dividends in the recent past, including a $5.50 per share special dividend in fiscal 2021 along with a $2.00 per share special dividend back in fiscal 2012.

Aug 19, 2022

Nelson: The 16 Most Important Steps To Understand The Stock Market
Image Source: Tim Green. We outline the '16 Most Important Steps to Understand the Stock Market.' We think it's important to take a read of these key stock market tenets when things are going great -- and perhaps even more important when things aren't going your way. This continues to be a working document.

Jul 27, 2022

Walmart’s Business Update Likely Means U.S. Is In Recession, But Near-Term Weakness Is Already Baked Into Stock Market
Image Shown: Shares of Walmart Inc dropped sharply during afterhours trading on July 25 as the retailer sharply cut its adjusted operating income and EPS guidance for the current fiscal year as inflationary pressures are taking a sizable toll on its bottom-line. On July 25, Walmart Inc issued a business update that saw the retailer sharply cut its adjusted operating income and EPS guidance for fiscal 2023 (period ended January 2023), while boosting its consolidated net sales guidance. The company also adjusted its guidance for the fiscal second quarter. Shares of WMT plummeted during afterhours trading on July 25 as investors began to price in concerns over the retailer’s deteriorating margins. We anticipated ongoing weakness in Walmart’s business. On July 4, we released an audio report, “Nelson: I Have Been Wrong About the Prospect of Near-Term Inflationary-Driven Earnings Tailwinds,” highlighting our growing concerns about consumer-tied entities in the consumer staples and consumer discretionary spaces. We continue to expect troubles at the big box retailers and across the apparel space, more generally. Here’s what Nelson had to say in early July that remains applicable today: "I simply was not expecting the magnitude of such operating-income drops across consumer-tied companies, and while I think long-term inflation will eventually help drive higher nominal earnings in the longer run when conditions reach “normalization” again, the lag will be much longer than I originally thought. The numbers out of Walmart, Target, and Nike, for example, speak not only to tremendous earnings weakness, but also to the prospect of economic recession in the U.S." A recession in the U.S. is no reason for panic, however. For starters, we believe most of the fundamental weakness across retail is baked into the stock market, but more generally, investors should not worry about recessionary trends. But why? Well, implicitly embedded within a fair value estimate of a company are expectations of a “normal” economic cycle, complete with peak and trough, with the fair value estimate driven largely by mid-cycle expectations that feed into later stages of the model. The prospects for an unexpected recession in economic activity in the near term shouldn’t cause much of a change in the fair value estimate of a company either, given not only that a recession is already implicitly embedded in the fair value estimate, as noted, but also that near-term expectations don’t account for nearly as large of a contribution to the fair value estimate as long-term normalized expectations within the valuation construct. Most of a company’s intrinsic value is driven by its performance beyond year 5 in our model, or on a mid-cycle, going-concern basis. A company’s fair value estimate range (margin of safety) also captures various scenarios regarding economic activity, including a bull and bear case. With that said, recessionary tendencies may cause pricing impacts in the market in the event that consumers/investors use the stock market as a source of income by selling stocks, causing pressure on share prices, but the discounted cash flow (DCF) model already bakes in economic cyclicality and inevitable recessions, if not directly, then implicitly by targeting long-term mid-cycle expectations and via the application of the fair value estimate range. That’s why it’s great to be a long-term investor, scooping shares up when others are forced to sell in the near term, while holding them over long periods, letting compounding work its magic.