Valuentum Exclusive Analysis for the Discerning Investor

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Nov 2, 2023

Apple Doesn’t Disappoint in Fourth Quarter Fiscal 2023 Earnings
On November 2, Apple put up solid results in its fourth quarter of fiscal 2023 for the period ending September 30, 2023. The company’s iPhone sales ($43.8 billion) came in in-line with Street expectations, squashing concerns about demand for its new iPhone 15. Its high-margin Services business put up a nice growth rate (+16.3%) in the period, reaching a new all-time high. Though the firm’s Mac sales didn’t impress and accounted for most of the weakness in the quarter, Apple is optimistic that the holiday season will make for a strong comeback. We don’t expect to make any changes to our fair value estimate in light of the report, which was about as expected. For the three months ended September 30, Apple’s operating income expanded to ~$27 billion from ~$24.9 billion, while net income leapt to ~$23 billion from ~$20.7 billion, translating into diluted earnings per share of $1.46 in the period, nice growth from the $1.29 per share it put up during the same quarter last year. Total cash and marketable securities stood at ~$162.1 billion versus ~$15.8 billion in short-term debt and commercial paper and ~$95.3 billion in long-term debt. Apple has a robust net cash position at the moment, and its free cash flow generation remains sound coming in at ~$99.6 billion for fiscal 2023. Very few other firms can compare with Apple’s financial wherewithal, and the company remains a top dividend growth idea to boot.

Nov 2, 2023

Ferrari's Results Speak to Resilience in Ultra-Luxury Markets
Image: Ferrari raised its guidance for 2023. Ferrari raised its year-end guidance thanks in part to a strong product mix and improved revenue from racing activities, and the firm noted that its “order book remains at highest levels reflecting strong demand across all geographies, covering the entire 2025.” We couldn’t be happier with the performance at Ferrari, and the momentum speaks to continued strength across the ultra-luxury landscape. We like Ferrari as one of our favorite automakers, a name that we prefer much more than any of the Big 3 in Detroit.

Nov 2, 2023

AMD Continues to Enhance Artificial Intelligence Capabilities
On October 31, Advanced Micro Devices reported solid third-quarter results with revenue advancing 4% on a year-over-year basis and non-GAAP earnings per share coming in slightly better than expectations, with net income up more than four-fold, to $299 million. Management expressed excitement about demand for its Ryzen 7000 series PC processors and noted that its data center business is progressing well thanks to its 4th Gen EPYC CPU portfolio and Instinct MI300 accelerator shipments across various markets, including artificial intelligence [AI].

Nov 1, 2023

Caterpillar's Pricing Power Remains Phenomenal
Image: Price realization remains a key driver behind Caterpillar’s strong performance. On October 31, Caterpillar reported better-than-expected third-quarter results, with revenue advancing 12% and non-GAAP diluted earnings per share handily beating the consensus forecast. Caterpillar continues to benefit from significant pricing power, but the firm is also experiencing volume increases. The firm's adjusted operating profit margin expanded to 20.8% in the third quarter compared to 16.5% for the third quarter of 2022. Caterpillar ended the third quarter with $6.5 billion in cash and cash equivalents, short-term borrowings of ~$4.2 billion, and long-term debt of ~$1 billion and ~$7.6 billion in its ‘Machinery, Energy & Transportation’ and ‘Financial Products’ divisions, respectively. Its balance sheet, while not showcasing a net cash position, remains very healthy, in our view, especially in the context of its free cash flow generation. Through the first nine months of 2023, the maker of mining and construction equipment’s cash flow from operations soared to ~$8.9 billion, as it shelled out just ~$1.06 billion in capital expenditures, a number that excludes equipment leased to others (~$1.2 billion). Free cash flow generation at the firm remains excellent, and we like that it continues to focus on dividend growth. We continue to like the pricing power witnessed within Caterpillar’s operations of late, and we’re sticking with our above-market $262 fair value estimate for now.

Oct 30, 2023

Staying Far Away from Intel; McDonald’s a Better Play
Image: Intel’s cash flow from operations is under pressure, as it continues to shell out capital expenditures, resulting in materially negative free cash flow generation. Intel's cash-based sources of intrinsic value are in a world of hurt, meaning that we won't be adding the company to any newsletter portfolio anytime soon. Instead, we prefer McDonald's, which is well-positioned for inflationary pressures as it continues to raise its payout.

Oct 27, 2023

Getting Down to Brass Tacks on Amazon’s Cash-Based Sources of Intrinsic Value
Image: Amazon had a very strong and better-than-expected third-quarter report, and the firm is now on pace to generate positive free cash flow during 2023. As reported in Amazon’s third-quarter 2023 press release, the retail giant’s “free cash flow improved to an inflow of $21.4 billion for the trailing twelve months, compared with an outflow of $19.7 billion for the trailing twelve months ended September 30, 2022.” Cash and marketable securities were ~$64.2 billion at the end of its third quarter compared to ~$61.1 billion in long-term debt, meaning that Amazon has a modest net cash position, but nothing near the likes of other big cap tech and large cap growth peers. All eyes will continue to be on Amazon Web Services [AWS] and its growth trajectory, but when it comes to the cash-based sources of intrinsic value, Amazon is back on the right track.

Oct 26, 2023

Brief Take: Altria’s 10% Dividend Yield Is Too Hard to Pass Up
Altria Group’s forward estimated 10% dividend yield is too hard to pass up as it is comfortably covered by traditional free cash flow. The tobacco giant reported third-quarter 2023 results on October 26 that showcased how its asset-light business model continues to throw off tons of cash. Traditional free cash flow generation came in at ~$5.9 billion during the first nine months of 2023, while cash dividends paid came in at ~$5 billion, resulting in a very nice free cash flow cushion on a ~10%-yielding stock. Though revenue growth at Altria remains under pressure, gross profit continues to move in the right direction. Altria has raised its dividend 58 times during the past 54 years, and the firm continues to target mid-single-digit dividend growth annually. For income investors that aren’t worried about ESG-related criteria, Altria could make for a great diversifier in a high-yield dividend income portfolio. Our fair value estimate stands north of $60 per share (shares are trading under $40 at the time of this writing).

Oct 25, 2023

Alphabet and Meta Are Net-Cash-Rich, Free-Cash-Flow Generating, Secular-Growth Powerhouses
Image: Free cash flow growth at Alphabet has been phenomenal during the first nine months of 2023. Both Alphabet and Meta are net-cash-rich, free-cash-flow generating, secular-growth powerhouses. Though cloud revenue growth and the pace of expense expansion at Alphabet are concerns, and while Meta may experience some softness in advertising revenue during the current quarter, both entities’ quarterly performances during the calendar third quarter showcased why they have been market darlings during 2023. Note: We’ve corrected our updated report on Alphabet. We had previously uploaded an incorrect version, but this version (pdf) has now been corrected. There is no change to the updated fair value estimate of $133 per share.

Oct 25, 2023

Download the Updated 16-page Stock Report of Alphabet
Download the updated 16-page stock report of Alphabet in this article.

Oct 25, 2023

Visa’s High Margin Business Reveals Consumer Spending Remains Resilient
Image: Visa has been a strong performer thus far in 2023. On October 24, Best Ideas Newsletter portfolio holding Visa reported excellent fourth-quarter results for its fiscal 2023. Net revenues advanced 11% on a year-over-year basis, while non-GAAP net income and non-GAAP earnings per share leapt 18% and 21% year-over-year, respectively, in the period. For the fiscal year, Visa generated an impressive 64.4% operating margin. Payments volume increased 9% and cross-border volume advanced 16%, showcasing that the consumer remains very healthy thanks in part to low unemployment rates, despite concerns over higher mortgage costs, student loan repayments, and general economic uncertainty as savings accrued during the COVID-19 pandemic wane. We continue to be big fans of Visa as our top payments-related idea.