Valuentum Exclusive Analysis for the Discerning Investor

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Apr 8, 2021

The Best Years Are Ahead
The wind is at our backs. The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets to remain overpriced for some time). Bond yields are paltry and will likely stay that way for some time, requiring advisors to rethink their asset mixes. The stock market looks to be the place to be long term, as it has always been. With all the tools at the disposal of government officials, economic collapse (as in the Great Depression) may no longer be even a minor probability in the decades to come--unlike in the past with the capitalistic mindset that governed the Federal Reserve before the “Lehman collapse."

Feb 11, 2021

Cisco Systems Expects Revenue Growth Will Resume This Fiscal Quarter
Image Source: Cisco Systems Inc – Second Quarter of Fiscal 2021 IR Earnings Presentation. On February 9, Cisco Systems reported second quarter earnings for fiscal 2021 (period ended January 23, 2021) that beat consensus top- and bottom-line estimates. Additionally, Cisco Systems raised its quarterly dividend by about 3% on a sequential basis in conjunction with its earnings report. We include Cisco Systems in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios and continue to like exposure to the name. As of this writing, shares of CSCO yield ~3.1% on a forward-looking basis, and our fair value estimate stands at $51 per share of Cisco Systems.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Jan 27, 2021

ALERT: Raising Cash in the Newsletter Portfolios
Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we're raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. For more conservative investors, the high end of this range may even be larger, especially considering the vast "gains" from the March 2020 bottom and the increased systemic risks arising from price-agnostic trading (read Value Trap). The individual holdings will be reduced in proportion to arrive at the new targeted cash weighting in the respective simulated newsletter portfolios. The High Yield Dividend Newsletter and Dividend Growth Newsletter are scheduled for release February 1. We'll have more to say soon.

Jan 22, 2021

IBM Is Still A Disappointment
We’ve never liked IBM. The company has all the attributes of a stock that we'd prefer to stay as far away from as possible.

Sep 3, 2020

3 Lessons in Portfolio Management Over 10 Years
Image Source: http://www.epictop10.com/. "When I left as director in the equity and credit department at Morningstar in 2011, I thought I knew a whole heck of a lot about investing. I felt like I was one in the top 5-10 in the world as it relates to the category of practical knowledge of enterprise valuation (maybe include Koller at McKinsey, Mauboussin at Counterpoint, and Damadoran at Stern on this list). After all, I oversaw the valuation infrastructure of a department that used the process extensively, and the firm was among just a few that used enterprise valuation systematically. Then, at Valuentum, our small team would go on to build/update 20,000+ more enterprise valuation models. There can always be someone else out there, of course, but I don't think anybody has worked within the DCF model as much as I have across so many different companies. That said, through the past near-10 years managing Valuentum's simulated newsletter portfolios, I've also learned a number of things to become an even better portfolio manager." -- Brian Nelson, CFA

Aug 27, 2020

Earnings Brief: NTAP, URBN, HPE, SJM, MDT
Image Source: Valuentum. Pantry stuffing was prevalent during the second quarter, and mall-based retail is holding up better than some had expected. Cloud-based services companies continue to experience breakneck growth, and medical procedure volumes are picking up as we learn more and more about COVID-19.

Aug 24, 2020

Nvidia Bets Big on Data Centers
Image Source: Nvidia Corporation – 2020 Annual Meeting of Stockholders Presentation. On August 19, Nvidia Corp reported second quarter fiscal 2021 earnings (period ended July 26, 2020) that beat consensus top-line estimates (on a GAAP basis) and consensus bottom-line estimates (on a non-GAAP basis, as its GAAP earnings were slightly lower than consensus estimates). Nvidia has several things going for it including a pristine balance sheet (meaning a net cash position), a data center business that is growing at a brisk pace (which we will cover in this note), a high quality cash flow profile (relatively low capital expenditure requirements to generate meaningful revenues), and its outlook is supported by secular growth tailwinds, particularly as it relates to demand from cloud computing providers. Shares of NVDA yield a negligible ~0.1% as of this writing.

Apr 3, 2020

Repub from July 2019 -- The Valuentum Economic Roundtable
We sat down with the Valuentum team to get their thoughts on the global economy and key issues that may threaten this near 10-year bull market.

Jan 4, 2020

Valuentum Exclusive Success Rates Trump Even the Best Quant Hedge Funds
Image: President of Investment Research Brian Nelson, CFA. A new book, “The Man Who Solved the Market,” hit bookshelves last year, and thus far it has been a hit. The text goes into the story of quant hedge fund Renaissance Technologies and its hedge fund, the Medallion Fund, which has put up mammoth returns since inception.