Valuentum Exclusive Analysis for the Discerning Investor

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Feb 8, 2022

Nutrien Benefiting from the Strong Global Farm Economy, Shares Yield ~2.5%
Image Source: Nutrien Limited – 2020 Annual Report. Nutrien Limited is benefiting from the strong global farm economy. The company sells tens of millions of metric tons of potash, nitrogen, and phosphate products every year, which are key ingredients used in the production of fertilizer. With geopolitical tensions building in Eastern Europe, Nutrien is preparing to bring idle potash production capacity in Canada back online while steadily expanding its nitrogen production capabilities. Nutrien is a great free cash flow generator with a promising growth outlook, though its net debt load is rather large. The firm is focusing on deleveraging activities in the near term, which we appreciate. Shares of NTR yield ~2.5% as of this writing, and we think it is one for your radar.

Jan 23, 2022

RH’s Financials, Long-Term Potential Great But Housing Market and Deteriorating Wealth Effect Pose Risks
Image Shown: Shares of RH have exploded higher since the news broke that Berkshire Hathaway Inc had taken a stake in the firm’s equity back in 2019, though shares of RH have shifted lower in recent months. RH is an innovative home furnishing company that pairs its products with interior/exterior design services to offer a comprehensive package. The company primarily targets affluent households in the U.S., Canada, and the U.K. RH has tremendous pricing power and its margins have increased significantly in recent fiscal years, even during the COVID-19 pandemic, and its net revenues are trending higher as well. The firm is expanding into the high-end hospitality industry and has several projects that are set to come online in 2022 and beyond. RH is a stellar free cash flow generator with a manageable net debt load. Though the company has been executing nicely of late, as witnessed by its stellar financial performance and recent guidance increases, shares of RH have sold off in recent months. In our view, the recent selloff is a function of broad based market weakness, but it also may be due to investors growing more concerned about the impact higher interest rates and a deteriorating wealth effect may have on housing and home furnishing demand and on its push into the hospitality space, respectively. We continue to view RH’s long-term capital appreciation upside potential favorably, however.

Jan 22, 2022

Don’t Throw the Baby Out with the Bathwater
Image: Erica Nicol. Junk tech should continue to collapse, but the stylistic area of large cap growth and big cap tech should remain resilient. Moderately elevated levels of inflation coupled with interest rates hovering at all-time lows isn’t a terrible combination. In fact, it’s not bad at all. The markets are digesting the huge gains of the past few years so far in 2022, and the excesses in ARKK funds, crypto, SPACs, and meme stocks are being rid from the system. Our best ideas are “outperforming” the very benchmarks that are outperforming everyone else. The BIN portfolio is down 6.4% and the DGN portfolio is down 3.2% year to date. The SPY is down 7.8%, while the average investor may be doing much worse. Our timing to exit some very speculative ideas in the Exclusive publication has been impeccable. Beware of “best-fitted” backtest data regarding sequence of return risks. Research is to help you navigate the future, not the past. We remain bullish on stocks for the long haul and grow more and more excited as our simulated newsletter portfolios continue to hold up very well. Don’t throw the baby out with the bath water. Stick with the largest, strongest growth names. We still like large cap growth and big cap tech, though we are tactical overweight in the largest energy stocks (e.g. XOM, CVX, XLE). The latest short idea in the Exclusive publication has collapsed aggressively since highlight January 9, and we remain encouraged by the resilience of ideas in the High Yield Dividend Newsletter portfolio and ESG Newsletter portfolio. Our options idea generation remains ongoing.

Dec 26, 2021

VIDEO/TRANSCRIPT: 2021 Valuentum Exclusive Call: Inflation Is Good
Valuentum's President Brian Michael Nelson, CFA, explains why investors should not fear inflation, why government agencies such as the Fed and Treasury are prioritizing something other than price discovery, why the 10-year Treasury rate is a must-watch metric, and why Valuentum prefers the moaty constituents in large cap growth due to their net cash rich balance sheets, tremendous free cash flow generating potential, and secular growth tailwinds.

Nov 18, 2021

Shares of Dividend Growth Idea Home Depot Roar Higher After Latest Earnings Update
Image Shown: Shares of dividend growth idea Home Depot Inc have surged higher year-to-date on the back of the home improvement retailer’s stellar operational performance and impressive free cash flow generating abilities. We liked what we saw in Home Depot’s latest earnings report published on November 16. Demand for home improvement activities appears to be holding up well, even as lockdown measures related to the COVID-19 pandemic ease up across North America. The outlook for housing activity and construction demand more broadly is quite bullish for several reasons including the need for US housing supply to catch up with new household formation and the large $1+ trillion US infrastructure fiscal stimulus bill that was recently signed into law. Home Depot has exposure to this upside via the Pro side of its home improvement retailing operations and its recently enlarged MRO business. We view Home Depot’s dividend growth trajectory quite favorably and continue to like shares of HD as an idea in the Dividend Growth Newsletter portfolio. In light of better-than-expected fundamental performance of late, we may tweak our cash flow valuation model of the firm. As of this writing, shares of HD are trading near the top end of our fair value estimate range (which currently sits at $397 per share).

Nov 12, 2021

Hard Work and the Trust That Binds
Image: Terry Johnson. It’s easy to forget how much we’ve been through the past two years. Often, we forget how helpful the warning that markets were going to crash was the weekend before they did on February 22, 2020, “Is a Stock Market Crash Coming? – Coronavirus Update and P/E Ratios,” how we thought dollar-cost-averaging made sense at the bottom in March 2020, and how we went “all-in” in April 29, 2020, “ALERT: Going to “Fully Invested” – The Fed and Treasury Have Your Back,” when we saw the writing was on the wall for this blow off top. If nothing else, these three moves alone during the past couple years have paid for a lifetime of subscriptions.

Nov 3, 2021

Large Cap Growth Has More Room To Run
“The stylistic area of large cap growth has been one of our favorite areas because of the strong net cash rich, free cash flow generating, secular growth powerhouses that make up much of the space. The image is a rundown of the key Valuentum statistics for the top 15 holdings of the Schwab U.S. Large Cap Growth ETF (SCHG). We believe where large cap growth goes, so does the broader market, considering the hefty weightings of some of these stocks in other broad-based indices. Based on the high end of our fair value estimate range for this group of bellwethers, the broader U.S. markets still have room to run, to the tune of 7%+, despite the many highs already reached during 2021. Though traditional valuation multiples may seem stretched by most measures, many market bellwethers have huge net cash positions and tremendous free cash flow growth potential. We expect the equity markets to continue to be led by large cap growth.” – Brian Nelson, CFA

Aug 18, 2021

Dividend Growth Idea Home Depot Remains Rock-Solid
Image Shown: Shares of Home Depot Inc have moved significantly higher year-to-date and are up approximately 21% through the end of normal trading hours on August 17. On August 17, Home Depot reported second quarter earnings for fiscal 2021 (period ended August 1, 2021) that beat both consensus top- and bottom-line estimates. Comparable sales were up 4.5% year-over-year last fiscal quarter though shares of HD slid lower during the trading session that day as investors were expecting even stronger performance. Shares of HD are up roughly 21% year-to-date as of the end of the normal trading session on August 17 (that includes the impact of the ~4% drop in shares of HD after its earnings report), and in our view, investors were locking in some profits. We liked what we saw in Home Depot’s latest earnings report and includes shares of HD as an idea in the Dividend Growth Newsletter portfolio.

Jul 8, 2021

Still Bullish -- Stocks for the Long Run!
Image shown: The 10-year Treasury rate has fallen quite a bit since March of this year, suggesting that inflation expectations have come down in recent months. Image source: CNBC. The S&P 500, Dow Jones Industrial Average and Nasdaq continue to hover near all-time highs, and all appears well. We maintain our bullish take on the markets and believe that we are in the early innings of a long bull market that started following the washout March 2020 during the depths of the COVID-19 meltdown. Stock bull markets tend to average about 4.4 years in duration, with the last one enduring ~11 years, while bear markets are very abrupt, lasting only 11.3 months on average, the last one a very short 1.1 months, according to data from First Trust. We’re about 15 months into this new stock bull market, and we continue to believe increased equity exposure may better serve investors of all types going forward, through both the best of times and the worst of times.

Jun 7, 2021

Favorite Miner Newmont Shines Bright
Image Source: Newmont Corporation – June 2021 IR Presentation. On January 13, 2020, we added shares of Newmont Corp as an idea to the Dividend Growth Newsletter portfolio. The gold miner has a top-notch asset base located in favorable mining jurisdictions with ample reserves to maintain and potentially grow its production base over the coming years. Other than gold, Newmont also produces silver, lead, copper, and zinc. We continue to view Newmont as one of the best positioned miners out there and see the company as a way to hedge against growing inflationary pressures. Shares of NEM yield ~3.1% on a forward-looking basis.