Valuentum Exclusive Analysis for the Discerning Investor

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Recent articles

Phillips 66 Rounds Out Cash-Rich 2022; Dividend Remains Solid Jan 31, 2023: Image Source: Phillips 66.

2022 was a fantastic year for Phillips 66. The company hauled in $10.81 billion in operating cash flow and spent $2.194 billion in capital expenditures and investments, resulting in free cash flow that was far greater than the shareholder distributions during the period. The strong free cash flow generation during the year allowed the company to pare down debt, while building its cash balance, to $6.1 billion. Its net-debt-to-capital ratio was 24% at the end of the year, and it put up 22% adjusted return on common equity for 2022. Shares yield ~3.9% at this time.

Visa’s Q1 Fiscal 2023 Solid, Puts Up 64%+ Operating Margin Jan 30, 2023: Image: Visa is a free cash flow generating powerhouse and is insulated from rising delinquency and charge offs, unlike others in the credit card space. Image Source: Visa.

Visa is a capital-light entity, meaning that its capital expenditures are quite small relative to its revenue and cash flow from operations. We love these types of companies as they are able to generate a significant amount of free cash flow, which for Visa, came in at $3.92 billion during the quarter, about 49% of total revenue. Visa’s business model is so cash-rich that for every $1 generated in revenue, roughly half of that turns into free cash flow. Very few companies have the operating margin and free cash flow profile as that of Visa, and we remain huge fans of this Best Ideas Newsletter portfolio holding. Shares yield 0.8%.

We Don’t Think Intel Will Spoil the Tech Rally Jan 28, 2023: Image Shown: The Invesco QQQ ETF has broken through its technical downtrend, and we don’t think Intel’s poor outlook will derail this tech rally. Image Source: TradingView.

Intel no longer is the bellwether it once was. Its market capitalization has dwindled significantly in recent years and now stands at ~116.5 billion, lower than Advanced Micro Devices' market capitalization of ~$121.6 billion, Texas Instruments' market capitalization of ~$158.8 billion, and Nvidia’s market capitalization of ~$501 billion. Taiwan Semiconductor has a market capitalization of ~$431 billion, while ASML Holding has a market capitalization of ~$268 billion. Intel no longer is what it once was, and as such, we don’t think its poor and borderline shocking outlook will derail a tech rally that could have significant legs. We still like these markets, and we don’t think Intel will spoil the party.

Market-Cap Weighted S&P 500 Breaks Out; Have We Already Seen the Bottom? Jan 26, 2023: Image: The market-cap weighted S&P 500 (SPY) has broken through its downtrend. The markets could be headed meaningfully higher. Image Source: TradingView.

The market-cap weighted S&P 500 has broken out of the technical downtrend that defined 2022 following the equal-weight breakout that preceded it. The pace of inflation looks like it peaked in June 2022, and while myriad risks to both the economy and stock market remain, fourth-quarter 2022 earnings season is shaping up better than feared. We maintain our view that the markets remain at critical technical levels, and we continue to monitor earnings season and technical developments closely.

Microsoft Is Betting Big on Artificial Intelligence (AI); Fiscal Q2 Shows Meager Revenue Growth, Weaker Cash Flow Generation Jan 24, 2023: Image: Microsoft believes artificial intelligence (AI) will be the next platform wave, and the company is going full steam ahead to incorporate AI across its business systems. Image Source: Microsoft.

“The age of AI is upon us and Microsoft is powering it. We are witnessing non-linear improvements in capability of foundation models, which we are making available as platforms. And as customers select their cloud providers and invest in new workloads, we are well positioned to capture that opportunity as a leader in AI. We have the most powerful AI supercomputing infrastructure in the cloud. It’s being used by customers and partners like OpenAI to train state-of-the-art models and services, including ChatGPT.” – Microsoft CEO Satya Nadella (January 24, 2023)