Update on Valuentum's Research
publication date: Jul 9, 2020
author/source: Brian Nelson, CFA
Update on Valuentum's Research
Trust you are doing great.---
Many of the top-weighted ideas in the newsletter portfolios continue to perform quite well, and two of the recent additions--Apple (AAPL) and Microsoft (MSFT)--have also been delivering nicely of late. Though uncertainty remains, we couldn't be more pleased with how things have been progressing.---
As a core part of our analytical process, we use our research and methodology to highlight ideas in the newsletter portfolios. In case you missed the July edition of the Dividend Growth Newsletter (and its portfolio), the email can be accessed here. The Best Ideas Newsletter portfolio can be accessed here (login required). Please let us know if you have forgotten your password by reaching out to us at email@example.com.---
The markets, especially the NASDAQ, have been powering ahead, and we maintain our bullish long-term stance on equities. As you're well aware, the stock market is not the economy, and stocks are long-duration financial instruments (i.e. forecasts about the long term impact the price today). Fed and Treasury actions have inflated the longer-duration components of intrinsic value, more than offsetting in most cases the implications of a weak economy/earnings in the near term. Here is why the markets have been so strong of late, in our view >>---
The duration element of intrinsic value is a key component of enterprise valuation and a topic covered extensively in the book Value Trap. Stocks are not just driven by next year's earnings or the year's after that, but they are driven by all the components of enterprise valuation. On the topic of Value Trap, if all goes well, I plan to release the second edition of the book with COVID-19 commentary in a brand new Prologue with accompanying Appendix this month. I think the second edition will make a nice addition to your library.---
Though the Fed and Treasury have largely backstopped the equity markets, stock selection will always be paramount to outperformance, in my view. For one, I think we've done a really good job steering clear of energy (XLE) and financials (XLF) stocks, two of the worst-performing sectors during the past month and year-to-date. The XLE, for example, is down nearly 38% so far this year, while the XLF is down nearly 24%. We have little interest in these two areas at the moment.---
Leading the charge this year has been technology (XLK), which has advanced nearly 17% year-to-date. The newsletter portfolios have been significantly overweight technology equities for some time, and we don't expect this to change anytime soon. We think many asset-light, net-cash-rich, and strong free cash flow generators with secular growth prospects will prevail in a post-COVID-19 world, and a lot of these ideas are tech-related.---
We always prefer ideas in the newsletter portfolios, including the High Yield Dividend Newsletter portfolio, as well as ideas highlighted in the Exclusive publication, but if we were to simplify where in the markets there exists a high concentration of Valuentum stocks, it would be in the broad areas of large-cap growth, big-cap tech, and the NASDAQ. On the other hand, capital-intensive and overleveraged old-economy names may continue to face pressure in a post-COVID-19 world.
Our team has been working hard, and I wanted to bring to your attention some of the most recent research we've published on the website. We talk about one of our favorite monthly dividend-paying REITs, "Realty Income Updates Investors (July 8)," and we tackle new developments in the mining industry, "Freeport-McMoRan's Outlook Improves Considerably (July 8)," as well as our latest thoughts on the electric-vehicle space, "Tesla Surges on Promising Production Report (July 7)."
We talk about Berkshire's recent purchase, "Berkshire Hathaway Expands Its Bet on North American Natural Gas (July 6)," and address recent developments at FedEx, "FedEx Indicates Its Outlook Is Improving (July 6)." Don't forget to check out the interview with Valuentum's Callum Turcan here, and we take a look at news from Lululemon, "Lululemon Athletica Buys MIRROR (July 6)," and catch up on the department store arena, "Macy's Builds Liquidity and Cuts Costs to Stay Afloat (July 1)."
With that said, I wanted to thank you again for participating in the Valuentum survey, and I hope to share with you any new developments in the future. In the meantime, I appreciate your interest very much, and please stay tuned. We're available for any questions.
Brian Nelson, CFA
President, Investment Research
Valuentum Securities, Inc.
Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.
Brian Nelson owns shares in SPY and SCHG. Some of the other securities written about in this article may be included in Valuentum's simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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