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Valuentum Weekly

publication date: Aug 7, 2021
author/source: Brian Nelson, CFA

Image: Bitcoin, technology and large cap growth have led the pack the past 5 years while pipeline MLPs, crude oil and energy stocks have fallen way behind. Large cap growth > small cap value. Bonds, non-US stocks continue to lag.

The Valuentum Weekly is a brand-new weekly market commentary from Valuentum Securities, released each weekend in digital form. The Valuentum Weekly offers members a weekly synopsis of the markets and major events. It will be straight and to-the-point. Our goal is to deliver to you the latest information and insights. We welcome your feedback on how we can make the Valuentum Weekly as useful and as relevant for you as ever!


  • The markets offer investors an asymmetric risk opportunity, and many still haven’t recognized it. With the Fed and Treasury bailing everyone out, first during the Great Financial Crisis and then most recently during the COVID-19 meltdown, moral hazard will continue to drive equities ever-higher in the long run.

  • We’ve correctly called just about every major move in the markets during the COVID-19 event from the crash to the bottom to new all-time highs. We’ve been right on almost every turn, and we remain bullish.

  • With our favorites of Facebook and Google, among others, we’ve been huge fans of big cap tech and large cap growth, which have dominated the markets the past 5 years. We’ve been terribly bearish on many pipeline MLPs, which have lagged considerably the past five years (see the image above).

  • We’ve highlighted ideas that have generated tremendous alpha time and time again! Market returns won't always be robust, so searching for alpha will always be in vogue. Don't fall into indexing just because the past 10 years of broad market returns have been excellent.
  • As a research publisher, there are only a few times one comes up to bat in a clutch situation during a market cycle. To be worth our salt, we think we had to call the COVID-19 swoon and identify the best grouping of stocks (big cap tech, large cap growth) and the worst grouping of stocks (pipeline MLPs) the past five years. That's a tremendously high bar that we handily leapt over.
  • What has been the edge? The discounted-cash flow model (enterprise valuation) and its universal applications--from understanding the drivers of market price movements to dividend health analysis and beyond. We preach this everyday. There are either those that do the DCF or those that do not (and even wide disparities between those that do!). There is no middle ground or compromise, and there are no shortcuts to the wisdom of its perspective, particularly for those that are experienced and know how to apply it.
  • We're bullish on the markets, but that doesn't mean they are risk free. Investing comes with all sorts of risks that you should be aware of, including the loss of principle.


Very few have been as prescient with respect to market direction as Valuentum. On February 24, 2020, the day of the beginning of one of the biggest crashes in market history, we warned members, “ALERT: Adding Market Crash ‘Protection...” We actually warned about the coming crash that weekend here.

It wouldn’t be until late March 2020 (pretty much at the bottom) when we thought it started to make sense to dollar cost average. If you recall, many weren’t sure how to reconcile our views that we’d see Great Depression-like economic numbers (which we have witnessed), while at the same time, it still made sense to take advantage of depressed prices (which was opportunistic).

Read the comments in the article from March 2020 here, “Fed and Treasury Efforts Might Not Be Enough…

The stock market is not the economy. You should have an opinion about the near term, intermediate term, and long term as well as an opinion between the markets and broader economy for each of these time horizons – and they may not be same. We’ve said this time and time again.

By April 2020, we had seen enough Fed and Treasury action to have finally learned that no longer could society return to pure free markets. The Fed and Treasury had fundamentally changed the investing game. The markets were going to go higher, no matter what. We went all in April 2020, “ALERT: Going to ‘Fully Invested’…

We reiterated our bullish take on the markets for months, pounding the table at times--and then pounded it some more. First published May 15, 2020, and then re-pubbed on June 8, we said “Stay Optimistic. Stay Bullish. I Am.” It had become clear to us that the Fed and Treasury had shown their hands. In Tom Petty style, the Fed and Treasury weren’t backing down.

Unlike in prior generations where creative destruction was allowed to occur, it was evident that the Fed and Treasury weren’t going to let practitioners of indexing and MPT fail. It became clear that no way would they let Vanguard’s huge stakes in stocks such as airlines go to zero like they should have (we have Chapter 11 bankruptcy laws that keep companies operating).

As if we were struck by lightning, it became evident to us that no way could the Fed and Treasury possibly let retirement savings around the world fail either. How could the SEC say it’s okay for pensions and institutions using MPT not to calculate the intrinsic values of their investments and then the Fed and Treasury not bail those speculators out time and time again for the public good? Moral hazard is rewarded.

They aren't going to let them fail. They simply can't. They'd get voted out of office and replaced by others that will bail them out.

First established in the Great Financial Crisis and then reaffirmed during the COVID meltdown, the view that these are managed markets is the right one. We finally saw the light near the COVID-19 bottom and did our best to let members know how we felt--and boy was this an awesome bull market the past 16 months -- with us pounding and pounding the table again for members again and again!

It wasn’t until earlier this year when we became a bit more guarded on the markets as the meme-stock craze took hold. This was something new, but at the same time it was expected. After all, we had published the award-winning book Value Trap, which warned about the irresponsibility of price-agnostic trading from indexing to quant to the latest iteration of buying without regard to price, as precisely in the case of meme stocks.

It should be obvious that the markets have been lucky that the meme-stock traders aren’t shorting equities and driving weak hands to the exits, causing panic selling. That's a relief. Instead, they are driving stocks higher. But for how long? Will they eventually change their tune? In February of this year, we wrote the thought piece, “The Invisible Hand Will Sink These Markets.” From our perspective, it will be years yet before the chickens come home to roost, but they will.

Still, there's no need to panic (for now).

We’ve gotten just about everything right with respect to market direction--and we remain bullish on stocks for the long run, a view we reiterated June 8, “Still Bullish – Stocks for the Long Run!” As it relates to identifying mispricings, look at large cap growth near the top of the list and pipeline MLPs near the bottom of the image above, too. Wow -- talk about that kind of alpha on top of everything else we do. Is this not good enough? What if we got all of this wrong? What if we just pretended like none of this happened?

We remember when many people were not sure why we were explaining the aftermath of our call on pipeline MLPs so much in 2017 through 2019 when it happened in 2015/2016. Well, it was to build up your trust so you wouldn't cancel your membership--and you'd get our warning on the next "big thing," which turned out to be the COVID-19 crash. Guess why we're now talking about our track record during COVID-19 and for the past 5 years? I'll tell you this--It's not because we like patting ourselves on the back.

To be quite honest, we’re not sure why others are calling for a market crash today. Recency bias maybe? Or maybe the bears are throwing a Hail Mary pass because they missed the fastest bull market in history? Who knows? Whatever it is, we don’t see a crash coming at all – after all, the market already crashed last year. In our view, the markets are about fairly valued at current levels, and recent second-quarter earnings reports have been fantastic, in our view. 

The S&P 500 and Dow Jones closed at all-time highs during the week ending August 6. The NASDAQ closed just shy of an all-time high. And guess what – we’re still bullish! Though valuations aren’t necessarily out of whack, the markets are being overrun with speculators--but to us, that just means more government involvement to guide the markets ever higher in the long run. We might even see a Bitcoin ETF soon! How crazy is that. The music will stop someday, but that day is still far, far away.

Going forward, we’ll publish this weekly commentary in bullet-point fashion and cover not only developments in the Markets, but also Top News, information about the Economy, thoughts about Valuations, the latest from the Fed and Treasury, ETF News, and other information across various sectors – not to mention what’s On Deck

Stay bullish, my friends.


It's Here! 
The Second Edition of Value TrapOrder today! 


Image Source: Value Trap


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, SCHG, QQQ, DIA, VOT, and IWM. Brian Nelson's household owns shares in HON, DIS, HAS. Valuentum owns shares in VOO, SCHG, DIA, and QQQ. 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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