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Valuentum Commentary
May 19, 2025
3 Undervalued Stocks to Consider Buying Now
All told, we think these three names are ripe for the picking. UnitedHealth Group has clearly plummeted on bad headline news, while the market is not giving Nvidia enough credit for the sustainability of its technology. Alphabet is being weighed down by antitrust issues and the concern that artificial intelligence will permanently alter its business model, which we believe will not happen anytime soon, if at all. All three ideas are included in the Best Ideas Newsletter portfolio, where we include a diversified portfolio of ideas for members to consider. Happy investing! May 6, 2025
Magnificent 7 Earnings Reports Not Bad Thus Far
Shortly after Trump's Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500, for example, is down just 3.3% year-to-date, excluding dividends. A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if a full US/China trade agreement won't be completed in the near term, as full-scale trade deals take time to mold. Thus far, we have been impressed by earnings this season, particularly by the Magnificent 7. Apr 25, 2025
Dividend Increases/Decreases for the Week of April 25
Let's take a look at firms raising/lowering their dividends this week. Apr 4, 2025
Trump Tariffs Higher than Expected; What We're Doing
The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in the coming months. Feb 4, 2025
Phillips 66 Outlines Strategic Priorities
Image Source: TradingView. Looking forward to its strategic priorities through 2027, Phillips 66 plans to return greater than 50% of operating cash flow to shareholders, achieve 2% higher than industry average crude utilization, target annual adjusted controllable costs of $5.50 per barrel in Refining, grow Midstream and Chemicals mid-cycle adjusted EBITDA $1 billion in total by 2027, and maintain financial strength and flexibility by reducing total debt to $17 billion. Though the quarterly performance was messy, we continue to like Phillips 66. Shares yield 3.9% at the time of this writing. Dec 4, 2024
Exxon Mobil’s Permian Assets Performing Well, Structural Cost Reductions on Track
Image Source: Exxon Mobil. We like Exxon Mobil’s strong advantaged volume growth from Guyana and Permian assets, including Pioneer Natural Resources, and we view Exxon Mobil as one of our favorite ideas to gain energy exposure, given its strong dividend track record and excellent free cash flow generation. Exxon Mobil is also aggressively pursuing structural cost savings and is on track to deliver cumulative savings of $15 billion through the end of 2027 versus 2019. Our fair value estimate stands at $126 per share. Exxon Mobil yields 3.4% at the time of this writing. Oct 29, 2024
Phillips 66’s Dividend Well Covered with Free Cash Flow
Image Source: Phillips 66. In the quarter, Phillips 66 achieved its target of $1.4 billion in business transformation savings, including a $1 per barrel refining cost reduction. The firm is also optimizing its portfolio, with asset dispositions totaling $2.7 billion, approaching its $3 billion target. We like Phillips 66 free cash flow generation of $774 million in the third quarter, which easily outpaced its dividends paid in the quarter. The company has distributed $12.5 billion through share buybacks and dividends since July 2022, and it remains on pace to achieve its target of $13-$15 billion by year end. Our fair value estimate of Phillips 66 stands at $155 per share. Shares yield 3.6% at the time of this writing. Aug 25, 2024
Latest Report Updates
Check out the latest report updates on the site. Aug 9, 2024
Paper: Value and Momentum Within Stocks, Too
Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. Jul 30, 2024
Phillips 66 Records Strong Free Cash Flow in Second Quarter
Image Source: Phillips 66 Investor Update. We like Phillips 66’s investment prospects. The company recently raised its mid-cycle adjusted EBITDA target to $14 billion by 2025. It has a strong investment-grade credit rating of A3/BBB+, with a net debt-to-capital ratio target between 25%-30%. Maintaining capital discipline is par for the course for Phillips 66, as it has generated 12% average ROCE since 2012. The company targets returning more than 50% of operating cash to shareholders, too. Its shares yield 3.3% at the time of this writing. Latest News and Media The High Yield Dividend Newsletter, Best Ideas
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