Valuentum Exclusive Analysis for the Discerning Investor

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Albemarle Raises Guidance Yet Again, Expects to Be FCF Positive in 2022
Image Shown: Albemarle Corporation’s lithium operations have posted stellar financial performance in recent quarters and underpin the firm’s bright long-term growth outlook. Image Source: Albemarle Corporation – Second Quarter of 2022 IR Earnings Presentation. We liked what we saw in Albemarle’s latest earnings report. Albemarle is betting the farm that the supply-demand dynamics will remain favorable for lithium producers. Volume growth and favorable pricing for lithium derivatives is a powerful combination that Albemarle has effectively capitalized on so far. Lithium is a major component in lithium-ion batteries which are used to power electric vehicles (‘EVs’), battery storage facilities, consumer electronics, and much more. Should EV sales continue to grow while utilities are increasingly turning to battery storage solutions to supplement their backup power options, demand for lithium should continue to grow at a robust pace as well. Albemarle is well-positioned to capitalize on this upside, aided by its stellar operational execution. Shares of ALB yield ~0.7% as of this writing and the top end of our fair value estimate range for Albemarle sits at $309 per share.

ASML Holding Retains Dominant Position in High-End Semiconductor Equipment Space
Image Shown: ASML Holding NV effectively has a monopoly on the high-end space of the semiconductor equipment industry as the Dutch company sells the only lithography systems that can produce the most advanced cutting edge “chips.” We are huge fans of the company’s business model. Image Source: ASML Holding NV – Second Quarter of Fiscal 2022 IR Earnings Presentation. ASML Holding is a tremendous enterprise with a bright growth outlook, a healthy balance sheet, and an impressive business model. The company’s management team is incredibly shareholder friendly. We view both ASML Holding’s dividend growth and capital appreciation upside quite favorably, and think the market is “getting it wrong” on this company considering shares of ASML have sold off heavily year-to-date, even though its longer term free cash flow growth trajectory is as strong as ever.

Garbage Hauler Republic Services Beats Estimates, Raises Guidance
Image Shown: Shares of newsletter portfolio idea Republic Services have put up strong performance so far year-to-date in the face of volatile capital markets. There is a lot to like about Republic Services as the waste management firm is a tremendous free cash flow generator with ample pricing power. Management is incredibly shareholder friendly, as seen through recent per share dividend increases, and the company has been firing on all cylinders of late. We continue to like Republic Services in our newsletter portfolios. Our recently updated fair value estimate for RSG sits at $132 per share and the top end of our fair value estimate range sits at $158 per share of Republic Services.

Best Idea Berkshire Hathaway Continues to Impress
Image Shown: Berkshire Hathaway Inc is a stellar cash flow generator in almost any operating environment. Image Source: Berkshire Hathaway Inc – 10-Q SEC filing covering the Second Quarter of 2022. Berkshire Hathaway Inc reported second quarter 2022 earnings that saw its ‘operating earnings’ metric surge higher versus the year-ago level. This metric removes realized and unrealized gains/losses in its large equity portfolio from the picture to provide investors with a better understanding of the company’s underlying performance. Due to the downturn in equity markets seen during the first half of this year, Berkshire Hathaway’s GAAP net income swung to a large net loss last quarter. We include shares of Berkshire Hathaway Class B (ticker: BRK.B) in the Best Ideas Newsletter portfolio, and our fair value estimate sits at $320 per share with room for upside.

Exxon Mobil Surging Higher with Room for Upside
Image Shown: Exxon Mobil Corporation put up stellar results when reporting its second quarter earnings in late July 2022. Image Source: Exxon Mobil Corporation – Second Quarter of 2022 IR Earnings Presentation. Exxon Mobil Corp posted second quarter 2022 earnings that flew past consensus top- and bottom-line estimates. The tailwind provided by elevated raw energy resources prices, rising oil & gas production volumes, ongoing cost structure improvement initiatives, and strong “crack spreads” (refining margins) more than offset headwinds arising from its decision to exit Russia in March 2022 and foreign currency headwinds due to a strong U.S. dollar. Exxon Mobil is one of our favorite energy ideas, and we include shares of XOM in several of the newsletter portfolios as it offers investors a nice combination of dividend growth and capital appreciation upside potential. Shares of XOM yield ~3.6% as of this writing, and our fair value estimate sits at $105 per share of Exxon Mobil.

Loving Stocks Here! Meta and Alphabet Setting Up Nicely for Long Term Investors!
Image: Nelson still remains bullish. We wouldn't be surprised to see the markets make new highs as they have done time and time again over the stock market's storied history of bull and bear markets, crashes and rip-your-face off rallies, and economic booms and recessions! There are myriad risks, but we're not overthinking this market. We like stocks for the long haul. One of the hardest parts of investing is keeping your head when others around you are running for the exits. That's exactly what we did for members (we don't manage money), and the stock market has come roaring back since the mid-June bottom! Anyone who has read our book Value Trap knows that the rapid fall in the 10-year Treasury yield to ~2.8% today from the mid-3% range in mid-June has helped support this stock market advance (due to a lower cost of capital in discounted cash-flow models -- enterprise valuation is the key driver behind stock market performance, in our view, as it has been revealed time and time again). After calling the COVID-19 crash when others doubted the impact that the coronavirus would have on the markets, and then calling the tremendous bull run that followed, we still remain bullish on these markets, and the simulated newsletter portfolios have done fantastic on a relative basis so far this year.

Global Payments Buying EVO Payments as Fintech Industry Consolidates
Image Shown: Global Payments Inc is in the process of acquiring EVO Payments Inc. Image Source: Global Payments Inc – Second Quarter of 2022 IR Earnings Presentation. Global Payments announced it would acquire EVO Payments for $34 per share through an all-cash deal worth ~$4.0 billion by enterprise value. As its name would suggest, Global Payments provides payment technology and software solutions to customers in over 100 countries. By acquiring EVO Payments, which focuses on providing payment technology and services to small and medium-sized businesses in over 50 markets worldwide, Global Payments will extend its reach into new markets (including Chile, Germany, Greece, and Poland) while enhancing its presence in existing markets (including Canada, the US, Mexico, the UK, Ireland, and Spain).

Shares of Best Idea Alphabet Remain Incredibly Undervalued
Image Shown: Alphabet Inc Class C shares are trading at bargain basement levels, in our view. Alphabet Inc reported second quarter 2022 earnings that missed consensus top- and bottom-line estimates. However, investors were clearly expecting the tech giant to perform much worse as shares of GOOG leapt higher following the report. We continue to like Alphabet Class C shares (ticker: GOOG) as a top-weighted idea in the Best Ideas Newsletter portfolio. Our fair value estimate (adjusted for Alphabet’s recent 20:1 stock split) sits near $157 per share of GOOG, well above where shares are trading at as of this writing.

Meta Platforms’ Shares Remain Cheap; Long Term Focus Required
Image Shown: Meta Platforms Inc’s family of apps continued to grow its active user base last quarter. Its social media networks are used by billions of users every single day. Image Source: Meta Platforms Inc – Second Quarter of 2022 IR Earnings Presentation. On July 27, Meta Platforms reported second quarter 2022 earnings that missed consensus top- and bottom-line estimates. We appreciate that its active user base across its family of apps (Facebook, Instagram, WhatsApp, and Messenger) and its ad impressions continued to trend in the right direction last quarter, though recent softness in its pricing power is concerning. Meta Platforms is responding by scaling back its targeted operating expense growth, which we appreciate. We continue to like Meta Platforms as an idea in the Best Ideas Newsletter portfolio, though we recognize that near term headwinds are weighing quite negatively on investor sentiment towards the name.

High Yielding Philip Morris International’s Growth Runway Remains Intact
Image Shown: Shares of Philip Morris International moved higher in the wake of its second quarter earnings report. Philip Morris International reported second quarter 2022 earnings that beat both consensus top- and bottom-line estimates. The company raised its full-year revenue and adjusted EPS guidance for 2022 on a pro forma basis (excluding its operations in Russia and Ukraine) versus previous estimates in conjunction with its latest earnings update. Now Philip Morris International expects to generate 6%-8% net revenue growth on an organic basis and 10%-12% diluted EPS growth in 2022 versus 2021 levels (these are non-GAAP metrics). We include Philip Morris International in the High Yield Dividend Newsletter portfolio as we are big fans of its resilient business model and ample pricing power.