Valuentum Exclusive Analysis for the Discerning Investor

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Salesforce Has Room to Run
Image Source: Salesforce Inc – Fourth Quarter of Fiscal 2022 IR Earnings Presentation. Salesforce offers software that assists its customers with marketing, customer service, sales, digital commerce, business development, collaboration, analytics, recruitment, and numerous other activities. These offerings aim to improve workplace productivity by streamlining certain functions and automating others. Salesforce provides a comprehensive suite of software solutions designed for businesses and government entities across its Customer 360 platform, while using analytics and AI to discover insights to further generate value for its customers. Over the two-plus decades Salesforce has been operating, the company has grown into a tech powerhouse by investing heavily in the business and continuously pursuing major acquisitions. Some of Salesforce’s bigger deals (by enterprise value) include acquiring Slack for $27.7 billion in a cash-and-stock deal that closed in July 2021, and buying Tableau for $15.7 billion through an all-stock deal that closed in August 2019. Let's dig a bit deeper into this idea.

Valuentum Weekly: Outsized Energy Exposure Continues to Buoy Newsletter Portfolios
Image: Light crude oil futures once traded for roughly -$40 (negative $40) during the COVID-19 crisis, but have now rocketed to more than $120 in recent trading. Image Source: TradingView. The S&P 500, as measured by the SPY, is down 9% year-to-date, a modest pullback, in our view, particularly in light of the fantastic performance the past few years. Though not necessarily welcome, a down year every now and then for the broader market indexes and a modest bear market can only be expected, at times. The Dow Jones Industrial Average, as measured by the DIA, is down more than 7% year-to-date (not too bad), while the Nasdaq--as measured by the QQQ--and 'disruptive innovation' stocks--as measured by the Ark Innovation ETF--have fallen more than 15% and 36%, respectively, so far this year (data from Seeking Alpha). We like how the simulated newsletter portfolios are positioned. Energy resource prices continue to surge (with WTI crude oil prices skyrocketing north of $120 per barrel at last check), and they are bringing energy equities higher along with them. The simulated Best Ideas Newsletter portfolio, simulated Dividend Growth Newsletter portfolio, and simulated High Yield Dividend Newsletter portfolio are all materially overweight energy equities relative to the energy sector’s weighting in the S&P 500, and we expect to maintain such high tactical "exposure." Both the Energy Select Sector SPDR ETF and the Vanguard Energy ETF soared to 13-year highs last week. Our favorite energy ideas are the largest two energy majors, Exxon Mobil and Chevron, and both have hefty 'weightings' in each of the three aforementioned simulated newsletter portfolios. Russian equities, as measured by the RSX, are down nearly 80% so far this year, and we're pleased to say that we've largely avoided the fall out. We continue to like the broader areas of U.S.-heavy, large cap growth and big cap tech when it comes to long-term secular exposure, and we continue to like energy as a tactical overweight for the foreseeable future across the simulated newsletter portfolios, as much as we did even prior to the huge advance in energy resource prices and the invasion of Ukraine by Russia.

Shares of Our Favorite Miner South32 Skyrocketed During Past Year
Image Shown: South32, an idea in our ESG Newsletter portfolio and one of our favorite miners, put up tremendous financial performance during the first half of fiscal 2022 as it capitalized on surging realized prices for its commodities sales. Image Source: South32 – First Half of Fiscal 2022 IR Earnings Presentation. Shares of the American depository receipts (‘ADRs’) of one of our favorite miners, South32, have put up tremendous performance during the past year. According to data provided by Yahoo! Finance, shares of SOUHY are up over 50% during the past year on a price only basis while the S&P 500 is up ~9% on a price only basis during this period as of late February 2022. South32 is focused on building up a portfolio around high-quality nickel, aluminum, alumina, manganese, and zinc assets (these are metals and minerals that are essential for building things such as lithium-ion batteries and electric vehicles) while retaining a meaningful presence in the metallurgical coal space. Let's follow up on this excellent idea.

Dividend Increases/Decreases for the Week February 18
Let's take a look at companies that raised/lowered their dividend this week.

Cisco Posts Great Earnings Update; Increases Dividend and Share Buyback Authority
Image Shown: Cisco Systems Inc is a very shareholder friendly company. Image Source: Cisco Systems Inc – Second Quarter of Fiscal 2022 IR Earnings Presentation. On February 16, Cisco Systems reported second quarter earnings for fiscal 2022 (period ended January 29, 2022) that smashed past both consensus top- and bottom-line estimates. Shares of CSCO surged higher initially after its earnings were made public as the company offered up promising near term guidance, indicating that its positive momentum seen of late is expected to continue. We include shares of CSCO as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Cisco announced a 3% sequential increase in its quarterly dividend in conjunction with its latest earnings update, bringing it up to $0.38 per share or $1.52 per share on an annualized basis. The company also announced it had increased its share repurchasing capacity by $15 billion, bringing its total repurchasing capacity up to ~$18 billion. Shares of CSCO yield ~2.8% as of this writing at its new payout level, and we view its dividend strength as rock-solid due to its pristine balance sheet and stellar free cash flows. Our fair value estimate for Cisco sits at $62 per share with room for upside as the high end of our fair value estimate range sits at $74 per share. That is meaningfully above where shares of CSCO are trading at as of this writing (~$56 per share each), and we view the company’s capital appreciation upside potential quite favorably.

Top ESG Idea South32 Getting Closer to Launching Major Mining Project in Arizona
Image Shown: South32 is targeting ample zinc, lead, and silver resources at the Hermosa project in Arizona that could be quite economical to extract should the Australian-based miner move forward with the endeavor. Image Source: South32 – January 2022 IR Presentation. Shares of South32, one of our favorite miners, are up over 50% during the past year as of this writing and that is before taking dividend considerations into account. The Australian miner has a bright outlook after shedding virtually all its thermal coal assets last calendar year (completed in June 2021) and announcing in October 2021 that it would acquire a sizable economic interest in a Chilean copper mine. We include shares of SOUHY as an idea in the ESG Newsletter portfolio and continue to be huge fans of the company. The miner has ample exposure to the “green energy” revolution and continues to pivot towards minerals that are expected to be in high demand in the future, which in turn supports the firm’s cash flow growth runway. South32 has exposure to attractive potential mining opportunities down in Arizona and recently provided a big update on these efforts that are worth going over. Let's dig in.

Sonos Expected to Continue Growing Rapidly; Margin Concerns Remain Key Issue
Image Source: Sonos Inc – Fourth Quarter of Fiscal 2021 IR Earnings Presentation. Sonos' financial performance staged an impressive turnaround in fiscal 2021. The company exited fiscal 2021 with a $640 million net cash position and generated $208 million in free cash flow that fiscal year. Sonos is leveraging its financial strength by buying back its stock. The firm is also considering potential M&A activities that could be used to enhance its growth runway, with an eye towards the potential for Sonos to expand into the premium wireless headphone space. Sonos forecasts that it will grow its revenues by double-digits annually in fiscal 2022, though its margins are expected to face moderate headwinds this fiscal year. Shares of SONO have faced sizable selling pressures of late as concerns mount over its medium-term outlook. We love the company's products, but we're cautious on the stock in the near-term given its cloudy EBITDA outlook. That said, we see potential upside in the stock to the high-$20s from a valuation perspective (modestly above where shares are trading at this time).

Our Thoughts on Big Pharma’s Calendar Fourth Quarter Earnings Reports
Image Source: Merck & Company Inc – Fourth Quarter of 2021 IR Earnings Presentation. We include the Health Care Select Sector SPDR Fund ETF in the Best Ideas Newsletter and Dividend Growth Newsletter portfolios to gain broad exposure to the health care sector. Instead of betting on one entity's pipeline (which could be hit or miss), we like the exposure to lots and lots of "shots on goal" when it comes to the vast collective pipeline in the XLV ETF. We wrote up the calendar fourth-quarter results of the top two weightings in the XLV ETF, United Health and Johnson & Johnson recently. We continue to like UNH a lot, but JNJ's story has become a lot more complicated for dividend growth investors in recent months. Let's have a look at some of the other key holdings in the XLV ETF, however. We'll cover the calendar fourth-quarter earnings reports from four heavyweights in the pharmaceutical arena (ABBV, GILD, LLY, and MRK). Additionally, we'll cover the performance of some of their top-selling treatments that have already received regulatory approval from the U.S. Food and Drug Administration (‘FDA’) and key clinical trials that could produce new commercial growth opportunities. The coronavirus (‘COVID-19’) pandemic has become more manageable during the past year or so after several vaccines and therapeutics for the virus were discovered in record time. While headwinds from the pandemic remain, the health care sector is steadily recovering and this space is home to plenty of attractive opportunities for capital appreciation and income seeking investors. XLV, UNH, JNJ, and VRTX are a few that we like a lot.

Undervalued PINS, SNAP Rallying; FB Incredibly Mispriced, and Refreshed Consumer Discretionary Reports
Image: Valuentum's Periodic Screener, February 4. Two of the most undervalued stocks in our coverage Pinterest, Inc. and Snap Inc. are indicated to rally hard February 4 after issuing positive earnings reports, providing further evidence of the importance of the discounted cash flow process and the magnet that intrinsic value estimates are to stock prices.

Preliminary Updated Summary Valuations for Meta Platforms and PayPal Holdings
The refreshed stock reports for Meta and PayPal will be available this weekend.