Valuentum Exclusive Analysis for the Discerning Investor

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Jul 12, 2023

Pet Insurer Trupanion’s Business Facing Numerous Challenges; Short Interest at 35%+
Image: Trupanion may be growing its top line like a weed, but its operating losses have been growing, too. Image Source: Trupanion 10-K. The insurance business is a tough one, and medical pet insurance may be even more difficult. A number of dynamics from adverse selection to conflicts of interest to lack of bargaining power within the industry’s structure have plagued Trupanion’s financial performance for years, with the company accumulating significant net losses since inception. We’re huge fans of Trupanion’s moaty network of clients and veterinarians as well as its tremendous top-line growth potential, but veterinarians continue to capture the industry’s economic rents, in our view, to the detriment of Trupanion’s shareholders. Unit economics have not been adding up at Trupanion either, and free cash flow has been meager at best for a very long time. As veterinarian costs continue to rise and the firm receives push back on proposed rate increases, Trupanion’s net losses may continue to mount, and even under optimistic assumptions, Trupanion’s shares could be considered rich.

Jul 7, 2023

Dividend Increases/Decreases for the Week of July 7
Let's take a look at firms raising/lowering their dividends this week.

Jul 4, 2023

How Much More Will Consumers Pay for McCormick Spices?
Image: Pricing growth remains the story at McCormick, but for how long? Image Source: McCormick. Just how much further McCormick will push pricing initiatives remains to be seen, but we think investor caution is in order. The stock is already trading at 33x current fiscal year adjusted earnings, and its shares have yet to return to the peak levels reached during 2020. We wonder if there may be troubling times ahead. Our fair value estimate stands at $73 per share, well below where shares are currently trading.

Jun 28, 2023

The Transaction Log of the Dividend Growth Portfolio
Image Source: Numbers and Finance. View the transaction log of the Dividend Growth Newsletter portfolio in this article. The Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Results are hypothetical and do not represent actual trading.

Jun 27, 2023

ALERT: Big Yield Additions to Dividend Growth Newsletter Portfolio and High Yield Dividend Newsletter Portfolio
Image Source: Mike Cohen. With the federal funds rate standing at 5%-5.25%, the hurdle rate for yield in the Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio is much higher these days. We’re not at all worried about a recession as that was largely priced in during 2022, and we’re looking ahead to strong nominal GDP and huge opportunities within artificial intelligence [AI]. Though we may add a dividend grower that is yielding below the 5% yield threshold to the Dividend Growth Newsletter portfolio with expectations for breakneck dividend-per-share expansion in the future, these days we’re looking for a couple incremental ideas that have yields already much higher than the 5% mark to add to the Dividend Growth Newsletter portfolio and the High Yield Dividend Newsletter portfolio. Let's dig in.

Jun 14, 2023

UnitedHealth Group’s Long-Term Story Intact
Image: UnitedHealth Group’s shares are facing pressure as the pace of medical procedures normalizes following COVID-19. We still like shares. On June 7, UnitedHealth Group raised its quarterly dividend nearly 14%, to $1.88 per share, which reflects a forward estimated dividend yield of 1.65%. The company remains a staple in the Dividend Growth Newsletter portfolio and is a new add in the Best Ideas Newsletter portfolio. Recent comments by UNH’s John Rex on June 14 regarding the firm’s healthcare costs during the second quarter have put shares under pressure during the trading session. Discretionary surgeries have picked back up following a lull during most of the COVID-19 pandemic as hospital capacity was largely constrained during that time. We’re viewing the expectations for higher medical costs in the near term for UNH as a reflection of pent-up demand (e.g. hip, knee replacements) and therefore largely a one-time step up that will weigh on is financials during 2023, but not in the longer run as premiums are eventually reset (repriced) to better cover the cost pressures. We think the market is overreacting to the news and likely reallocating to more aggressive areas within big cap tech as defensive stocks within healthcare weaken in 2023. UNH’s shares are now trading in the lower bound of our fair value estimate range, and we still like this large cap growth idea in the long run.

Jun 13, 2023

Oracle Hits All-Time Highs; Larry Ellison Pumps AI Opportunity
Image: Newsletter portfolio holding Oracle surges to all-time highs! “Oracle's Gen2 Cloud has quickly become the number 1 choice for running Generative AI workloads. Why? Because Oracle has the highest performance, lowest cost GPU cluster technology in the world. NVIDIA themselves are using our clusters, including one with more than 4,000 GPUs, for their AI infrastructure. Our GPU clusters are built using the highest-bandwidth and lowest-latency RDMA network—and scale up to 32,000 GPUs. As a result, cutting edge companies doing LLM development such as Mosaic ML, Adept AI, Cohere plus 30 other AI development companies have recently signed contracts to purchase more than $2 billion of capacity in Oracle's Gen2 Cloud.” – Chairman and CTO Larry Ellison

Jun 12, 2023

FDA Accepts License Application for Vertex Pharma’s and CRISPR Therapeutics’ Key Investigational Treatment
Image: Vertex's pipeline is impressive. We like its areas of focus and the progress it continues to make with key therapies in CRISPR and pain management. The combination of robust financials and a tremendous pipeline of game-changing therapeutics from exa-cel to VX-548 makes Vertex Pharma a no-brainer idea for the Best Ideas Newsletter portfolio, in our view. Vertex Pharma's shares are up nearly 18% so far in 2023, and we think its long term remains very bright. The company's dominance in CF gives it moaty economic characteristics, while the possible launch of as many as five new products in the next five years offers tremendous promise. Vertex Pharma's risk-reward situation continues to be skewed positively in investors' favor.

May 30, 2023

Phillips 66’s Stock May Be Volatile But Its Management Remains Very Shareholder Friendly
Image: Phillips 66’s shares have been quite volatile as refining margins ebb and flow, but shares are up nicely since the start of 2021 even as they’ve given up some ground so far in 2023. Phillips 66’s dividend yield stands at 4.4% at the time of its writing, and management remains committed to continuing to raise the payout, having done so as recently as its most recently reported quarter. Refining margins will continue to be volatile as feedstock costs fluctuate and prices at the pump vary, and while Phillips 66 retains a rather large total debt load, we think the risks are acceptable for this income generator. We continue to like shares as an idea in a well-diversified equity income portfolio.

May 24, 2023

Dick’s Sporting Goods Trades at Less Than 10x Expected Fiscal 2023 Earnings; We Like Shares
Image Source: Dick’s Sporting Goods. When it comes to retail exposure, Dick’s Sporting Goods is one of our top considerations. The company reported strong first-quarter fiscal 2023 results for the period ending April 29, 2023, that showed 3.4% same-store-sales growth and a 19% advance in non-GAAP earnings per diluted share. For fiscal 2023, management is targeting positive same-store sales expansion and earnings per diluted share in the range of $12.90-$13.80, implying that shares are trading at less than 10x expected fiscal 2023 earnings. The company has considerable long-term operating lease liabilities, but it has a net cash position. Dick’s Sporting Goods raised its dividend considerably recently, and we continue to like shares in the Dividend Growth Newsletter portfolio.