Valuentum Exclusive Analysis for the Discerning Investor

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Nov 17, 2020

Growing Competitive Pressures, Leverage Drive Our Reduced Fair Value Estimate of CVS Health (Walgreens, Too)
The rivalries in the pharmacy space continue to intensify. Just this week, on November 17, CNBC reported that Amazon was launching Amazon Pharmacy in the US, which reportedly will include free delivery for Amazon Prime members. Shares of CVS Health sold off sharply after the news broke, as did shares of Walgreens Boots Alliance. Here, we would like to highlight how recognizing competitive threats (both existing and future) represents one of the qualitative overlays we use during the enterprise cash flow analysis process to model expected future financial performance of the company. These competitive dynamics had a large influence in our decision to reduce CVS Health’s fair value estimate. Note, we also reduced our fair value estimate of peer Walgreens Boots Alliance to $43 per share from $60 per share on November 9, too.

Nov 13, 2020

Seeking High Success Rates on Individual Ideas? Consider the Exclusive Publication, a Valuentum Securities Offering.
We wanted to update our membership on the stats of ideas that we have highlighted in the Exclusive publication thus far for the past 52 months. For those that aren't aware of this publication, it is an add-on publication to the regular membership where we highlight three ideas in full thesis form each month -- an income idea, a capital appreciation idea, and a short idea consideration. For capital appreciation ideas, the success rates* have been 86.5% -- meaning that 86.5% of capital appreciation ideas that we've highlighted have advanced from their highlight price to their close or current price (including dividends). It's a pretty striking sight to see. For short idea considerations, the success rates have been 92.3% -- meaning that 92.3% of short idea considerations that we've highlighted have fallen from their highlight price to their close or current price (including dividends). This is even more remarkable than the capital appreciation success rates.

Nov 13, 2020

Shares of Disney are Now Surging Towards the Top End of Our Fair Value Estimate Range
Image Shown: Shares of The Walt Disney Company are steadily climbing towards the top end of our fair value estimate range, which sits at $153 per share of DIS. After the market closed on November 12, The Walt Disney Company reported its fourth quarter and full-year earnings for fiscal 2020 (period ended October 3, 2020). Its latest results beat both consensus top- and bottom-line estimates. Though Disney’s financials took a big hit from the coronavirus (‘COVID-19’) pandemic, as expected (with an eye towards the enormous headwinds facing its ‘Parks, Experiences and Products’ business segment), the company’s outlook has improved considerably as its various video streaming services continue to outperform. We include shares of Disney in our Best Ideas Newsletter portfolio with a modest weighting. As the top end of our fair value estimate range sits at $153 per share of Disney, there could be room for shares to run higher even after recent share price gains.

Nov 11, 2020

Pfizer/BioNTech Vaccine Not a Catalyst for Portfolio Changes
Image: BioNTech. Next Generation Immunotherapy Presentation, October 2020. The world received great news this week that the days of this terrible COVID-19 pandemic may finally be numbered. On November 9, Pfizer and BioNTech announced that “their mRNA-based vaccine candidate, BNT162b2, against SARS-CoV-2 has demonstrated evidence of efficacy against COVID-19 in participants without prior evidence of SARS-CoV-2 infection.” Our thesis on the inevitable successful development of a vaccine for COVID-19 never centered on which pharma/biotech giant would be the first to develop one, but rather our thesis has always been focused on the large number of shots on goal (the large number of vaccine candidates in development, and the high probability that at least one would be effective). We’re sticking with some of the best companies out there in the newsletter portfolios, however, and we’re reiterating our fair value estimate range of 3,530-3,920 on the S&P 500 (established June 12), which we derive as 18-20x multiple on pre-pandemic 2021 earnings of $196. The S&P 500 stands within the range at ~3,560 today.

Nov 11, 2020

Realty Income Remains Resilient and Its Outlook is Improving
Image Shown: An overview of Realty Income Corporation’s asset base and historical financial performance. Image Source: Realty Income Corporation – Third Quarter of 2020 IR Earnings Presentation. On November 2, Realty Income Corp posted third quarter earnings for 2020 that saw the real estate investment trust’s (‘REIT’) funds from operations (‘FFO’) come in flat year-over-year at $0.82 per share, while its adjusted funds from operations (‘AFFO’) declined by 2% year-over-year, hitting $0.81 per share. Realty Income invests in single-tenant commercial properties, and its business has faced headwinds from the ongoing coronavirus (‘COVID-19’) pandemic. However, things are starting to improve, though there is ample room for additional improvement. We like the relative resilience of Realty Income’s financials and continue to include shares of O at a modest weighting in our Dividend Growth Newsletter portfolio. As of this writing, shares of Realty Income yield ~4.4% and for reference, the REIT pays out a monthly dividend.

Nov 10, 2020

Reiterating Our $229 Fair Value Estimate for Berkshire Hathaway
Image Shown: Shares of Berkshire Hathaway Inc Class B are moving on upwards. Berkshire Hathaway reported third quarter 2020 earnings this past Saturday, November 7. The insurance and industrial conglomerate reported that its GAAP income almost doubled year-over-year as its investment portfolio reported large gains. However, that masked pressures at some of Berkshire Hathaway’s myriad businesses as the company navigated the storm created by the ongoing coronavirus (‘COVID-19’) pandemic. Berkshire Hathaway continued to generate significant free cash flows during the first nine months of 2020, and we are reiterating our fair value estimate of $229 per share of Berkshire Hathaway Class B shares.

Nov 10, 2020

Public Storage Continues to Shine
Image Shown: Shares of Public Storage have recovered from the depths of the COVID-19 pandemic and have been on an upward climb over the past few months. On November 4, Public Storage reported earnings for the third quarter of 2020. As expected, headwinds created by the coronavirus (‘COVID-19’) pandemic weighed on its financial performance during this period; however, that did not stop the self-storage real estate investment trust (‘REIT’) from being very free cash flow positive. The long-term outlook for the self-storage industry in metropolitan areas in the US and elsewhere remains quite promising given the desire for households to maximize living space within their housing unit at a given budget. We include shares of Public Storage in our High Yield Dividend Newsletter portfolio and shares of PSA yield 3.5% as of this writing.

Oct 15, 2020

Johnson & Johnson Once Again Raises Guidance
Image Shown: An overview of Johnson & Johnson’s financial performance during the third quarter of fiscal 2020. Image Source: Johnson & Johnson – Third Quarter of Fiscal 2020 IR Earnings Presentation. On October 13, Johnson & Johnson reported third quarter fiscal 2020 earnings (period ended September 27, 2020) that beat consensus non-GAAP EPS estimates and consensus GAAP revenue estimates, though its GAAP EPS fell short of consensus estimates likely due to turbulence created by the ongoing coronavirus (‘COVID-19’) pandemic. Johnson & Johnson’s GAAP revenues were up 2% year-over-year last fiscal quarter while its GAAP gross margin stayed broadly flat at 66.9%. A sharp reduction in other expenses resulted in Johnson & Johnson’s GAAP net income more than doubling year-over-year in the fiscal third quarter. The company once again raised its full-year guidance for fiscal 2020 (boosting both its top- and bottom-line forecasts) during its latest earnings report, just as it did back during its fiscal second quarter earnings report. Stronger than expected performance at Johnson & Johnson’s ‘Medical Devices’ business operating segment was largely responsible for the guidance increase according to management commentary during the firm’s latest earnings call. We continue to include shares of Johnson & Johnson in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Sep 26, 2020

Update on Johnson & Johnson
Image Shown: An overview of Johnson & Johnson’s expectations for fiscal 2021 provided during its second quarter of fiscal 2020 earnings report. We continue to like shares of Johnson & Johnson as a top-weighted holding in our Dividend Growth Newsletter portfolio. Image Source: Johnson & Johnson – Second Quarter of Fiscal 2020 Earnings IR Presentation. Johnson & Johnson is a top-weighted holding in our Dividend Growth Newsletter portfolio, and we continue to be big fans of the healthcare and consumer staples giant. The company recently published some key updates that we wanted to draw our members’ attention towards. Before we begin, please note that Johnson & Johnson is near the front of the pack when it comes to developing a potential coronavirus (‘COVID-19’) vaccine. Should Johnson & Johnson prove successful, global health authorities would be better able to combat the severity of the COVID-19 pandemic.

Aug 20, 2020

Johnson & Johnson Buys Momenta Pharmaceuticals
Image Source: Johnson & Johnson – Second Quarter of Fiscal 2020 IR Earnings Presentation. On August 19, Johnson & Johnson announced it was acquiring Momenta Pharmaceuticals for $52.50 per share in cash through a deal worth $6.5 billion (or $6.1 billion when including Momenta Pharmaceuticals’ net cash position). At the end of June 2020, Momenta Pharmaceuticals had ~$0.45 billion in cash and cash equivalents on hand with no debt on the books. We include shares of JNJ as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.