Valuentum Exclusive Analysis for the Discerning Investor

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Oct 22, 2023

There Will Be Volatility
Image: An ETF tracking Russell 1000 "growth" stocks has outperformed an ETF tracking Russell 2000 "value" stocks since the beginning of 2021. To us, the market remains hypersensitive to almost every economic data point that hits the wires, and we’re just not going to play that game. The macro headlines and never-ending news flow are what many quant and algorithmic traders are trading on, and to a very large extent, for investors with a long-term horizon, these macro data points just don’t factor into the equation. When valuing equities, we’re always after mid-cycle expectations, not peak or trough performance, so our valuations implicitly embed a "normal" recession. Warren Buffett didn’t become a billionaire buying and selling on macro data points, and volatility is simply to be expected given the proliferation of price-agnostic trading these days. Instead of panicking over higher interest rates, we think investors should view the Fed’s work thus far as future potential dry powder to stimulate both the economy and the markets. Whenever you feel like stocks are no good, have a read of Warren Buffett’s classic piece written during the Great Financial Crisis, “Buy American. I Am.” To us, we still like stocks for the long run. Happy investing!

Oct 9, 2023

Investors Likely Overreacting to Long-Run Impact That Weight-Loss Drugs Will Have on Snack and Food Stocks
Image: Domino’s stock has slumped recently due to weakening same-store sales expansion and concerns that weight-loss drugs will have on snack and food demand. The American eater continues to fight the “battle of the bulge” as many seek improved lifestyles and the health benefits from losing weight and getting in shape. The healthcare industry is delivering on this front, too, with diabetes drugs from Novo Nordisk and Eli Lilly called GLP-1 agonists that also have weight-loss benefits. Though we applaud what looks to be a solution in part for the obesity epidemic that has overtaken the U.S., investors are growing concerned that food that snack and food stocks will see slackening demand.

Sep 20, 2023

ICYMI: Questions for Valuentum’s Brian Nelson
Valuentum's President Brian Nelson, CFA, answers your questions.

Jul 12, 2023

Domino’s Pizza Breaks Through Downtrend on Uber Eats and Postmates Deal
Image Source: Domino’s Pizza is up nearly 14% on a year-to-date basis during 2023, but the company’s shares haven’t done much over the past 52 weeks. On July 12, Domino’s Pizza announced that it had inked a new deal with Uber that would allow customers in the U.S. to order Domino’s food through the Uber Eats and Postmates apps with delivery provided by drivers of Domino’s and its franchisees. Domino’s Pizza continues to be a standout leader in digital initiatives across the restaurant arena, and the firm noted that the new agreement will open up Domino’s and its franchisees “to a new segment of customers and what (it) believes will be a meaningful amount of incremental delivery orders.” The high end of our fair value estimate of Domino’s stands at $450 per share.

May 30, 2023

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.

Apr 26, 2023

Chipotle Hits All-Time High, Microsoft Doesn’t Disappoint in Calendar First-Quarter 2023
Image: Ideas in the Best Ideas Newsletter portfolio are doing great! Shares of Chipotle are up ~45% so far in 2023, while shares of large cap growth giant Microsoft (orange) are up more than 20% year-to-date. Microsoft’s shares soared during the trading session April 26 thanks to strong third-quarter fiscal 2023 performance for the period ending March 31 led by its Azure cloud business segment, while Chipotle’s first-quarter 2023 report only provides more support for a higher intrinsic value estimate for shares.

Apr 18, 2023

Brief Take: Chart of Best Ideas Newsletter Portfolio Idea Chipotle Looks Beautiful!
Image: Chipotle’s shares have surged to a 52-week high. We continue to like the company’s long-term market opportunity. Chipotle’s shares have surged past the high end of our fair value estimate range, but we expect to take another look at our valuation model to reflect greater confidence in an established restaurant concept that has plans to more than double its current store count in the longer run. Younger millennials and Generation Z (born 1997-2012) generally did not grow up when Yum Brands’ Taco Bell dominated Mexican cuisine, and many prefer Chipotle hands down. It’s probable, in our view, that Chipotle’s long-term target of 7,000 restaurants may also be conservative. Readers should expect us to increase our fair value estimate of Chipotle upon the next report update.

Feb 22, 2023

Walmart Warns: “Prices Are Still High and There Is Considerable Pressure on the Consumer”
Image Source: Mike Mozart. Walmart’s outlook may very well be conservative, but its commentary certainly doesn’t bode well for many discretionary retailers and the broader economy. With the labor markets still strong and the producer price index still coming in hot, the Federal Reserve is not yet done raising rates. We expect the markets to test their uptrends and 200-day moving averages in the coming days to weeks, and if we break through these support levels to the downside, we won’t hesitate to “raise some cash” across the newsletter portfolios. When Walmart warns about the health of the consumer, we pay attention.

Feb 10, 2023

Dividend Increases/Decreases for the Week of February 10
Let's take a look at firms raising/lowering their dividends this week.

Feb 9, 2023

Chipotle’s Fourth Quarter 2022 Results Not Bad, Has Incredible Long-Term Unit Restaurant Potential
Image Source: Valuentum. Long term, Chipotle has plans to expand to 7,000 restaurants, up from nearly 3,200 restaurants at the end of 2022. The company still holds the wild card of expanding into the breakfast daypart, which we believe is a huge source of upside potential for the burrito maker, especially as it adds more drive-throughs across its restaurant portfolio. We continue to like shares.