Valuentum Exclusive Analysis for the Discerning Investor

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Aug 4, 2020

Apple Surges Higher Ahead of Stock Split
Image Shown: Shares of Apple Inc have staged an impressive rally since bouncing off their March 2020 lows, with AAPL up ~46% year-to-date as of this writing on August 3. We added shares of Apple back to the Best Ideas Newsletter and Dividend Growth Newsletter portfolios on June 12, 2020. Later on this August, Apple intends on completing a four-for-one stock split. We added Apple back to both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios on June 12, 2020 (link here). Companies that are supported by secular growth tailwinds and pristine balance sheets, such as Apple, are well-positioned to deal with the ongoing coronavirus (‘COVID-19’) pandemic. Shares of AAPL have surged significantly higher since mid-June and are now trading well above the top end of our fair value range as of this writing, but we want to stress here that we like to let our winners run. It is not until after a firm’s technicals turn against it that we would consider removing shares of that firm from our newsletter portfolios. Given its stellar third quarter fiscal 2020 earnings report (period ended June 27, 2020) published on July 27, shares of Apple may have room to run further still.

Jul 31, 2020

Our Judgment for the Long Haul
As you're probably aware by now, Apple, Alphabet, and Facebook--key positions in the newsletter portfolios--put up monster second-quarter results July 30, respectively. We'll be addressing the quarterly reports more in depth on our website in the coming days, but Apple is now a ~$410 per share stock, trading up 6%+ on the session, and now Facebook is trading over $250, up 7%+ on the session. Now at all-time highs, Facebook has been one of the top weightings in the Best Ideas Newsletter portfolio for some time. Its poor performance during 2018 is now history! Alphabet, while facing some weakness today, hit all-time highs earlier this month.

Jul 28, 2020

AT&T Remains Free Cash Flow King, Though Deleveraging Efforts Are Getting Tougher
Image Shown: AT&T Inc continued to be a free cash flow cow last quarter, though the ongoing pandemic created headwinds for its various businesses. Image Source: AT&T Inc – Second Quarter of 2020 IR Earnings Presentation. The ongoing coronavirus (‘COVID-19’) pandemic has created some very serious headwinds for AT&T, but that did not stop the telecommunications and entertainment giant from being incredibly free cash flow positive last quarter. On July 23, AT&T reported its second quarter 2020 earnings report and we remain confident in the firm’s ability to keep making good on its dividend obligations going forward. Shares of T yield ~7.1% as of this writing, and we include shares of AT&T in our High Yield Dividend Newsletter portfolio.

Jul 24, 2020

Intel’s 7-nm Chips Behind Schedule, Free Cash Flows Remain Strong
Image Shown: Intel Corporation made waves on July 23 when it announced its 7-nm chips were well behind schedule. Image Source: Intel Corporation – Second Quarter Fiscal 2020 IR Earnings Presentation. On July 23, Intel Corp reported second quarter fiscal 2020 earnings (period ended June 27, 2020) that beat both consensus top- and bottom-line estimates. However, shares of INTC dropped during after hours trading that day due to Intel delaying the rollout of its 7-nanometer chips. The company offered full-year guidance for fiscal 2020 that indicated its growth trajectory was continuing in the face of the ongoing coronavirus (‘COVID-19’) pandemic, though investors were largely fixated on the delay of its 7-nm chip offerings.

Jul 23, 2020

Microsoft Closes Out Fiscal 2020
Image Shown: An overview of Microsoft Corporation’s financial performance during the fourth quarter of fiscal 2020. The company reported strong year-over-year revenue growth across its three main business segments. Image Source: Microsoft Corporation – Fourth Quarter Fiscal 2020 Earnings PowerPoint Presentation. On June 12, 2020, we added Microsoft Corp back to the Best Ideas Newsletter and the Dividend Growth Newsletter portfolios. We strongly appreciate Microsoft’s net cash position, high quality cash flow profile, and its long-term outlook, which is underpinned by secular growth tailwinds. On July 22, Microsoft posted fourth quarter fiscal 2020 (period ended June 30, 2020) that beat both consensus top- and bottom-line estimates, though its guidance for the current fiscal quarter was lighter than what analysts had expected. The top end of our fair value estimate range for Microsoft sits at $234 per share, indicating shares of MSFT have room to run further still after climbing ~34% year-to-date as of the end of normal trading hours on July 22 (before taking dividend considerations into account). Additionally, we give Microsoft “EXCELLENT” Dividend Growth and Dividend Safety ratings due to its promising payout growth outlook and stellar Dividend Cushion ratio of 3.9 (which factors in annual double-digit per share dividend increases over the coming fiscal years). Shares of MSFT yield ~1.0% as of this writing.

Jul 22, 2020

Second Quarter Earnings Roundup
The figure above shows the performance of the simulated Best Ideas Newsletter portfolio from inception May 17, 2011, through December 15, 2017, relative to its declared benchmark, the S&P 500 (SPY), on an apples-to-apples basis, with dividends collected but not reinvested for both the newsletter portfolio and the SPY, as reported in the monthly newsletter. The simulated Best Ideas Newsletter portfolio outperformed the S&P 500, including reinvested dividends in the benchmark, since inception (May 17, 2011) and since the inaugural release of the newsletter (July 13, 2011) through the end of the measurement period (December 15, 2017). The results are hypothetical and do not represent returns that an investor actually earned. Past results are not indicative of future performance.

Jul 22, 2020

IBM’s Cloud Transition Continues
Image Source: International Business Machines Corporation – 2019 Annual Report. On July 20, IBM reported second quarter 2020 earnings that beat both consensus top- and bottom-line estimates. Most of the market’s excitement centered on IBM’s ‘Cloud & Cognitive Software’ segment posting year-over-year revenue growth of ~3% in the second quarter while its company-wide GAAP revenue declined by ~5% year-over-year, though initial gains in IBM’s share price faded away during regular trading hours on July 21. In the earnings press release, IBM noted its “total cloud revenue” grew by 30% year-over-year last quarter. Shares of IBM are trading near their fair value estimate of $129 as of this writing, indicating that shares of IBM appear fairly valued.

Jul 9, 2020

Update on Valuentum's Research
The markets, especially the NASDAQ, have been powering ahead, and we maintain our bullish long-term stance on equities. As you're well aware, the stock market is not the economy, and stocks are long-duration financial instruments (i.e. forecasts about the long term impact the price today). Fed and Treasury actions have inflated the longer-duration components of intrinsic value, more than offsetting in most cases the implications of a weak economy/earnings in the near term.

Jun 26, 2020

Update on Dell Technologies and VMware
Image Source: VMware Inc – First Quarter Fiscal 2021 IR Earnings Presentation. Dell Technologies and VMware Inc are back in the news as the WSJ recently reported the former is considering spinning off its enormous equity stake in the latter. Back in September 2016, Dell completed its ~$67 billion cash-and-stock acquisition of EMC which gave Dell a controlling equity stake in VMware (and a mountain of net debt in the process). As of January 31, 2020, Dell owned approximately 80.9% of VMware’s outstanding equity. Dell can spin off its equity stake in VMware tax-free after a five-year waiting period, though Dell would need to wait until September 2021 before that could occur (given when the EMC deal closed).

Jun 25, 2020

Broadcom’s Financials Are Stabilizing
Image Source: Broadcom Inc – June 2020 IR Presentation. On June 4, Broadcom posted second-quarter earnings for fiscal 2020 (period ended May 3, 2020). Shares of AVGO are trading in the upper bound of our fair value estimate range and appear reasonably priced as of this writing considering the relatively favorable forward-guidance management offered for the fiscal third quarter. Though the ongoing coronavirus (‘COVID-19’) pandemic is negatively impacting Broadcom’s operations with an eye towards “challenges” at the firm’s supply chain, the company’s growing ‘Infrastructure software’ segment appears to be helping stabilize its financial performance. We give Broadcom a Dividend Cushion ratio of 1.0, earning the firm a “GOOD” Dividend Safety rating (these metrics factor in expectations that the firm will push through meaningful per share dividend growth over the coming fiscal years). While Broadcom carries a hefty net debt load, its business model is light on capital expenditures which allows for the firm to generate meaningful free cash flows. Shares of AVGO yield ~4.2% as of this writing.