Valuentum Exclusive Analysis for the Discerning Investor

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Sep 4, 2023

Report Updates -- Did You Throw the Baby Out with the Bathwater?
The markets are finally making sense again, and we remain huge fans of big cap tech and the stylistic area of large cap growth. Though entities are starting to register high ratings on the Valuentum Buying Index, we’re not pulling the trigger on either Alibaba or Korn/Ferry in light of the tremendous risks related to U.S-China relations for Alibaba and the lack of fundamental catalysts for Korn/Ferry. That said, should these firms’ technical and momentum indicators shape up, their equity prices could really catch a bid, in our view. The newsletter portfolios continue to deliver in a big way, not only generating outperformance relative to the market-cap weighted S&P 500 during 2022, but also positioning well for the boom in big cap tech and the stylistic area of large cap growth that has materialized in 2023. We’ve said it before, and we’ll say it again: Don’t throw the baby out with the bathwater.

Jul 11, 2023

An Important Measure of Leverage for Dividend-Growth and Income-Oriented Shareholders, One That Is Dividend-Adjusted
As more and more investors rely on company dividends for income, dividends, in our view, have become more debt-like commitments in nature, especially from the perspective of dividend-growth or income-oriented shareholders. Years ago, we rolled out a measure of financial leverage that considers both the company’s debt and the present value of its future expected cash dividend obligations, which, in the eyes of die-hard dividend-growth or income-oriented shareholders, may be implicitly assumed to be debt-like commitments in substance. We think this leverage ratio can be used in conjunction with the Dividend Cushion ratio to gain additional insight into the dividend-paying financial health of an entity.

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.

May 23, 2023

Call Me Unconcerned
Image: Large cap growth has dominated returns the past five years. The Best Ideas Newsletter portfolio continues to have significant exposure to this area. We’re taking it slow this time of year. With the area of large cap growth nearly doubling since the beginning of 2018, trouncing the return of the broader market, dividend growth strategies, the area of small cap value and general REIT indices, it’s just hard to find much wrong with staying pat. The proliferation of artificial intelligence will likely propel big cap tech and large cap growth to new highs, while small cap value may continue to be weighed down by the banks--and dividend-oriented strategies may face continued pressure from rising interest rates and tired real estate markets. Things were a bit murky during 2022, but thanks for keeping the faith.

May 22, 2023

Nice! -- NASDAQ-100 Follows Through on Breakout
Image: NASDAQ-100 breaks through August 2022 resistance.

Mar 24, 2023

How the Payment of a Dividend Impacts Intrinsic Value Estimation
"Dividends are a transfer of cash to the shareholders that the shareholders already owned."In this purely educational article, using historical data from 3M, let’s walk through the mechanics of how the payment of a dividend impacts the intrinsic value of a company. The takeaways may be somewhat counterintuitive but are nonetheless very important for members to understand.

Mar 14, 2023

Brain Teaser - Reflexive versus Reflective
Image: Amy Leonard. Valuation multiples tend to trigger the reflexive side of our brain, and we process the multiples through anchoring. On the other hand, enterprise valuation, or the process required to answer the questions (in this article) correctly, shows that our reflexive process can be quite incorrect at times. In fact, cognitive biases such as anchoring can completely trip us up into missing out on truly undervalued companies that may have high P/E ratios while baiting us into value traps with low P/E ratios.

Jan 24, 2023

Manpower Group’s Massive Free Cash Flow Yield Facing Some Pressures; Shares Have Dividend Yield of ~3%
Image: Manpower Group is a tremendous generator of free cash flow, though performance can be lumpy at times. Image Source: Manpower Group. Manpower Group has been acquisitive and is facing increased competition of late, but the company’s financials, particularly its free cash flow generation, remain quite attractive. The firm continues to buy back stock at a nice clip, too, as it pays its attractive semi-annual dividend of $1.36 per share. Though its free cash flow yield will face some pressure using pending 2022 results, Manpower Group could be an idea for investors seeking equities with outsized free cash flow yields in this market, in our view. We expect to fine-tune our assumptions within our discounted cash-flow model once the company’s fourth-quarter results are released in the coming weeks, but very few non-energy firms have such a strong normalized free cash flow yield as that of Manpower Group.

Jan 5, 2023

The Fed ‘Can’t Stop, Won’t Stop’ Until Labor Market Feels More Pain
Image: Prices for private label brands at Aldi are considerably lower than those of branded products. The consumer staples sector, however, remains fully-priced with a 21+ forward earnings multiple, and many constituents hold large net debt positions. We believe the sticking point for the Fed is not groceries or gasoline prices, but rather the labor markets, which remain very strong, despite layoffs. Image Source: Valuentum. We maintain our view that markets will remain challenged for at least the first quarter of 2023, and we expect the S&P 500 to bottom around 3,400 based purely on a technical evaluation of the ongoing downtrend. The labor market remains too strong for the Fed to stop rate hikes, as the primary concern for the Fed is not what inflation will do this year, but rather whether it will spike again in 2024. To truly stomp out inflation, the Fed needs to witness further weakening in the labor markets, as consumers have found ways to trade down to offset grocery inflation and as gas prices at the pump ease. We’re never happy to hear of layoffs, but an unemployment rate of 4.5%-5% may be the range required for the Fed to stop hiking, in our view. The last thing the Fed wants is to stop hiking too early, only for inflation to come roaring back in the quarters that follow the pause. The Fed is not thinking about year-over-year inflation numbers for 2023, in our view, but rather policies that will ensure that inflation rates of the past 12-18 months do not return in 2024-2025. They are playing the long-term game.

Jan 3, 2023

Our Reports on Stocks in the Technology Giants Industry
Our reports on stocks in the Technology Giants industry can be found in this article. Reports include META, AAPL, GOOG, AMZN, MSFT, CSCO, V, MA, PYPL, INTC, ORCL, QCOM, ADI, IBM, ADBE, NVDA, CRM, AMD, AVGO, BABA, BKNG, BIDU, TSM, TXN, EBAY, ADP, MU, KFY, MAN, KLAC, LRCX, AMAT.