Valuentum Exclusive Analysis for the Discerning Investor

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Oct 4, 2021

Markets Look Vulnerable, Adding "Protection"
The S&P 500 (SPY) and corresponding 50-day (green), 100-day (purple), and 200-day moving averages (red). We expect the SPY may have to "correct" to the 200-day moving average, or about $412-$413 per share before it finds its footing. Self-inflicted wounds the past several weeks have altered the market's sentiment for the worse, and we don't think the selling is done yet.

Sep 22, 2021

Facebook’s Stock Sell Off Explained
Image: Facebook's free cash flow generation has been resilient in the face of prior iOS updates, and we think it will continue to grow rapidly in the future. Source: Facebook. We never like to see a 10-rated stock sell off, even if it’s up more than 30% so far this year and up over 140% since it registered a 10 on the Valuentum Buying Index in January 2019, but that’s what we’ve been closely following with Facebook. The stock experienced similar selling pressure during the summer of 2018, and while we’re huge fans of this underpriced tech giant in the long run, we think shares may face more selling pressure in the near term. Nonetheless, we’re reiterating its 10-rating on the Valuentum Buying Index and our $515 fair value estimate. Shares closed Friday at ~$353 each.

Sep 13, 2021

The Investment Case for More Gender Diversity
Image: The Impact Shares' YWCA Women’s Empowerment ETF (WOMN) has trounced the S&P 500 since inception, while the SPDR SSGA Gender Diversity Index ETF (SHE) has bested the quantitatively-hailed small cap value ETF over the same time period. There has been a plethora of research over the years regarding the value of diversity on teams, in corporate boardrooms, and across asset management. One of the forms of diversity is gender diversity. It has been documented that diverse teams create more innovative ideas and creativity, which can serve as quite an advantage in industries where margins are slim, or there are few barriers to entry. While a 2019 study summarized in the Harvard Business Review indicated that the value of gender diversity is highly context-dependent and tends to have the greatest benefit where it is already valued, the corporate environment, and arguably the stock market, itself, are a few of those areas where value has been demonstrated.

Sep 7, 2021

Update on Best Idea Alphabet’s Self-Driving Taxi Upside
Image Shown: Shares of Alphabet Inc Class C have boomed higher year-to-date as of early-September 2021. We see ample room for additional upside. We are huge fans of Alphabet and include Alphabet Class C shares (ticker: GOOG) as a top-weighted holding in the Best Ideas Newsletter portfolio. Our fair value estimate for Alphabet Class C shares sits at $3,500 per share, well above where GOOG is trading at as of this writing. Should Waymo, the company's self-driving unit, one day get commercialized, that upside is purely incremental to our fair value estimate, highlighting why we are such huge fans of the digital advertising behemoth.

Aug 22, 2021

Kohl’s and Macy’s Bounce Back But Long Term Remains Ominous
Image Source: Kohl’s Corporation – Second Quarter of Fiscal 2021 IR Earnings Presentation. In this article, we cover the recent earnings reports of two US department stores as the domestic economy steadily emerges from the worst of the coronavirus (‘COVID-19’) pandemic, keeping headwinds from the “delta” variant in mind. The department store business model continues to lose share from e-commerce and specialty retailers. Amazon is also considering opening large physical retail operations that would largely resemble department stores, starting with locations in California and Ohio. The long term remains ominous for department-store retail, in our view.

Jul 30, 2021

Amazon Leads Market Lower, Free Cash Flow Disappoints
Image: Amazon's free cash flow performance was hugely disappointing during its second quarter of 2021. We were disappointed in Amazon’s mixed second-quarter report released after the bell July 29. The e-commerce and web services giant missed revenue expectations, while the company’s bottom-line earnings-per-share number of $15.12 came in better than the consensus figure. We find it highly ironical that Amazon's shares are selling off on a hugely profitable quarter when years ago the Street was complaining about it bleeding red ink. Shares of Amazon are trading down to about our fair value estimate of ~$3,343 at the time of this writing; the sell-off may be deserved.

Jul 21, 2021

Netflix’s Free Cash Flow Remains Poor While Competition Is Intensifying
Image shown: Netflix continues to experience robust growth and improvements in its operating margin, but free cash flow remains weak. Image source: Netflix’s second-quarter earnings shareholder letter. Without a doubt, Netflix has been one of the best-performing stocks the past decade, but we have a hard time making the case for the firm, especially in light of the much better balance sheets, competitive profiles and free cash flow generation at Facebook, Apple, and Alphabet. Our fair value estimate for Netflix stands just shy of $500, and we think the company’s shares will be rangebound until the next catalyst, which we think will be a negative one, given heightened competition. We remain on the sidelines.

Jun 22, 2021

Kroger Raises Guidance After Solid Earnings Report
Image Source: Kroger Co – First Quarter of Fiscal 2021 IR Earnings Presentation. Grocers are facing tough year-over-year comparisons due to the pantry stockpiling dynamic seen in 2020 in the wake of the coronavirus (‘COVID-19’) pandemic, though demand for consumer staples products remains healthy. On June 17, Kroger Co reported first quarter earnings for fiscal 2021 (period ended May 22, 2021) that beat both consensus top- and bottom-line estimates. Kroger’s management team also noted how the grocer views the current inflationary landscape, which we will cover in this note.

Jun 16, 2021

Best Idea Alphabet on the Move!
Image Shown: Shares of Alphabet Inc Class C have been on a nice upward climb over the past several months with ample room for additional capital appreciation upside, in our view. We include shares of GOOG as a top-weighted idea in the Best Ideas Newsletter portfolio. Companies with real pricing power are well-positioned to navigate headwinds arising from inflation pressures as cost increases can be passed along to the consumer and then some (i.e. price increases above inflation). Many large cap tech firms fit this bill including one of our favorite ideas Alphabet Inc, with an eye towards the pricing strength seen at its enormous digital advertising business. We include shares of Alphabet Class C (ticker: GOOG) as a top-weighted idea in the Best Ideas Newsletter portfolio. In this article, we will highlight why we view Alphabet’s growth outlook and capital appreciation potential quite favorably in the face of major hurdles.

Jun 1, 2021

ICYMI -- Video: Exclusive 2020 -- Furthering the Financial Discipline
In this 40+ minute video jam-packed with must-watch content, Valuentum's President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He'll talk about what companies Valuentum likes and why, and which areas he's avoiding. This and more in Valuentum's 2020 Exclusive conference call.