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Latest Valuentum Commentary
Dec 5, 2019
Best Buy’s Rebound Continues
Image Shown: Best Buy Co Inc has staged an impressive rebound over the past few years. This rebound was aided by significant investments in its digital presence, recognizing the core markets Best Buy wanted to target, and ultimately comparable store sales growth. On November 26, Best Buy reported third quarter earnings for its fiscal 2020 (three month period ended November 2, 2019) that beat both top- and bottom-line consensus estimates. Even better, Best Buy raised its guidance for fiscal 2020, largely on the back of stronger than expected same-store sales growth. Best Buy’s update helped send shares of BBY over our fair value estimate of $76 per share, and if this outperformance is sustained, the retailer may march towards the upper end of our fair value range estimate (which currently sits at $95 per share). Shares of BBY yield 2.5% as of this writing, and we like the firm’s dividend growth prospects. However, we caution that Best Buy remains very exposed to the US-China trade war, and we don’t include shares of BBY in our newsletter portfolios in large part due to the downside risks exogenous forces impose.
Nov 22, 2019
Dividend Growth Newsletter Portfolio Holding Microsoft Secures a Big Win
Image Shown: Shares of Microsoft Corporation continue to make new highs and we think MSFT may test the upper end of our fair value range given the company’s improving growth outlook. Shares of Dividend Growth Newsletter portfolio holding Microsoft continue to climb higher. We think shares could test the upper end of our fair value estimate range, which currently sits at $166 per share, comfortably above where Microsoft’s stock is trading at as of this writing (~$149 per share). Recent events have augmented the company’s free cash flow potential, with an eye towards the Joint Enterprise Defense Infrastructure (‘JEDI’) contract win. Shares of MSFT yield ~1.4% as of this writing.
Nov 16, 2019
Walmart Earnings Report Indicates US Consumer Still Strong
Image Shown: Shares of Walmart Inc have performed quite well so far in 2019. That’s arguably due to the ongoing strength of the US consumer and the significant investments Walmart has made into expanding its domestic grocery e-commerce offerings. There’s a lot of talk of recession right now, but as Walmart’s latest quarterly results show, the US consumer remains resilient. A combination of historically low unemployment rates and modest wage growth in the US has created a bulwark against exogenous shocks, with an eye towards the economic slowdown currently going on in the Eurozone and East Asia. We’ll see how long this paradigm can last. We aren’t interested in adding Walmart to any of our newsletter portfolios at this time, as shares of WMT already trade near the top end of our fair value estimate range (which sits at $119 per share). Shares of WMT yield 1.8% as of this writing. We continue to like the current holdings in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.
Nov 3, 2019
Our Reports on Stocks in the Internet Content and Catalog Retail Industry
Image Source: Robert Scoble. Our reports on stocks in the Internet Content and Catalog Retail industry can be found in this article. Reports include AMZN, BABA, BKNG, EBAY, EXPE, GRPN, IAC, OSTK, QRTEA, STMP.
Oct 25, 2019
Amazon Contends with Rising Operating Expenses and Shrinking Gross Margins
Image Shown: Shares of Amazon Inc have stumbled so far in 2019 as the headwinds from rising tariffs, largely a product of the US-China trade war, combined with a competitive cloud computing landscape put downward pressure on its profitability levels. Amazon reported third quarter 2019 earnings after the market close on Thursday October 24 that underwhelmed investor expectations and saw shares plummet after-hours. However, shares of AMZN recovered somewhat throughout the trading session on Friday October 25. We don’t include Amazon in our Best Ideas Newsletter portfolio due in part to its high levels of operating leverage. Small changes in one’s valuation assumptions generally cause large swings in the intrinsic value estimates of a company like Amazon. We like Amazon’s long-term free cash flow generating potential, and our fair value estimate stands at $2,000 per share, but we are still staying away from the company for now. Amazon would have to be heavily discounted relative to the low end of our fair value estimate range (which stands at $1,500 per share as of this writing) before we could get interested in the name as a potential newsletter portfolio addition.
Oct 23, 2019
Netflix Continues to Grow Paying Subscriber Count, Free Cash Flows Elusive for Now
Image Shown: Netflix Inc continues to grow its global net subscriber count as it pushes deeper into overseas markets and fends off rising competitive threats. Image Source: Netflix Inc – Third quarter 2019 IR presentation. While we doubt Netflix will generate meaningful free cash flows in the short-term given its large content investments and marketing spend, we think the company’s longer term trajectory is quite promising. Competitive pressures are building, however, and while growth ensues at the firm, we aren’t interested in shares of NFLX given its wide fair value estimate range (small changes in Netflix’s trajectory can have an outsized influence on its intrinsic value). That said, we see the company being able to stay a leader in the streaming race.
Oct 12, 2019
ICYMI: Interview with Valuentum's President Brian M. Nelson, CFA
Catch up with Valuentum's President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles.
Oct 9, 2019
Oracle Makes a Big Push Into the Cloud
Image Source: Oracle Corporation – September 2019 IR Presentation. On Monday October 7, Reuters reported that Oracle Corporation planned to hire an additional ~2,000 workers to support the tech giant’s cloud expansion strategy. These new jobs would be centered around San Francisco, Seattle, and India. We continue to like Oracle as a holding in our Dividend Growth Newsletter portfolio and are excited to see how its push into new international cloud computing markets will pan out. Our fair value estimate stands at $55 per share, roughly where ORCL is trading at as of this writing, with the top end of our fair value estimate range sitting at $66 per share (Oracle could test the upper bounds of our range should its cloud computing growth story pick up steam).
Sep 23, 2019
Empirical Support for Porter’s “Gospel,” Plus Comments on the “Head Fake” Rotation
“Let’s be very clear: There is strong empirical quantitative evidence that the price-to-fair value equation (“factor”) is predictive of returns, which is what matters for value investors, and in Morningstar’s case, the moat assessment is just part of that overarching conclusion (fair value estimate). Researchers continue to attack the moat “factor” on grounds that don’t make any sense, in my view, and are cherry-picking parameters to assess value investing.” – Brian Nelson, CFA
Sep 19, 2019
FedEx Bemoans Trade Wars and Issues Weak Guidance, Shares Get Crushed
Image Source: FedEx Corp -- IR Presentation. Global logistics and shipping giant FedEx Corp reported first-quarter earnings for its fiscal 2020 (ended August 31) on September 17 that underwhelmed, sending shares sharply lower (down almost 13%) on September 18. As a capital intensive business operating in a cyclical industry, FedEx is stuck in a bind. Either pursue its drive for greater efficiency, greater scale, and (in theory) greater profits in the future while acknowledging that significant headwinds in the short- to medium-term will pressure free cash flows at a time of significant capital investment, or attempt to scale back which hollows out the core of management’s capital allocation strategy. Please note FedEx’s future aircraft purchase commitments make cutting capital expenditures by a meaningful amount a significantly harder task, reducing its financial flexibility. Management has opted to push forward into the fray. We are remaining firmly away from FedEx at this time.
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The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Nelson Exclusive publication, and any reports, articles and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. The sources of the data used on this website are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor and does not offer brokerage or investment banking services. Valuentum, its employees, and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.