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Latest Valuentum Commentary
Sep 22, 2020
How Big Is Your "Too Hard" Bucket?
Image Source: Christian Schnettelker. In investing, it's okay to admit that there are some things that investors can't know. It's not a poor reflection of one's analytical ability or a possible shortcoming of one's experience, but rather quite the contrary: Understanding and accepting that some things are "unknowable" is a sign of the quality of one's judgment. Quite simply, certain critical components of the equity evaluation process are more "unknowable" than others. The intelligent investor recognizes the variance (fair value estimate ranges) and the magnitude of the "unknowable" between companies and generally tries to identify entities that have the least "unknowable" characteristics as possible or situations where the "unknowable" might actually be weighted in their favor (an asymmetric fair value distribution).
Sep 16, 2020
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, in most cases. On the other hand, enterprise valuation, or the process required to answer the second set of 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 while baiting us into value traps.
Sep 14, 2020
The Role of Luck in Investing and How To Think About It
Image: EpicTop10.com. For every Amazon that made it, there are hundreds, maybe thousands, from the dot-com era that didn't. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla, there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. For every streaming enterprise like Netflix, there is a Napster that failed. Most of us probably don't even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet, there's an AltaVista or Netscape. For every Apple, there is a Palm or Blackberry. Who remembers how popular the Palm Pilot and Blackberry were? How about the Motorola Razr? For every Facebook, there is a Myspace or Friendster. As investors, we underestimate the role of luck in a company's long-term success. In February 2000, a month before the dot-com market crash, a fledgling Amazon raised $672 million in convertible notes to European investors. If the company hadn't done so, there'd likely be no Amazon today, and one of the wealthiest men in the world, Jeff Bezos, might have just been a mere footnote in stock market history. Amazon would have been insolvent in 2001-2002 just like many of its other dot-com peers.
Sep 11, 2020
Oracle’s Transformation Continues
Image Shown: Shares of Dividend Growth Newsletter portfolio holding Oracle Corporation are on an upward trajectory after the tech giant reported that its strategic transition towards cloud-based offerings was going well during its latest earnings report. On September 10, Oracle Corporation reported first quarter fiscal 2021 earnings (period ended August 31, 2020) and we liked what we saw. In constant currency terms, the company’s ‘cloud services and license support’ and ‘cloud license and on-premise license’ segments reported year-over-year sales growth of 2% and 8%, respectively. We appreciate that Oracle’s cloud-oriented businesses are finally starting to gain some real traction in this lucrative and hypercompetitive market. Additionally, Oracle’s strong performance occurred in the face of the ongoing coronavirus (‘COVID-19’) pandemic, highlighting the resilience of its business model and the company’s ability to rise to the occasion.
Sep 11, 2020
Thinking Slow: 3 Research Blind Spots That Changed the Investment World
Image Source: EpicTop10.com. We have to be on high alert about how our minds work. PBS is premiering a four-part series examining about how easily our minds are being hacked, and why it is so important to "think slow." Tune in (5). When it comes to the active versus passive debate, does the analysis suffer from parameter risk? With respect to empirical, evidence-based analysis, does the analysis have the entire construct wrong? When it comes to short-cut multiples, are we falling into the behavioral trap of thinking on autopilot? I hope that you found this article helpful, and don't let your mind get hacked!
Sep 10, 2020
Good News for Microsoft
Image Source: Microsoft Corporation – Fourth Quarter of Fiscal 2020 IR PowerPoint Presentation. Microsoft offers investors a combination of income growth and capital appreciation upside. Shares of MSFT yield ~1.0% as of this writing and given its large net cash position and high quality cash flow profile, we see room for Microsoft to push through annual double-digit (per share) dividend increases over the coming years. Our fair value estimate for Microsoft sits at $216 per share (above where shares are trading at as of this writing) with room for upside as the top end of our fair value estimate ranges sit at $259 per share.
Sep 9, 2020
Our Thoughts on the Widespread Launch of 5G Services
Image Shown: The evolution of wireless networks and telecommunications technology over the years. Image Source: Intel Corporation – November 2019 State of 5G Presentation. The rollout of 5G telecommunication networks is upon us and we want to draw our members' attention to some of the key companies with meaningful exposure to this space. Many are excited about what opportunities 5G technology could enable. To ride out the ongoing coronavirus (‘COVID-19’) pandemic we prefer large-cap tech companies with pristine balance sheets, quality cash flow profiles, and firms whose growth outlooks are underpinned by secular growth tailwinds. Between Broadcom and Qualcomm, we are keeping a closer eye on Qualcomm given its more manageable net debt load and the company’s aforementioned near-term catalysts.
Sep 8, 2020
The Most Important Thing: You
Research publisher Valuentum will continue to offer members great ideas, fantastic commentary, and wonderful newsletters and reports, but Pigeon Oak's mission will be to offer clients peace of mind with advice tailored to their goals and risk tolerances. Pigeon Oak will also offer several strategies for financial advisors and institutions. Please stay tuned in the coming months for more information on how I can meet your financial needs at Pigeon Oak Capital Management, LLC.
Sep 3, 2020
3 Lessons in Portfolio Management Over 10 Years
Image Source: http://www.epictop10.com/. "When I left as director in the equity and credit department at Morningstar in 2011, I thought I knew a whole heck of a lot about investing. I felt like I was one in the top 5-10 in the world as it relates to the category of practical knowledge of enterprise valuation (maybe include Koller at McKinsey, Mauboussin at Counterpoint, and Damadoran at Stern on this list). After all, I oversaw the valuation infrastructure of a department that used the process extensively, and the firm was among just a few that used enterprise valuation systematically. Then, at Valuentum, our small team would go on to build/update 20,000+ more enterprise valuation models. There can always be someone else out there, of course, but I don't think anybody has worked within the DCF model as much as I have across so many different companies. That said, through the past near-10 years managing Valuentum's simulated newsletter portfolios, I've also learned a number of things to become an even better portfolio manager." -- Brian Nelson, CFA
Sep 3, 2020
Update: Frequently Asked Questions About Valuentum Securities, Inc.
We address a number of questions from both subscribers and visitors to our site.
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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.