Valuentum Exclusive Analysis for the Discerning Investor

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Jan 27, 2021

ALERT: Raising Cash in the Newsletter Portfolios
Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we're raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. For more conservative investors, the high end of this range may even be larger, especially considering the vast "gains" from the March 2020 bottom and the increased systemic risks arising from price-agnostic trading (read Value Trap). The individual holdings will be reduced in proportion to arrive at the new targeted cash weighting in the respective simulated newsletter portfolios. The High Yield Dividend Newsletter and Dividend Growth Newsletter are scheduled for release February 1. We'll have more to say soon.

Jan 26, 2021

Recent Fair Value Estimate Changes
Let's cover a few recent fair value estimate changes in this note: APD, F, GM, EOG, LMT, CVS.

Nov 19, 2020

Boeing’s Financials Are Absolutely Frightening
The reality is that Boeing’s financials are still pretty scary. During the first nine months of 2020, the company burned through an incredible $15.4 billion in free cash flow, even as it cut capital spending by a few hundred million. As of the end of the third quarter of 2020, its total consolidated debt now stands at $61 billion, with total cash and marketable securities of $27.1 billion. This compares to total consolidated debt of $24.7 billion and total cash and marketable securities of $10.9 billion, as of the end of the third quarter of 2019. The grounding of the 737 MAX and the outbreak of COVID-19 have combined to be an absolute wrecking ball to Boeing’s financials, and it may take a very, very long time before things start looking better on the books. S&P, Moody’s and Fitch still give the company investment-grade credit ratings (BBB-/Baa2/BBB-), but we’re not sure the aerospace giant deserves them. Here’s what Fitch noted October 2020: “…many of the company's quantitative rating factors will be inconsistent with the 'BBB' category for three years (2019-2021) and into 2022.” It’s probably fair to say that Boeing’s debt should be rated junk, but that would cause some severe reverberations in the credit markets, in our view.

Nov 4, 2020

We Expect to Raise Our Fair Value Estimate of Honeywell
Image: Honeywell’s Third Quarter 2020 Earnings Release Slide Deck. We may have been a bit too conservative with our latest fair value estimate change of Honeywell in light of our expectations of the impact of COVID-19 on its business. Heading into the COVID-19 crash, our fair value estimate for Honeywell had been north of $150, and we expect to revise it modestly higher than that mark upon the next update of our valuation model. In light of COVID-19, we plan to apply a wider fair value estimate range, too, and that should put shares as fairly valued. Honeywell is our favorite industrial idea, but it remains on the bench in favor of better-positioned net-cash-rich powerhouses currently in the newsletter portfolios.

Oct 21, 2020

Lockheed Martin Beats Expectations and Raises Guidance Yet Again
Image Shown: Lockheed Martin continued to grow its revenues and segment operating profit in the third quarter of fiscal 2020. Image Source: Lockheed Martin Corporation – Third Quarter of Fiscal 2020 IR Earnings Presentation. On October 20, Lockheed Martin Corp reported third quarter earnings for fiscal 2020 (period ended September 27, 2020) that beat consensus top- and bottom-line estimates. Lockheed Martin’s GAAP sales rose by 9% year-over-year, hitting $16.5 billion, in part due to the company increasing its F-35 aircraft deliveries to 31 in the fiscal third quarter from 28 in the same quarter last fiscal year. Additionally, all four of Lockheed Martin’s core business segments (‘Aeronautics,’ ‘Missiles and Fire Control,’ ‘Rotary and Mission Systems’ and ‘Space’) reported year-over-year sales growth. Lockheed Martin’s diluted EPS from continuing operations rose by over 10% year-over-year last fiscal quarter, though its GAAP diluted EPS was held down (still grew by 7% year-over-year) by a loss from its discounted operations relating to the resolution of a tax dispute stemming from a 2016 divestment.

Oct 8, 2020

Nelson: I'm Not Worried About This Market
Image Source: The White House. President Donald J. Trump listens as U.S. Surgeon General Jerome Adams delivers remarks and urges citizens to wear masks in public at a coronavirus (COVID-19) update briefing. All things considered, not much has changed since our last update. I think the newsletter portfolios--Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio--are well-positioned for this market environment, our new options idea generation has been great, the Exclusive ideas have had tremendous success rates (we just closed another two winners recently), and we continue to add tremendous value in providing our work in full transparency for readers. Thanks for tuning in.

Oct 6, 2020

Third-Level Thinking and "Keynesian Convergence"
Image: The analytical process of the Valuentum Buying Index rating system. At Valuentum, we seek to identify strong, competitively-advantaged companies that are underpriced [with solid cash-based sources of intrinsic value (net cash, strong expected free cash flows)] whose share prices are either 1) also advancing, 2) have strong relative pricing strength, or 3) have just started to begin to advance toward an intrinsic value estimate (with a nice growing dividend to boot, where applicable). Third-level thinking is our foundation at Valuentum, and it continues to serve investors well.

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.
Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports and dividend reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information. We address a number of questions from both subscribers and visitors to our site.

Sep 1, 2020

Valuentum Website Overview
Overview of the key features of www.valuentum.com (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information.