Valuentum Exclusive Analysis for the Discerning Investor

In The News: Hurricane Florence, Tariffs and Capital Spending Delays, Kroger and Big Tobacco on the Move
Let’s take a look at some of the top stories across the market, including the impact tariffs are having on capital spending plans and bottom lines and recent developments in big tobacco.

Aug 13, 2018

The Berkshire Breakout
Image shown: Berkshire Hathaway's shares have broken out following the release of its second-quarter 2018 results. We continue to believe Berkshire Hathaway belongs in the simulated Best Ideas Newsletter portfolio. Warren Buffett and Charlie Munger have more flexibility to pursue share buybacks, and we’d be flat-out surprised if Berkshire were to buy Southwest outright. Berkshire’s cash balance continues to grow, and we think a stake in Facebook might be the best opportunity for a part of the equity security allocation.

Jun 28, 2018

Amazon: The Destroyer of Other Companies’ Profits
Image Source: Victor. Amazon is stepping into the pharmacy business with the purchase of online pharmacy start-up PillPack. The market is implying the move will prove to be more than just a headache for those operating in the drug store/pharmacy and drug-distributor complex. Whether the impact will be significantly material in the coming years remains to be seen, but it’s a big directional negative for impacted parties.

May 25, 2018

CVS Health Story Unchanged; Still Okay with Its Removal
Image Source: Mike Mozart. CVS Health continues to face long-term threats to its business, and relatively weak near-term performance expectations have done little to inspire confidence. The company’s long-term debt load has exploded as it prepares to acquire Aetna, and we don’t expect the company to bounce back onto our radar given the materially increased financial leverage amidst other challenges.

Apr 5, 2018

Walgreens Boots Alliance Remains at the Crossroads of a Rapidly-Evolving Healthcare Landscape
Image Source: Walgreens 2Q 2018 Earnings Release. The evolving healthcare landscape has been dealing with the threat of a disruptive new competitor entering the market and considerable political risk. Though the need for healthcare remains impervious to economic forces, a clear deflationary trend has descended on the industry that has affected many of the well-entrenched participants. Let’s examine Walgreens Boots Alliance for clues that a shift in sentiment may have occurred in this well known, yet beleaguered sector.

Mar 15, 2018

Cigna, Express, and the Unwinding of the PBM Market
Image Source: Cigna. Given its track record of creative destruction, when Amazon plans to enter a particular line of business, it presents an ominous threat to incumbents. What is often overlooked, too, is that Amazon is more than willing to try new verticals—if they prove promising, additional assets will be devoted to the new line of business, often with fawning media coverage. If Amazon is unsuccessful in its endeavor, however, then it seems as though it will “fail fast” and shut down the project and move on. We found the recent announcement of a joint venture to tackle the healthcare industry as particularly noteworthy.

Feb 27, 2018

Buffett’s Berkshire, Corporate Buybacks on Pace for Record; Lithium, Steel Prices on the Move
Image Source: Berkshire Hathaway, Shareholder Letter (2017). “Fifteen common stock investments at year end that had the largest market value.” “The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.” – Warren Buffett, Shareholder Letter (2017)

Feb 20, 2018

The Future for Independent Advisors and Planners Is…Stock Selection? What?
Image Source: 401K Calculator. "The annual fee of 0.04% to invest in an index ETF, for example, on a portfolio of $250,000 might run about $100/year. Over 25 years, assuming no compounding, that’s $2,500. Setting up a diversified portfolio of 40-50 or so blue-chip, moaty, dividend-paying stocks might cost $200-$300 in total over 25 years, assuming little-to-no turnover, set up through a discount broker. Spread out over dozens of clients, you’re talking real savings for clients."

Feb 15, 2018

Cisco Rallies Big Time!
Image shown: Performance of the S&P 500 (SPY) since August 2017. As US equities continue their newly-found volatility, let’s take a look at some recent earnings reports and other developments around the markets. Cisco, the workhorse of both simulated newsletter portfolios, put up a fantastic report and upped its dividend. Berkshire continues to love Apple, and we maintain the view that the 10-year Treasury rate may be the greatest determinant of how well stocks perform in the coming decades. Airlines, garbage stocks, the “gas tax,” and more.

Feb 8, 2018

Rising Risk Free Rates Threatening Market, Removing CVS and Hanesbrands
The most important variable to keep your eye on, the 10-year Treasury, is rising, and the long-term implications on equity values could be considerable. We don’t think the moves thus far have been too disruptive, but continued concerns over US tax receipts and infrastructure/defense spending could send sovereign yields roaring higher. As fourth-quarter earnings season marches on, let’s take a look at some meaningful recent quarterly reports. We’re also shedding two companies from the simulated newsletter portfolios.

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Valuentum Exclusive Analysis for the Discerning Investor