Valuentum Exclusive Analysis for the Discerning Investor

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Oct 27, 2021

Digital Realty Boosts Guidance and Further Extends Growth Runway
Image Source: Digital Realty Trust Inc – Third Quarter of 2021 IR Earnings Presentation. On October 26, Digital Realty Trust posted third quarter 2021 earnings that beat both consensus top- and bottom-line estimates. The data center real estate investment trust (‘REIT’) saw its GAAP operating revenues come in at $1.1 billion (up 11% year-over-year) and its non-GAAP core funds from operations (‘FFO’) per share come in at $1.65 per share (up 7% year-over-year) last quarter. Digital Realty also increased its guidance in conjunction with its latest earnings report, which we appreciate, as that signals the REIT is growing confident that it will exit 2021 on a high note. When taking into consideration Digital Realty’s ability to tap capital markets at attractive rates (something we cover in this article), we give the REIT a “GOOD” Dividend Safety rating as its adjusted Dividend Cushion ratio is near parity at 0.7, which factors in expected dividend growth over the coming years. Additionally, we give Digital Realty a “GOOD” Dividend Safety rating, underpinned by its bright cash flow growth outlook. The top end of our fair value estimate range sits at $186 per share of DLR, well above where Digital Realty is trading at as of this writing.

Oct 7, 2021

IBM Provides Investors with a Major Update
Image Source: International Business Machines Corporation – October 2021 IR Presentation. While still a major enterprise, International Business Machines Corp is no longer the tech juggernaut it used to be and hasn’t been a leading tech company for over a decade. The company recognizes this and back in October 2020, IBM announced that it planned to “separate its Managed Infrastructure Services unit of its Global Technology Services division into a new public company” that will be called Kyndryl. By the end of 2021, this tax-free spinoff is expected to be complete (shares of Kyndryl will be spun off to IBM shareholders). In October 2021, IBM provided a major update to its shareholders covering its medium-term financial outlook, key operational updates, and what to expect going forward as it concerns its dividend policy, areas that we are going to cover in this article.

Oct 1, 2021

Best Idea Visa on the Rebound, Generating Gobs of Free Cash Flow
Image Shown: Visa Inc is a stellar free cash flow generator and is included as an idea in our Best Ideas Newsletter portfolio. Image Source: Visa Inc – Third Quarter of Fiscal 2021 IR Earnings Presentation. We are huge fans of the payment processing and payment solutions space. This industry is supported by secular growth tailwinds due to the global shift away from cash-to-card and card-not-present (e.g. online purchases) purchase options, and the ongoing proliferation of e-commerce. Furthermore, companies in this space benefit immensely from the network effect, which creates an economic moat for their business. These companies are incredibly lucrative with relatively high operating margins and impressive free cash flow generating abilities, aided by their relatively modest capital expenditure requirements to maintain a certain level of revenues. We include payment networks giant Visa as a “top-weighted” idea in the Best Ideas Newsletter portfolio and view its capital appreciation upside quite favorably, with the top end of our fair value estimate range sitting at $304 per share of Visa.

Sep 24, 2021

Cisco Systems’ Growth Outlook Continues to Improve
Image Source: Cisco Systems Inc – 2021 Investor Day Event Presentation. Things at Cisco Systems are beginning to turn around and management made sure to highlight the company’s improving outlook during its big Investor Day event held on September 15. We include Cisco Systems as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios as the firm has a fortress-like balance sheet (i.e., large net cash position), tremendous free cash flow generating abilities, and its growth outlook has improved immensely since contending with serious headwinds from the worst of the coronavirus (‘COVID-19’) pandemic. Shares of CSCO yield ~2.6% as of this writing.

Sep 10, 2021

Best Idea Korn Ferry Posts a Stellar Earnings Update
Image Shown: Shares of Korn Ferry have surged higher year-to-date, and we see room for additional capital appreciation upside. We added shares of Korn Ferry as an idea to our Best Ideas Newsletter portfolio back in January 2021 and continue to be huge fans of the name. The top end of our fair value estimate range sits at $104 per share of Korn Ferry. Organizational consulting firm Korn Ferry posted results for its first quarter of fiscal 2022 (period ended July 31, 2021) on September 8 that smashed past consensus top- and bottom-line estimates. Korn Ferry commented in the earnings press release that it had generated record quarterly fee revenue, the source of the lion’s share of its sales (alongside modest ‘reimbursed out-of-pocket engagement expenses’), and that its operating income, adjusted EBITDA, and diluted EPS all came in at all-time highs last fiscal quarter. The company’s business is rebounding strongly from the worst of the coronavirus (‘COVID-19’) pandemic with room to run.

Sep 9, 2021

Digital Realty Is a Stellar Income Growth Idea
Image Source: Digital Realty Trust Inc – September 2021 IR Presentation. Digital Realty Trust is a carrier-neutral data center real estate investment trust (‘REIT’) that provides co-location and interconnection services. The REIT has grown its annual dividend over the past 15+ consecutive years, and we view Digital Realty as a stellar income-generation idea. As of this writing, shares of DLR yield ~2.8%. We include shares of DLR as an idea in both the Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios. Investors have been steadily warming up to Digital Realty this year, with shares of DLR up ~23% year-to-date, and we see room for additional upside as the top end of our fair value estimate range sits at $186 per share of Digital Realty.

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.

Sep 3, 2021

Best Idea PayPal Is a Tremendous Enterprise with Ample Capital Appreciation Upside
Image Source: PayPal Holdings Inc – 2021 Investor Day Presentation. PayPal is a stellar enterprise with rock-solid financials. The company is incredibly free cash flow positive and carries a pristine balance sheet while also sporting tremendous pricing power. We continue to be enormous fans of the fintech giant and expect to hear more great things from the company going forward. PayPal’s growth outlook is incredibly bright, and we forecast the company’s free cash flows will swell higher over the years and decades to come. Management noted during the firm’s 2021 Investor Day event that the goal is to allocate 30%-40% of PayPal’s future free cash flows towards share repurchases over the medium-term. We view PayPal’s capital appreciation upside quite favorably and continue to like the company as an idea in the Best Ideas Newsletter portfolio with a sizable 'weighting' in the portfolio.

Aug 19, 2021

Cisco Systems Continues to Recover; Growth Outlook Quite Promising
Image Source: Cisco Systems Inc – Fourth Quarter of Fiscal 2021 IR Presentation. On August 18, Cisco Systems reported fourth quarter earnings for fiscal 2021 (period ended July 31, 2021) that beat consensus top- and bottom-line estimates. Cisco Systems also offered guidance for both the first quarter of fiscal 2022 along with full-year guidance for fiscal 2022, breaking with tradition (usually the company does not offer full fiscal year forecasts). Cisco Systems is included as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. We continue to be huge fans of Cisco Systems, and shares of CSCO initially moved significantly higher during the morning trading hours on August 19.

Aug 12, 2021

Dividend Growth Idea Qualcomm Enters Bidding War to Bolster Automotive Growth Runway
Image Source: Qualcomm Inc – March 2021 Annual Meeting of Stockholders Presentation. One of our favorite semiconductor plays is Qualcomm. For those just getting familiar with the name, the company is about much more than just supplying components used in smartphones. While the rollout of 5G-capable smartphones will provide Qualcomm’s medium-term financial performance a large boost due to its Snapdragon mobile platform offerings, another key aspect of Qualcomm’s promising growth story is its exposure to the automotive industry.