Valuentum Exclusive Analysis for the Discerning Investor

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Aug 27, 2022

Video: We Expect A Huge Market Flush! Looking to "Raise" Incremental Cash
Video: Valuentum's Brian Nelson, CFA, breaks down the current market environment, highlighting reasons for the poor market sentiment driven by "tapped out" consumers and investors alike. He expects a big market "flush," and a challenging next couple years but remains a big fan of stocks for the long haul. Valuentum continues to seek to "raise" incremental cash in the simulated newsletter portfolios as it prepares to weather the storm. Video length: ~10 minutes.

Aug 24, 2022

ICYMI (Aug 19) -- ALERT -- PYPL, META, GOOG, V -- Making Some Big Changes in the Simulated Best Ideas Newsletter Portfolio!
Image Shown: We are very happy with the overall "performance" of the simulated Best Ideas Newsletter portfolio, which is carving out 2.6 percentage points of relative outperformance so far in 2022 on a price-only basis, as shown in the table above. However, we're making some big changes to the simulated newsletter portfolio today on some of our favorite names. Our best ideas continue to be in the simulated Best Ideas Newsletter portfolio, the simulated Dividend Growth Newsletter portfolio, the simulated High Yield Dividend Newsletter portfolio, the simulated ESG Newsletter portfolio, and the Exclusive publication, as well as with our additional options commentary. We're making some big moves in the simulated Best Ideas Newsletter portfolio today! At the moment, the simulated Best Ideas Newsletter portfolio is carving out about 2.6 percentage points of relative outperformance so far in 2022, on a price-only basis relative to the the SPDR S&P 500 Trust ETF. Overall, after some huge years, the simulated Best Ideas Newsletter portfolio is down a modest ~8.6% in 2022, by our estimates. Pretty good, all things considered. That said, the SPDR S&P 500 Trust ETF has bounced right off its 200-day moving average (technical resistance), and we're not going to sit by while the risks to the market this year increase. We remain bullish on stocks for the long haul, of course, but we think incremental alpha may be generated by removing/trimming/adding to some of our winners in the simulated Best Ideas Newsletter portfolio at this time. We're changing our mind on a couple things, too, as any good investor does. [This note was emailed to members August 19.]

Aug 19, 2022

Nelson: The 16 Most Important Steps To Understand The Stock Market
Image Source: Tim Green. We outline the '16 Most Important Steps to Understand the Stock Market.' We think it's important to take a read of these key stock market tenets when things are going great -- and perhaps even more important when things aren't going your way. This continues to be a working document.

Jul 27, 2022

Walmart’s Business Update Likely Means U.S. Is In Recession, But Near-Term Weakness Is Already Baked Into Stock Market
Image Shown: Shares of Walmart Inc dropped sharply during afterhours trading on July 25 as the retailer sharply cut its adjusted operating income and EPS guidance for the current fiscal year as inflationary pressures are taking a sizable toll on its bottom-line. On July 25, Walmart Inc issued a business update that saw the retailer sharply cut its adjusted operating income and EPS guidance for fiscal 2023 (period ended January 2023), while boosting its consolidated net sales guidance. The company also adjusted its guidance for the fiscal second quarter. Shares of WMT plummeted during afterhours trading on July 25 as investors began to price in concerns over the retailer’s deteriorating margins. We anticipated ongoing weakness in Walmart’s business. On July 4, we released an audio report, “Nelson: I Have Been Wrong About the Prospect of Near-Term Inflationary-Driven Earnings Tailwinds,” highlighting our growing concerns about consumer-tied entities in the consumer staples and consumer discretionary spaces. We continue to expect troubles at the big box retailers and across the apparel space, more generally. Here’s what Nelson had to say in early July that remains applicable today: "I simply was not expecting the magnitude of such operating-income drops across consumer-tied companies, and while I think long-term inflation will eventually help drive higher nominal earnings in the longer run when conditions reach “normalization” again, the lag will be much longer than I originally thought. The numbers out of Walmart, Target, and Nike, for example, speak not only to tremendous earnings weakness, but also to the prospect of economic recession in the U.S." A recession in the U.S. is no reason for panic, however. For starters, we believe most of the fundamental weakness across retail is baked into the stock market, but more generally, investors should not worry about recessionary trends. But why? Well, implicitly embedded within a fair value estimate of a company are expectations of a “normal” economic cycle, complete with peak and trough, with the fair value estimate driven largely by mid-cycle expectations that feed into later stages of the model. The prospects for an unexpected recession in economic activity in the near term shouldn’t cause much of a change in the fair value estimate of a company either, given not only that a recession is already implicitly embedded in the fair value estimate, as noted, but also that near-term expectations don’t account for nearly as large of a contribution to the fair value estimate as long-term normalized expectations within the valuation construct. Most of a company’s intrinsic value is driven by its performance beyond year 5 in our model, or on a mid-cycle, going-concern basis. A company’s fair value estimate range (margin of safety) also captures various scenarios regarding economic activity, including a bull and bear case. With that said, recessionary tendencies may cause pricing impacts in the market in the event that consumers/investors use the stock market as a source of income by selling stocks, causing pressure on share prices, but the discounted cash flow (DCF) model already bakes in economic cyclicality and inevitable recessions, if not directly, then implicitly by targeting long-term mid-cycle expectations and via the application of the fair value estimate range. That’s why it’s great to be a long-term investor, scooping shares up when others are forced to sell in the near term, while holding them over long periods, letting compounding work its magic.

Jul 11, 2022

Valuentum's Unmatched Product Suite
We continue to be huge believers in the concept of enterprise valuation, which emphasizes the key cash-based sources of intrinsic value--net cash on the balance sheet and strong and growing future expected free cash flows. Meta Platforms, Inc. and Alphabet Inc. remain two of the most underpriced ideas on the market today, and we remain huge fans of their tremendous long-term investment prospects.

Jul 4, 2022

Nelson: I Have Been Wrong About the Prospect of Near-Term Inflationary-Driven Earnings Tailwinds
"Though I have been clearly wrong on my near-term thesis for inflation-driven earnings expansion, we still did great sorting through investment idea considerations. Through late June, for example, the simulated Best Ideas Newsletter portfolio has generated 4-5 percentage points of alpha relative to the S&P 500, as measured by the SPY. The simulated Dividend Growth Newsletter portfolio is down only modestly this year, also performing better than traditional benchmarks. The simulated High Yield Dividend Newsletter is generating “alpha” against comparable benchmarks, and the Exclusive publication continues to deliver, with both capital appreciation ideas and short idea considerations generating fantastic success rates. ESG and options-idea generation have also been great. With all this being said, in the long run, I believe nominal earnings will expand rapidly from 2021 levels, which is why I remain bullish on stocks. I believe markets tend to overestimate earnings in the near term and underestimate them in the long run. The intelligent investor knows, too, that the most money is made during recessions and bear markets, where steady reinvestment and dollar cost averaging help to better position portfolios for higher returns over the longer run. The newsletter portfolios are well-positioned for continued “outperformance,” in our view, and while we may make a few tweaks to them, we’re not making any material changes at this time."

Jun 17, 2022

Qurate Retail Faces Difficult Turnaround Process
Image Source: Qurate Retail Inc – First Quarter of 2022 IR Earnings Presentation. Executive Summary: Qurate Retail Inc is home to several well-known retail brands including QVC and HSN that operate television networks and online marketplaces that sell curated products. The company is contending with several exogenous shocks such as inflationary pressures and supply chain hurdles, while customer engagement levels are on the decline after growing during the initial phases of the COVID-19 pandemic. Qurate Retail has a massive net debt load and sizable annual financing obligations, and its margins have deteriorated substantially of late. Due to its complex share structure and management organization, weak financial position, and lackluster outlook, we are not interested in Qurate Retail’s common or preferred shares at this time. Qurate Retail is too risky for our taste.

Jun 9, 2022

Best Idea Dollar General Beats Consensus Estimates and Raises Guidance in the Face of Substantial Headwinds
Image Shown: Dollar General Corporation’s GAAP net sales rose in the first quarter of fiscal 2022 on a year-over-year basis due to growth in its net store count. Image Source: Dollar General Corporation – May 2022 8-K SEC Filing. As a discount retailer, Dollar General is contending with myriad headwinds though its underlying business is holding up quite well. We continue to view its capital appreciation upside potential quite favorably, and its dividend program offers incremental upside potential. Shares of DG yield ~1.0% as of this writing.

Apr 12, 2022

Best Idea Dollar General Roaring Higher
Image Shown: We like the niche Dollar General Corporation has carved out for itself in the competitive discount retail industry. Image Source: Dollar General Corporation – Fiscal 2021 Annual Report. Though the discount store retail industry is incredibly competitive, we like the niche that Dollar General Corp has carved out for itself by targeting towns and cities in the U.S. with populations of 20,000 or less. These are regions where e-commerce economics are not attractive due to hefty fulfillment costs, and often are underserved in terms of shopping options. Dollar General operates over 18,100 stores across 46 U.S. states and is included as an idea in the Best Ideas Newsletter portfolio. We continue to be big fans of Dollar General. Our fair value estimate stands at $234 per share of DG with room for upside as the top end of our fair value estimate range sits at $281 per share.

Mar 18, 2022

Dividend Increases/Decreases for the Week March 18
Let's take a look at companies that raised/lowered their dividend this week.