Valuentum Exclusive Analysis for the Discerning Investor

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Apr 13, 2024

Vertex Pharma to Acquire Alpine Immune Services
Image: Vertex Pharma’s shares have had a nice run the past couple years. On April 10, Vertex Pharma announced that it had entered into an agreement where Vertex will acquire Alpine Immune Services for $65 per share or ~$4.9 billion in cash. We have no qualms with the deal for Alpine, and we expect Vertex Pharma to continue to deliver for shareholders.

Apr 12, 2024

JPMorgan Cautious on Geopolitical Tensions and Inflationary Pressures
Image Source: Hakan Dahlstrom. On April 12, JPMorgan reported mixed first-quarter 2024 results. JPMorgan is one of our favorite banks, in part due to strong leadership at the top and solid fortress-like balance sheet. Though we don’t include any individual bank in the newsletter portfolios, we do think the Financial Select Sector SPDR makes sense for diversification reasons, as showcased in the Best Ideas Newsletter portfolio. Shares of JPMorgan yield ~2.4% at the time of this writing.

Apr 11, 2024

Fastenal Puts Up Mixed First Quarter Results
Image: Fastenal reported mixed first quarter 2024 results. We like its business model quite a bit. On April 11, Fastenal Company reported mixed first-quarter fiscal 2024 results with revenue and earnings per share coming in slightly lower than expectations. Net sales advanced 1.9% for the three-month period ending March 31. The company noted that adverse weather impacted sales in its first quarter by about 10 to 30 basis points on a net basis. Operating income nudged lower in the quarter modestly, while net income advanced 0.9% in the period on a year-over-year basis. Diluted earnings per share was roughly flat in the quarter on a year-over-year basis, increasing 0.6% from the same period a year ago. We like Fastenal’s business model quite a bit, and shares yield ~2.1% at the time of this writing.

Apr 10, 2024

Delta Reports Strong March Quarter; Airline Stocks are Too Risky for Our Taste
Image Source: Colin Brown. Delta’s quarter ending in March was solid, and its full year outlook was encouraging. In general, however, we don’t like airline equities. The extreme ticket price transparency creates an ultra-competitive environment, and overcapacity is always a concern. We view airlines as merely trading vehicles on the health of the global economy and the trajectory of crude oil prices. Delta is operating well, but it will never be able to escape the challenges of its industry, and for those reasons we remain on the sidelines with respect to shares.

Apr 10, 2024

How Well Do Enterprise-Cash-Flow-Derived Fair Value Estimates Predict Future Stock Prices? -- And Thoughts on Behavioral Valuation
 Abstract: This paper attempts to solidify the efficacy of the predictive power of fair value estimates for stocks, as derived by the discounted enterprise cash flow (free cash flow to the firm) process. The piece emphasizes the difference between share prices and estimated fair (intrinsic) values and offers an overview of the discounted enterprise cash flow model, what causes fair value estimates to change, and what drivers may be most important within the context of the discounted enterprise cash flow model. The work examines the importance of both art and science in discounted enterprise cash flow valuation, and introduces the topic of behavioral valuation. An explanation of the methods used in the study include the creation of price-to-fair value comparisons and subsequent share-price performance of companies relative to their respective price-to-fair value ratios. The study in this work measures the predictive power of fair value estimates through eight subsequent time periods, or approximately 3 years. The subsets of data are broken into “undervalued” and “overvalued” stock groupings, and the predictive power of fair value estimates is then evaluated for each category.

Apr 8, 2024

3 Dividend Growth Stocks for the Long Run
Image: Mike Mozart. There are many applications for the discounted cash-flow model. Not only does the tool help to derive a fair value estimate for a company, but the core drivers behind the intrinsic value calculation are also key drivers behind the health of a dividend payer. Stocks with a solid net cash position and also generate strong expected free cash flows more than their cash dividend obligations are in a much better position to grow their payouts in the future than stocks burdened by a net debt position and where their free cash flow comes up short. Apple, Microsoft and Dick’s Sporting Goods make the cut and are three of our favorite dividend growth stocks on the market today.

Apr 8, 2024

What Is Gold Really Worth?
Image: Gold prices have surged since 2020, and they recently hit an all-time high. What is the yellow metal really worth? Let's discuss the greater fool characteristics of the price of gold.

Apr 7, 2024

Geopolitical Risks Driving Crude Oil Prices Higher
Image: Crude oil prices have staged a strong advance to start 2024. Geopolitical tensions continue to be elevated as concerns grow that the war in the Middle East could further escalate, and as the war in Ukraine continues to rage on. On April 1, Israel apparently staged an attack on an Iran embassy in Syria that killed several military officials, including three senior Iranian commanders. Iran has indicated that it would retaliate, and many are speculating that the possible attack may be on Israeli soil, which would further increase global tensions. Ukraine has also been actively targeting Russian energy infrastructure, cutting into Russia’s refining capacity.

Apr 6, 2024

Crown Castle Under Activist Fire
Image: Crown Castle's shares have been under pressure the past couple years. Crown Castle continues to deal with activist pressure from Elliott Investment and founder Ted Miller (Boots Capital Management).

Apr 5, 2024

The Dividend Cushion Beats the Aristocrats
A prolonged period of low interest rates has driven income investors to dividend growth investing as a way to achieve retirement goals. Traditional dividend growth analysis has rested on evaluating a company’s dividend payout ratio and its track record of historical consecutive annual dividend increases. A supplement to these approaches, the forward-looking, cash-flow-based Dividend Cushion ratio maps a company’s future expected free cash flows to its future expected cash dividends paid (after considering balance sheet health) and has shown to be a superior indicator of both dividend growth (risk) and total return relative to other dividend growth analytical processes. The results in this paper showcase the outperformance of a select number of high-yielding equities with strong Dividend Cushion ratios relative to both S&P 500 firms and companies with decades of consecutive annual dividend increases.