Valuentum Exclusive Analysis for the Discerning Investor

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May 11, 2023

We Prefer Visa
Image: Visa’s operating cash flow of $8 billion, and free cash flow of ~$7.5 billion through the first half of its fiscal 2023 is remarkable. Image Source: Visa. Visa's second-quarter fiscal 2023 results released April 25 were enough to support our continued positive take on the moaty entity, as it beat the consensus estimate on both the top and bottom line. During its quarter ending March 31, 2023, net revenues advanced 11%, while GAAP earnings per share leapt 20%, to $2.03 per share. Payments volume advanced 10% in the quarter on a year-over-year basis, while total cross-border volume increased 24%. Processed transactions advanced 12% in the quarter from the same period a year ago.

May 10, 2023

The Fall of an Icahn?
Image Source: danor shtruzman. Hindenburg Research put together a compelling short report on Icahn Enterprises (IEP). We think it is worth a read.

May 9, 2023

Earnings Roundup
Let's get Nelson's thoughts on five stocks recently reporting their first-quarter 2023 results: PYPL, DPZ, MNST, BKNG, TXRH.

May 8, 2023

Long Live Apple and Large Cap Growth!
Image: Since the release of the book Value Trap in December 2018, an ETF that tracks large cap growth (SCHG) has outperformed not only the S&P 500 (SPY), but also the areas of dividend growth (SDY) and small cap value (IWN) by sizable margins. In a world where monetary policy is tightening and regional banks are failing, we maintain our long-held view that big cap tech and large cap growth are the places to be. Since the release of the book Value Trap in December 2018, an ETF that tracks the area of large cap growth (SCHG) has not only outperformed the S&P 500 (SPY), but also the areas of dividend growth (SDY) and small cap value (IWN) by sizable margins. We love the net cash rich balance sheets and strong expected future free cash flow generators within the area of large cap growth, and Apple remains one of our very favorites that fits the mold. Apple is included in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.

May 5, 2023

Apple’s Second-Quarter Fiscal 2023 Results Were Good Enough
Image Source: Valuentum. On May 4, Apple reported second-quarter results for its fiscal 2023 for the period ending April 1, 2023, that were slightly better than consensus forecast, but we’re viewing the report as mixed. Revenue dropped 2.5% in the quarter on a year-over-year basis as better-than-expected resilience in iPhone sales could not offset weakness in Mac and iPad performance, and its quarterly EPS of $1.52 was unchanged from last year’s mark. Revenue in the company’s Services business jumped 5.4%, and the iPhone maker announced a $90 billion buyback program as it upped its quarterly dividend by more than 4%, to $0.24 per quarter. We plan to make a few tweaks to our valuation model of Apple, but we don’t anticipate a material change to our fair value estimate.

May 5, 2023

Dividend Increases/Decreases for the Week of May 5
Let's take a look at firms raising/lowering their dividends this week.

May 4, 2023

Paramount Global Cuts Payout, Dividend Cushion Ratio Caught Another!
Image Source: Paramount Global. The Dividend Cushion ratio is not a perfect predictor of dividend health and the risks of a dividend cut, but it’s a pretty darn good one. On May 4, Paramount Global missed expectations for its first-quarter 2023 results on both the top and bottom line and cut its quarterly dividend to $0.05 per quarter (was $0.24). The company’s Dividend Cushion ratio, which considers its balance sheet as well as future expectations of free cash flow relative to future expected cash dividends paid, was -2.5 (negative 2.5). Any ratio below 1 indicates growing risk to the health of the dividend, while any materially negative (below 0) ratio indicates severe risk of a dividend cut in the longer run.

May 1, 2023

Honeywell Raises Outlook for 2023; Backlog Remains Strong
Image: Honeywell continues to experience strong fundamental momentum across the board. Image Source: Honeywell. We liked Honeywell’s first-quarter 2023 report, released April 27, and its raised outlook for 2023. We remain huge fans of Honeywell’s ~2.1% dividend yield, and we support Honeywell’s COO Vimal Kapur who will succeed Darius Adamczyk as CEO on June 1, 2023. Our fair value estimate for Honeywell remains $210 per share. With shares trading at ~$200 at the time of this writing, there’s still valuation upside to the Honeywell story, in our view.

May 1, 2023

Case Study: How to Assess Earnings Quality
How a lack of a focus on return on invested capital and economic profit and an emphasis on accounting measures and earnings per share in IBM's executive incentive programs brought down Big Blue. In this case study, let's discuss the five basic areas that we at Valuentum evaluate to assess the quality of a firm's earnings.

Apr 28, 2023

The Energy Sector Has Had a Great Run
Image: The energy sector was the top-performing sector during 2022. Exxon Mobil's and Chevron's first-quarter 2023 results were strong but as expected. The energy sector may have another good year or two in the next five-to-seven years, but our favorite areas for long-term investors remain large cap growth and big cap tech. Let’s say the only thing you ever read about investing was the book Value Trap, and after reading it, you decided to go long large cap growth and stay away from small cap value. You would be dancing right now.