Valuentum Exclusive Analysis for the Discerning Investor

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Sep 8, 2023

Our Latest Report Updates
Check out our latest report updates on the website.

Aug 3, 2023

Not Expecting Much From Consumer Staples Stocks
Image: Kellogg is representative of many consumer staples stocks that have considerable net debt positions. Image Source: Kellogg’s second-quarter press release. Though consumer staples equities have shown tremendous resilience in the face of adversity and their dividend yields can make sense in certain portfolios, the group is overflowing with net debt positions, meager long-term growth prospects, and free cash flow generation that is largely absorbed by growing per-share dividend liabilities. On the other hand, big cap tech and large cap growth have tremendous net cash positions and substantial future expected free cash flow generation, paving the way for what could be considerable long-term return potential. As with the last decade, we expect cash-based sources of intrinsic value to prevail, and for that, we continue to point to big cap tech and large cap growth as areas for consideration.

Jul 14, 2023

Positive Pricing Elasticities Continue to Power Pepsi
Image: Effective net pricing continues to be strong at Pepsi. Image Source: PepsiCo. On July 13, PepsiCo, Inc. reported excellent second-quarter 2023 results. The firm’s pricing power continues to impress as the executive team manages modest losses in organic volume with huge effective net pricing increases. We’re sticking with the high end of our fair value estimate range for Pepsi of ~$220 per share as pricing power will likely continue for as long as pricing elasticities remain positive.

Jul 12, 2023

Pet Insurer Trupanion’s Business Facing Numerous Challenges; Short Interest at 35%+
Image: Trupanion may be growing its top line like a weed, but its operating losses have been growing, too. Image Source: Trupanion 10-K. The insurance business is a tough one, and medical pet insurance may be even more difficult. A number of dynamics from adverse selection to conflicts of interest to lack of bargaining power within the industry’s structure have plagued Trupanion’s financial performance for years, with the company accumulating significant net losses since inception. We’re huge fans of Trupanion’s moaty network of clients and veterinarians as well as its tremendous top-line growth potential, but veterinarians continue to capture the industry’s economic rents, in our view, to the detriment of Trupanion’s shareholders. Unit economics have not been adding up at Trupanion either, and free cash flow has been meager at best for a very long time. As veterinarian costs continue to rise and the firm receives push back on proposed rate increases, Trupanion’s net losses may continue to mount, and even under optimistic assumptions, Trupanion’s shares could be considered rich.

Jul 4, 2023

How Much More Will Consumers Pay for McCormick Spices?
Image: Pricing growth remains the story at McCormick, but for how long? Image Source: McCormick. Just how much further McCormick will push pricing initiatives remains to be seen, but we think investor caution is in order. The stock is already trading at 33x current fiscal year adjusted earnings, and its shares have yet to return to the peak levels reached during 2020. We wonder if there may be troubling times ahead. Our fair value estimate stands at $73 per share, well below where shares are currently trading.

Jul 4, 2023

Walmart's 'Great Value' Brand and Position Across Retail Never Stronger
Image: Walmart’s shares have gotten back on track. We think Walmart’s ‘Great Value’ brand and position across bargain retail has never been stronger, and its share price reflects a company that is at a sweet spot of consumer demand as rivals continue to struggle. The high end of our fair value estimate range of Walmart stands north of $170, and shares yield ~1.4% at the moment. We’re liking what we see at Walmart these days.

Jun 30, 2023

Dividend Increases/Decreases for the Week of June 30
Let's take a look at firms raising/lowering their dividends this week.

May 30, 2023

Paper: Value and Momentum Within Stocks, Too
Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks.

Apr 25, 2023

Brief Take: Best Idea PepsiCo Hits All-Time High! Beautiful Breakout!
Image: PepsiCo, an idea in the Best Ideas Newsletter portfolio, has broken out to all-time highs. We continue to like the name. PepsiCo now expects core earnings per share to advance to $7.27 in fiscal 2023, a 7% increase (up from 6% previously). As in the case of General Mills and several consumer staples entities, PepsiCo’s price elasticities remain in its favor, and we expect a modest fair value increase upon our next report update. PepsiCo remains a key idea in the Best Ideas Newsletter portfolio.

Apr 12, 2023

Fed Winning the Fight Against Inflation, Food-at-Home Prices Easing
Image: CPI-U, not seasonally adjusted. The 12-month percent change in the pace of inflation for all items has fallen from north of 9% in June 2022 to 5% in March 2023. Image Source: BLS. The Bureau of Labor Statistics (BLS) released the Consumer Price Index for All Urban Consumers (CPI-U) on April 12, and it showed that the Fed is winning its fight against inflation. The CPI-U rose just 0.1% in March on a seasonally adjusted basis, down 0.3 percentage points from the increase in February. During the past 12 months, the all-items index has advanced 5.0% before any seasonal adjustments, a level that is still higher than the Fed’s long-term target, but not one indicative of runaway inflation or a worsening of the strain on consumer budgets. Though the news is but one data point that will influence the Fed’s rate decision next meeting, we’re viewing the news positively.