Valuentum Exclusive Analysis for the Discerning Investor

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Jul 15, 2021

PepsiCo Beats Estimates, Raises Guidance
Image Source: PepsiCo Inc – CAGNY 2021 Presentation. On July 13, PepsiCo reported second-quarter fiscal 2021 earnings (period ended June 12, 2021) that beat both consensus top- and bottom-line estimates. Due to its strong performance during the first half of the fiscal year, PepsiCo raised its full-year guidance for fiscal 2021 in conjunction with its latest earnings report. Now the firm expects to post 6% organic sales growth (versus a mid-single-digit range previously) and 11% core constant currency EPS growth (versus a high-single-digit range previously) in fiscal 2021 on an annual basis. Foreign currency tailwinds favorably impacted its financial performance last fiscal quarter, and for the full fiscal year, PepsiCo sees these tailwinds boosting its net revenue and core EPS performance by ~100 basis points.

Jul 15, 2021

Answering Some Questions from Our Members
Image Source: Eric. Let’s cover some recently asked questions for the benefit of all.

Jul 13, 2021

Chevron’s Promising Cash Flow Growth Outlook
Image Source: Chevron Corporation – May 2021 IR Presentation. The outlook for the global energy complex is bright and getting brighter as public health authorities utilize widespread coronavirus (‘COVID-19’) vaccine distribution efforts to put an end to the pandemic. We added shares of Chevron Corporation to the Best Ideas Newsletter and Dividend Growth Newsletter portfolios on June 27 in order to gain exposure to the ongoing recovery in the global energy complex via a high-quality integrated oil major. Shares of CVX yield ~5.1% as of this writing.

Jul 8, 2021

Still Bullish -- Stocks for the Long Run!
Image shown: The 10-year Treasury rate has fallen quite a bit since March of this year, suggesting that inflation expectations have come down in recent months. Image source: CNBC. The S&P 500, Dow Jones Industrial Average and Nasdaq continue to hover near all-time highs, and all appears well. We maintain our bullish take on the markets and believe that we are in the early innings of a long bull market that started following the washout March 2020 during the depths of the COVID-19 meltdown. Stock bull markets tend to average about 4.4 years in duration, with the last one enduring ~11 years, while bear markets are very abrupt, lasting only 11.3 months on average, the last one a very short 1.1 months, according to data from First Trust. We’re about 15 months into this new stock bull market, and we continue to believe increased equity exposure may better serve investors of all types going forward, through both the best of times and the worst of times.

Jul 7, 2021

ExxonMobil’s Immense Upside in Guyana
Image Source: ExxonMobil Corporation – 2021 Investor Day Presentation. ExxonMobil generated $6.9 billion in free cash flow during the first quarter of 2021, up from just $0.3 billion in the same period the prior year when the coronavirus (‘COVID-19’) pandemic began to slow the global economy to a crawl. Please note that working capital movements and the timing of capital expenditures often have an outsized influence on an energy firm’s quarterly financials, though the trajectory is crystal clear, ExxonMobil is well on its way to recovering from the COVID-19 pandemic. ExxonMobil spent $3.8 billion covering its total dividend obligations in the first quarter of 2021 and spent a negligible amount buying back its stock during this period. Both of these activities were fully covered by its free cash flows with room to spare, highlighting the company’s potential dividend growth upside going forward.

Jun 24, 2021

Energy: A Small Part of the S&P 500 But Making a Comeback
Image Source: Bureau of Land Management. The energy sector is now a small part of the S&P 500, but improving energy resource pricing has enhanced the merits of many in the space, namely the dividend growth and income prospects at ExxonMobil and Chevron. Both companies offer investors dividend yields north of 5%, and both have experienced tremendous improvements in free cash flow generation thanks in part to more prudent capital spending. We’ll be looking to add both to the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio on any market breather. We like the risk/reward opportunity.

Jun 24, 2021

Lululemon’s Growth Outlook Is Bright
Image Source: Lululemon Athletica Inc – First Quarter of Fiscal 2021 IR Earnings Infographic. Athleisure wear maker Lululemon Athletica recently reported first quarter earnings for fiscal 2021 (period ended May 2, 2021) that smashed past both consensus top- and bottom-line estimates. Its company-operated stores posted net revenue growth of 106% year-over-year as global economies began to recover from the coronavirus (‘COVID-19’) pandemic. The company’s direct-to-consumer (‘DTC’) net revenue grew 55% year-over-year (the e-commerce side of its business) last fiscal quarter, keeping in mind its DTC business more than doubled its net revenues in fiscal 2020. We were impressed with Lululemon’s latest results, and there could be room for shares of LULU to continue climbing higher. The top end of our fair value estimate range sits at $450 per share (well above where LULU is trading at as of this writing).

Jun 23, 2021

Best Idea Korn Ferry Posts Record Results, Shares Surge
Image Shown: Korn Ferry posted record fee revenue and diluted EPS performance in the final quarter of fiscal 2021 as its business continued to recover. We include Korn Ferry as an idea in our Best Ideas Newsletter portfolio and continue to be huge fans of the name. Image Source: Korn Ferry – Fourth Quarter of Fiscal 2021 IR Earnings Presentation. We continue to be enormous fans of Korn Ferry and its capital appreciation upside potential. Part of the firm’s strength comes from its industrial clients representing approximately 25%-30% of Korn Ferry’s business (according to recent management commentary), keeping in mind industrial activity has rebounded strongly from the depths of the pandemic-induced downturn last calendar year. As the services side of the global economy starts to recover in earnest, Korn Ferry’s financials should continue to improve going forward, while management also sees room for additional upside from its industrial clients as well.

Jun 21, 2021

Best Idea Korn Ferry Getting Ready to Post Earnings
Image Shown: Korn Ferry’s revenue generation mix across business operating segments, geographies, and industries as of the third quarter of fiscal 2021. Image Source: Korn Ferry – Third Quarter of Fiscal 2021 Earnings IR Presentation. The management consulting firm Korn Ferry was added to the Best Ideas Newsletter portfolio on January 12, 2021 after the firm registered a 9 on the Valuentum Buying Index (‘VBI’). Shares of KFY have increased by 31% since then versus an 11% gain for the S&P 500 as of the end of normal trading hours on June 18. The top end of our fair value estimate range sits $79 per share of KFY, well above where shares of Korn Ferry are trading as of this writing, and we see room for additional capital appreciation upside going forward. Though Korn Ferry’s business faced tremendous headwinds due to the coronavirus (‘COVID-19’) pandemic, ongoing vaccine distribution efforts are beginning to pick up steam worldwide and demand for the firm’s services is on the rebound.

Jun 18, 2021

Best Ideas PayPal and Visa Have Ample Capital Appreciation Upside Potential
Image Shown: PayPal Holdings Inc’s digital wallet offers the firm multiple sources of upside. Image Source: PayPal Holdings Inc – February 2021 Investor Day Presentation. The payment processing and fintech industries are incredibly lucrative and supported by powerful secular growth tailwinds such as the proliferation of e-commerce and the global shift away from cash (towards card, tap to pay, QR code, online, and other payment methods). PayPal Holdings and Visa are two of our favorites in the space, and we include both firms as ideas in the Best Ideas Newsletter portfolio.