Valuentum Exclusive Analysis for the Discerning Investor

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Nov 4, 2020

Our Thoughts on Magellan Midstream’s Latest Earnings
Image Shown: Keeping the many headwinds facing the energy infrastructure space in mind, Magellan Midstream Partners LP remains one of our favorite midstream master limited partnerships. Image Source: Magellan Midstream Partners LP – October 2020 IR Presentation. On October 30, Magellan Midstream Partners reported third quarter 2020 earnings that beat both top- and bottom-line consensus estimates. The midstream master limited partnership (‘MLP’) space has faced enormous headwinds due to the ongoing coronavirus (‘COVID-19’) pandemic, though the firm was still able to generate sizable free cash flows during the first nine months of 2020. Magellan Midstream is a modestly-weighted holding in the High Yield Dividend Newsletter portfolio, and as of this writing, units of MMP yield ~11.1%. Though that yield is quite high, given that the firm’s free cash flows should grow significantly going forward, we are optimistic the firm will be able to continue making good on its payout obligations for the time being.

Nov 4, 2020

We Expect to Raise Our Fair Value Estimate of Honeywell
Image: Honeywell’s Third Quarter 2020 Earnings Release Slide Deck. We may have been a bit too conservative with our latest fair value estimate change of Honeywell in light of our expectations of the impact of COVID-19 on its business. Heading into the COVID-19 crash, our fair value estimate for Honeywell had been north of $150, and we expect to revise it modestly higher than that mark upon the next update of our valuation model. In light of COVID-19, we plan to apply a wider fair value estimate range, too, and that should put shares as fairly valued. Honeywell is our favorite industrial idea, but it remains on the bench in favor of better-positioned net-cash-rich powerhouses currently in the newsletter portfolios.

Nov 4, 2020

Digital Realty’s Momentum Continues, Raises Outlook
Image Shown: An overview of Digital Realty Trust Inc’s asset base. Image Source: Digital Realty Trust Inc – Third Quarter of 2020 IR Earnings Presentation. On October 29, the data center real estate investment trust (‘REIT’) Digital Realty Trust reported third quarter 2020 earnings that beat consensus revenue estimates and consensus funds from operations (‘FFO’) estimates. Please note that while FFO is an imperfect metric, particularly because it does not incorporate the REIT in question’s need to refinance maturing debt and tap capital markets for funds for growth, it provides a useful snapshot of how well the REIT in question can maintain its dividend in the near-term. Digital Realty posted $1.54 per share in core FFO last quarter (an adjusted non-GAAP figure), down 8% year-over-year but flat sequentially. In this article, we will cover Digital Realty’s short-term headwinds and why we expect that the REIT’s financial performance will rebound. Shares of DLR yield ~3.1% as of this writing. Longer term, we use our adjusted Dividend Cushion ratio (includes funds raised via expected equity issuances over the next five full fiscal years) to gauge Digital Realty’s ability to keep making good on its dividend obligations. Digital Realty has an adjusted Dividend Cushion ratio of 1.1, earning the REIT a “GOOD” Dividend Safety rating. These metrics incorporate our expectations that the REIT will push through significant dividend increases over the coming years, and Digital Realty has an “EXCELLENT” Dividend Growth rating. We include shares of DLR as a holding in both our Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios.

Nov 3, 2020

We’re Reiterating Our $200 Fair Value Estimate for PayPal
Image Shown: Short-term headwinds aside, PayPal’s latest earnings report reinforced our optimistic view on its long-term growth outlook which in turn is why we are maintaining our fair value estimate of $200 per share. We continue to be big fans of PayPal. The company has a pristine balance sheet, high quality cash flow profile, impressive growth outlook, and is trading well below its fair value estimate as of this writing. Though investors initially sold off shares of PYPL following its third-quarter report November 2 due to its expected growth trajectory slowing down in the near term, we're reiterating our fair value estimate of $200 per share as PayPal continues to deliver impressive fundamental performance. PayPal’s medium- and long-term growth outlooks remain stellar. Venmo could be a source of significant upside in the medium-term, and we are monitoring events closely.

Nov 2, 2020

Kraft Heinz Shows the Power of the VBI
Image: Years ago, shares of Kraft Heinz registered a rating of 1 on the Valuentum Buying Index (VBI) on two separate occasions, highlighting the company’s overpriced nature and weakening technicals. Rare and extreme ratings on the VBI, 1 = worst; 10 = best, tend to be the most informative and/or the most actionable for investors. There are just too many net cash rich, free cash flow generating powerhouses with tremendous competitively advantaged business models tied to secular growth tailwinds that taking a flier on an overleveraged turnaround such as Kraft Heinz almost feels irresponsible. That said, shares yield ~5.2% as of this writing, so income investors might find a decent risk reward at the right price. With a 27% stake, Buffett's Berkshire Hathaway seems to think so.

Oct 30, 2020

Newmont Posts a Stellar Earnings Report, Raises Dividend
Image Shown: An overview of Newmont Corporation’s recent accomplishments. Image Source: Newmont Corporation – Third Quarter of 2020 IR Earnings Presentation. Shares of Newmont Corp are included in the Dividend Growth Newsletter portfolio because we view its long-term dividend growth trajectory quite favorably, and the gold miner has not disappointed. At the start of 2020, Newmont significantly increased its quarterly dividend. Due to a combination of its enlarged dividend, very promising growth outlook, sizable expected synergies from its 2019 acquisition of Goldcorp, and its stellar cash flow profile, we added shares of NEM as a holding to our Dividend Growth Newsletter portfolio on January 13, 2020.

Oct 30, 2020

Dividend Increases/Decreases for the Week October 30
Let's take a look at companies that raised/lowered their dividend this week.

Oct 29, 2020

News Brief: We Like Large Cap Growth, Big Cap Tech, and the NASDAQ
Image: Since 2010, a large cap growth ETF has outperformed the S&P 500 by nearly 150 percentage points (15,000 basis points). Since 2010, a large cap growth ETF has outperformed a small cap value ETF by over 275 percentage points, or 27,500 basis points (image not shown). We expect continued outperformance from companies within the large cap growth bucket. The markets have been see-sawing the past couple weeks as the global economy continues to recover and much of the world awaits the outcome of the 2020 US Presidential election. We think the equity markets have largely factored in the forecasted epidemiology curve with respect to COVID-19, including infection spikes across the world, so recent market volatility has largely been driven more by political/election risk than anything else. To nobody’s surprise, we expect continued volatility heading into and during election week, but we’re also maintaining our above market fair value estimate on the S&P 500 of 3,530-3,920 (the S&P 500 stands at about 3,300 at the moment). Once election week passes, we expect one of the best Santa Claus rallies in years as consumer sentiment improves. As a result of COVID-19, e-commerce proliferation will be more evident during the holiday season this year than ever before. Our newsletter portfolios remain well-positioned, and we continue to like the areas of large cap growth, big cap tech, and the NASDAQ. Our favorite names are those with strong net cash positions and solid expected future free cash flows with competitively advantaged business models that are tied to secular growth tailwinds in industries where many players can win. We’ve continued to point to Facebook, Alphabet, and PayPal as a few of our favorite longs in this environment.

Oct 29, 2020

Disney Is One Of Our Favorite Streaming Companies
Image Shown: Shares of The Walt Disney Company continue to recover from the pandemic-induced crash in March 2020. One of our favorite companies with significant exposure to the video streaming arena is the entertainment behemoth The Walt Disney Company. The company’s various streaming services include ESPN+, Disney+, Hulu, among others. On October 12, Disney announced a major restructuring which effectively reorganized several of its business operating segments around supporting its video streaming ambitions, with an eye towards ensuring sizable investments in original content would be put towards good use.

Oct 23, 2020

Our Thoughts on Intel’s Latest Earnings Report
Image Shown: An overview of Intel Corporation’s performance during the first nine months of fiscal 2020. Image Source: Intel Corporation – Third Quarter of Fiscal 2020 IR Earnings Presentation. On October 22, Intel Corp reported third quarter fiscal 2020 earnings (period ended September 26, 2020) that largely matched consensus expectations. Intel boosted its full-year outlook for fiscal 2020 on a net basis (which included an increase in its expected free cash flows this fiscal year) during its latest earnings update, though management reduced its forecast for Intel’s expected operating margins versus previous expectations. We continue to like Intel’s ability to generate sizable free cash flows, though we are concerned with its rising net debt load of late.