Valuentum Exclusive Analysis for the Discerning Investor

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May 14, 2020

Digital Realty Trust is Holding Up Quite Well
Image Shown: Shares of Digital Realty Trust Inc, a holding in both our Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios, have outperformed the S&P 500 by a wide margin over the past year and that’s before taking dividend considerations into account. On May 7, the data center real estate investment trust (‘REIT’) Digital Realty Trust reported first-quarter 2020 earnings. Though the firm’s near-term guidance disappointed investors, management communicated that the medium- and long-term trajectory of Digital Realty’s financial and operational performance remained strong. Furthermore, its liquidity position and its dividend coverage continued to be rock-solid, particularly after factoring in the data center REIT’s ongoing access to equity markets and lack of near-term debt maturities. Data centers are generally considered “essential” activities around the world given we live in the digital age and these assets have continued to operate during the pandemic. Shares of DLR yield ~3.4% on a forward-looking basis as of this writing.

May 13, 2020

Unicredit Is Best Worth Avoiding
Image Source: Unicredit 1Q2020 Earnings Presentation. The combination of revenue pressure from lower rates, a difficult operating environment, weakening efficiency metrics, one-off losses, and arguable low provisions for credit losses make for an ugly picture emerging at Unicredit at this time. We’re paying close attention to the key banking players in Europe to assess the likelihood of a global financial contagion that may accompany the global pandemic that has become COVID-19.

May 11, 2020

Facebook Is Roaring Higher!
Image Shown: Shares of Facebook (blue line) have roared higher since reaching their March 2020 lows, far outpacing the rebound in the S&P 500 (orange line). We continue to like shares of FB as a top-weighted holding in our Best Ideas Newsletter portfolio. Top-weighted Best Ideas Newsletter portfolio holding Facebook posted first quarter 2020 earnings on April 29 that saw its GAAP revenues jump 18% year-over-year to $17.3 billion while its GAAP diluted EPS grew by 101% year-over-year, hitting $1.71. Please note that Facebook’s bottom-line comparison was made easier due to the firm recording a $3.0 billion legal settlement with the US Federal Trade Commission (‘FTC’) during the first quarter of 2019. While digital advertising spending levels are expected to get crushed in 2020 due to the ongoing coronavirus (‘COVID-19’) pandemic, Facebook communicated to investors that its long-term growth trajectory remained very promising during the firm’s latest quarterly conference call. In our view, digital advertising spending levels will quickly bounce back once economies around the world start to reopen in earnest, though we caution that efforts to reopen the economy and resume “normal” daily activities need to keep in mind the risk another wave of infections imposes.

May 8, 2020

ICYMI: Never Been More Bullish Even as Buffett Dumps Airlines
Image Source: IATA. Data Source: McKinsey & Company (IATA). Airlines haven’t been able to earn their estimated cost of capital for as long as we can remember. There have been hundreds of airline bankruptcies since deregulation in 1978. The news may be scary in coming months, and market volatility may elevate again, but we’ve never been more bullish on the longer run. The biggest advantage of an individual investor is something called time horizon arbitrage. As many professionals continue to fear a break below the March 23 lows, we’re focused on how this market absorbs the tremendous and unprecedented stimulus in the coming months and what that means for nominal equity prices in the longer run. It may not happen this month or this year, but we expect lift off as investors race to preserve purchasing power! Our favorite ideas for a portfolio setting remain in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, and High Yield Dividend Newsletter portfolio. Our favorite brand new ideas, released each month, are included in the Exclusive publication.

May 8, 2020

Dividend Increases/Decreases for the Week Ending May 8
Let's take a look at companies that raised/lowered their dividend this week.

May 7, 2020

Gold Miner Newmont Continues to Shine
Image Source: Newmont Corporation – First Quarter of 2020 Earnings IR Presentation. On May 5, the gold miner Newmont Corp reported first quarter 2020 earnings that missed both consensus top- and bottom-line estimates which prompted shares to sell off modestly during the normal trading session that day, though shares of NEM have been on an epic bull run since the start of 2020. We continue to like Newmont as an idea in our Dividend Growth Newsletter portfolio with shares of NEM up ~48% as of this writing since joining the portfolio on January 13, 2020, before taking dividend considerations into account, while the S&P 500 is down ~13% during this period before taking dividend considerations into account. At Newmont’s new annualized dividend payout of $1.00 per share, shares of NEM yield ~1.6% as of this writing.

May 7, 2020

BNP Paribas’ Shares Could Have Upside Potential
Image Source: BNP Paribas 1Q2010 Earnings Presentation. BNP Paribas’ shares are trading at a fraction of tangible book. If the bank can contain its cost of risk through this cycle and produce double-digit returns on tangible equity on the other side of this crisis, shareholders would do quite well in such a scenario. That said, we point out that Europe is overtraded when it comes to banking, which pressures earnings power at even the stronger banks like BNP Paribas. We’re paying close attention to the key banking players in Europe to assess the likelihood of a global financial contagion that may accompany the global pandemic that has become COVID-19.

May 6, 2020

Berkshire Hathaway Prepares Itself for COVID-19
Image Source: Berkshire Hathaway Inc – 2019 Annual Report. Berkshire Hathaway reported first-quarter 2020 earnings on May 2, which due to significant unrealized losses in its investment portfolio (a product of the market swoon in the early months of 2020) the firm swung to a large loss on a GAAP basis. As Berkshire Hathaway’s leadership team has often noted, the 2018 accounting rule change that forces companies to recognize unrealized gains and losses in the income statement can make GAAP net income and GAAP diluted EPS figures near meaningless without digging deeper into the firm’s financials.

May 6, 2020

Tyson Faces Operational Hurdles
Image Source: Tyson Foods Inc – Second Quarter of Fiscal 2020 Earnings IR Presentation. On May 4, the major meat and prepackaged food provider Tyson Foods reported second-quarter earnings for its fiscal 2020 (period ended March 28, 2020) that missed consensus estimates on both the top- and bottom-line, sending its shares sharply lower during the regular trading session that day. The ongoing coronavirus (‘COVID-19’) is hurting its production capabilities, in particular the operations of its meatpacking plants as numerous confirmed COVID-19 cases (that unfortunately includes fatalities) have emerged at those facilities and the facilities of its peers across the US, prompting many to close or scale back. For instance, Tyson was forced to temporarily close a large pork plant in Waterloo, Iowa, starting in late-April as many workers were calling out sick.

May 4, 2020

COVID-19 Idea Apple Raises Dividend, Continues With Massive Share Repurchases
Image Shown: Shares of Apple Inc have sharply rebounded since falling precipitously from the start of 2020 through March, keeping in mind we removed shares of AAPL from our newsletter portfolios back on January 13, 2020 (link here), when shares of Apple were trading well over $300 per share. We announced on March 17, 2020, that we like Apple as a way to ride out the ongoing coronavirus (‘COVID-19’) pandemic. Apple reported earnings for its second quarter of fiscal 2020 (period ended March 28, 2020) that beat both consensus top- and bottom-line estimates. The company also pushed through a 6% sequential increase in its quarterly payout, bringing it up to $0.82 per share or $3.28 per share on an annualized basis. At the new payout rate, shares of AAPL yield ~1.1% on a forward-looking basis as of this writing. We highlighted Apple as a COVID-19 idea back on March 17 (article here) considering its enormous net cash balance and strong cash flow profile provides the firm with the strength to emerge on the other side of the pandemic with its financials intact. Given its large net cash position, Apple increased its share buyback authority by $50.0 billion in conjunction with its latest earnings report.