Valuentum Exclusive Analysis for the Discerning Investor

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Apr 27, 2020

COVID-19 Idea Consideration Chipotle Continues to Deliver
Image Shown: Shares of Chipotle Mexican Grill Inc have sharply rebounded over the past month as investors started to take into consideration the firm’s pristine balance sheet, ability to meet consumer demand via delivery services, and quality cash flow profile, keeping short-term headwinds in mind. On April 21, Chipotle Mexican Grill reported earnings for the first quarter of 2020 that beat both consensus top- and bottom-line estimates. Same-store sales rose 3.3% year-over-year almost entirely due to the strength of its digital business where sales were up almost 81% and represented over 26% of Chipotle’s sales last quarter. Chipotle’s GAAP revenues were up almost 8% year-over-year last quarter though its GAAP operating income fell by over 35% due to elevated operating costs as the firm coped with the emerging (at the time) coronavirus (‘COVID-19’) pandemic. In particular, ‘food, beverage and packaging’ and wage expenses were elevated as Chipotle adjusted its business.

Apr 27, 2020

Intel Is Well-Positioned to Ride Out the Storm
Image Source: Intel Corporation – January 2020 CES Presentation. Intel Corp reported first-quarter earnings for fiscal 2020 (period ended March 28, 2020) that beat both consensus top- and bottom-line estimates; however, guidance for the fiscal second quarter was softer than expected and shares of INTC initially sold off on the report. However, there’s a lot to like in the update, and we continue to like shares of Intel as a holding in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Intel is very well-positioned to ride out the storm caused by the ongoing coronavirus (‘COVID-19’) pandemic, and shares of INTC yield ~2.3% as of this writing.

Apr 27, 2020

Coca-Cola’s Debt Load Makes It Difficult to Navigate Rough Market Conditions
Image Source: The Coca-Cola Company – First Quarter Fiscal 2020 Earnings IR Presentation. On April 21, Coca-Cola reported first-quarter fiscal 2020 earnings (period ended March 27, 2020) that beat both consensus top- and bottom-line estimates, and furthermore, flat organic sales beat consensus estimates as well (which analysts expected would decline modestly year-over-year). Coca-Cola’s Asia Pacific business was weakened by the coronavirus (‘COVID-19’) pandemic and organic revenues in the region (an adjusted non-GAAP figure) were down 7% year-over-year last fiscal quarter. Strong growth in North America (organic revenues were up 4% year-over-year) and Latin America (organic revenues were up a whopping 13% year-over-year) due to greater sales volumes and favorable price increases/product mix shifts offset weakness in the Asia Pacific region in the fiscal first quarter. However, please note that this picture will likely change in the second fiscal quarter due to the spread of the pandemic worldwide.

Apr 25, 2020

Emergency Update on COVID-19
President of Investment Research at Valuentum, Brian Nelson provides an emergency update on COVID-19. He talks about how policymakers have dropped the ball thus far, and why investors should not let their guards down, despite what has been a nice bounce from the March 23 bottom.

Apr 24, 2020

Dividend Increases/Decreases for the Week Ending April 24
Let's take a look at companies that raised/lowered their dividend this week.

Apr 22, 2020

Lockheed Martin Marches Forward During These Harrowing Times
Image Source: Lockheed Martin Corporation – First Quarter Fiscal 2020 Earnings IR Presentation. On April 21, Dividend Growth Newsletter portfolio holding Lockheed Martin Corp reported first-quarter earnings for fiscal 2020 (period ended March 29, 2020) that beat both consensus top- and bottom-line estimates. Even better, management largely kept Lockheed Martin’s fiscal 2020 guidance intact, save for a marginal reduction in the firm’s expected sales which is primarily due to supply chain and production issues the ongoing coronavirus (‘COVID-19’) pandemic is creating for Lockheed Martin’s ‘Aeronautics’ business. With that in mind, Lockheed Martin is still forecasting for ~6% revenue growth this year, highlighting the resilience of defense contractor’s financials even during harrowing times such as these. Shares of LMT yield ~2.6% as of this writing.

Apr 21, 2020

Macy’s Will Find It Difficult to Unlock the (Fair) Value of Its Real Estate
Image Source: Valuentum. The embattled department store Macy’s suspended its dividend and drew down its revolving credit line on March 20 in order to shore up its financial position in the face of the ongoing coronavirus (‘COVID-19’) pandemic. All of Macy’s physical stores were temporarily closed on March 18, though some might shut down for good given the company’s financial woes. The fair value estimate of Macy’s is heavily dependent on factors well outside the control of management, and considering the US economy and global economy at-large are sliding toward a pandemic/leverage induced recession/depression, we aren’t optimistic on Macy’s ability to unlock the (fair) value of its real estate. Any real estate sales done in the foreseeable future will likely be at a discount to their fair value. As the firm continues to burn through cash--there’s a very high probability Macy’s will continue to generate negative free cash flows until the “cocooning” of households ends--the clock is working against Macy’s. We are staying away from the name.

Apr 20, 2020

Goldman Sachs Exposed to Too Much Risk
Image Source: Goldman Sachs 1Q2020 Earnings Presentation. Goldman Sachs posted a rough first quarter of 2020, results released April 15, just like its large bank peers. Regarding its on-balance sheet debt and equity investments, we remain very skeptical both about the marks on private equity and amortized cost debt, as well as the appropriateness of holding this size of assets on a leveraged bank balance sheet. In our view, it simply exposes the shareholders to too much risk, and we think these investments should be sold down to reduce risk.

Apr 20, 2020

Citigroup Holding Up Fairly Well
Image Source: Citigroup 1Q2020 Earnings Presentation. As with its large banking peers, Citigroup posted ugly performance in the first quarter of 2020, results released April 15. While there are probably more losses to come in terms of reserve build and future charge offs, especially in the company’s card business, Citigroup has held up reasonably well thus far in the early innings of this downcycle (and as compared to how poorly the bank fared during the Global Financial Crisis last time around).

Apr 19, 2020

ICYMI -- Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?
President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report.