Valuentum Exclusive Analysis for the Discerning Investor

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Feb 20, 2020

SmileDirectClub Comes Under Fire
Image Shown: SmileDirectClub has come under tremendous regulatory fire of late, which has aggressively pressured shares of SDC. We covered SmileDirectClub back in September 2019 shortly after its IPO. Since going public at $23 per share (the unconventional orthodontics company’s shares fell aggressively during their first day of trading), shares of SDC have tanked with an eye towards growing regulatory concerns and related obstacles. We don’t think catching a falling knife is a wise idea and see SmileDirectClub’s problems continuing for some time. SmileDirectClub is standing its ground and has been highlighting the many customers it has served, at a much cheaper cost than traditional orthodontist offerings, but the negative press alone will likely make it much tougher to grow going on a fundamental basis given how this negatively impacts its marketing and advertising campaigns. Should SmileDirectClub lose its ability to operate in California, that would have a profound impact on its trajectory.

Feb 19, 2020

Walmart Reports Fourth Quarter Results, Raises Dividend
Image Source: Valuentum. On February 18, global brick-and-mortar retail bellwether Walmart reported mixed fourth-quarter fiscal 2020 results (ends January 31, 2020) that showed revenue advancing 2.1% and non-GAAP earnings per share of $1.38 missing the consensus forecast. We await the filing of the firm’s 10-K to roll our valuation model forward, but we do not expect to make any material changes to our fair value estimate at this time, which stands at $109 per share. The stock is trading hands at ~$118 per share at the moment.

Feb 18, 2020

Newmont Updates Investors Ahead of Earnings
Image Source: Newmont Corporation – January 2020 IR Presentation. Back on January 13, we added Newmont Corp to the Dividend Growth Newsletter portfolio with a modest weighting as part of our shift towards more defensive names in light of rising exogenous headwinds to global economic activity. Some important considerations include Newmont increasing its quarterly payout to $0.25 per share from $0.14 per share, which is expected to be declared at the level in April 2020 (the fourth quarter of 2019 dividend, as management puts it, will be paid out in March 2020 at $0.14 per share). As of this writing, Newmont would yield ~2.2% at the new annualized dividend rate. We like Newmont’s dividend coverage and its Dividend Cushion ratio sits at a solid 2.2x, keeping in mind that ratio is based on its expected future dividend obligations (we have modeled in the large announced payout increase and single-digit annual payout increases on a per share basis going forward).

Feb 18, 2020

Digital Realty Starts 2020 Off Right
Image Source: Digital Realty Trust Inc – Fourth Quarter and Full-Year 2019 IR Earnings Presentation. On February 13, the data center real estate investment trust (‘REIT’) Digital Realty Trust reported fourth quarter and full-year earnings for 2019 after the market close. The firm’s top-line marginally missed consensus estimates as its funds from operations (‘FFO’) per share modestly beat consensus estimates. Shares of DLR marched up 4% on February 14 as investors priced in the FFO per share beat and recent events. We continue to like shares of DLR as a holding in our Dividend Growth Newsletter portfolio. As of this writing, Digital Realty yields ~3.3%.

Feb 18, 2020

Our Reports on Stocks in the Building Materials Industry
Image Source: Scott. We've optimized our building materials coverage.

Feb 18, 2020

Our Reports on Stocks in the Gaming & Hotels Industry
Image Source: Erin Pettigrew. We've dropped coverage of stocks in the Gaming & Hotels industry.

Feb 14, 2020

Dividend Increases/Decreases for the Week Ending February 14
Let's take a look at companies that raised/lowered their dividend this week.

Feb 13, 2020

What is Risk?
Image Source: Mike Cohen. Let’s start by talking about what isn’t risk. Risk isn’t easily measured, and yet that is what the asset management industry and academia tend to serve up to the average and professional investor alike. You will see the standard deviation of a stock or portfolio, showing how much the value wiggles. You will see beta, which shows how much the value wiggles as compared to the benchmark’s own wiggles. You will see things like the Sharpe and Sortino ratios, which tackle further quantifiable ways to describe risk--and the list of equations goes on and on. Do you know what is a much more difficult question for an asset manager to answer? How much real risk is contained in your portfolio? I was going to say fundamental risk, but real risk is a broader category and what I am driving at in this piece. So, let’s get after it. What is real risk as it pertains to an individual investment or a portfolio?

Feb 13, 2020

Cisco Continues to Showcase Its Free Cash Flow Strength
Image Source: Cisco Systems Inc – Second Quarter Fiscal 2020 IR Earnings Presentation. On February 12, Cisco reported second-quarter earnings for fiscal 2020 (period ended January 25, 2020) that beat consensus estimates on both the top- and bottom-line. However, shares of CSCO still fell initially on the news, possibly due to the company’s forward guidance for the third quarter falling short of expectations. Cisco is currently undergoing a major transition from a company that primarily sells hardware to one that also offers material subscription-based services and software, in order to offset the structural declines facing the enterprise data application management space (which can be summed up as many/most enterprises around the world switching their IT infrastructure needs off-site to more flexible, powerful, and often relatively cheaper cloud computing offerings when considering the dynamic effects of the change). Shares of CSCO are included in both our Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio as we appreciate the strength of its free cash flows, its pristine balance sheet (nice net cash balance), and see the firm’s strategic shift as one with promise (albeit, this is still a work in process).

Feb 12, 2020

Philip Morris International Moving on Upwards
Image Shown: We increased the weighting in shares of Philip Morris International in the High Yield Newsletter portfolio back on November 18, 2019. Shares of PM have rallied aggressively off of their Fall 2019 lows through the middle of February 2020. We continue to like Philip Morris International in our High Yield Dividend Newsletter portfolio, and we remain pleased with our decision to increase the weighting of shares of PM in the portfolio. The company’s guidance for 2020 indicates further improvement in its free cash flow generation, potentially allowing for future per share dividend increases. On a final note, we want to stress that while Philip Morris International’s Dividend Cushion ratio sits at 0.8x, we adjusted its Dividend Safety rating up to GOOD given its ability to refinance its net debt load and the stability of its free cash flows (while Philip Morris International is a capital market dependent entity, the firm retains quality access to capital markets). When we update our tobacco models, there’s a good chance the company’s Dividend Cushion ratio will improve given its declining net debt load, rising free cash flows, and improving outlook.