Valuentum Exclusive Analysis for the Discerning Investor

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Jul 26, 2021

Chinese Stocks Getting Hammered
Image shown: A confluence of factors are driving Chinese stocks lower, not the least of which is heightened regulatory concerns.Investing is really simple. You don’t need to find terribly underfollowed ideas to do well, just mispriced ones. For example, Alphabet is up over 80% the past 52 weeks, and the company has been a top weighting in the Best Ideas Newsletter portfolio for some time. Facebook has also been an outperformer. There’s no need to make things complicated. Focus on undervalued stocks on a DCF basis that have strong market support through relative strength or a solid technical breakout--and stay away from those net-debt heavy, low valuation multiple value traps!

Jun 1, 2021

ICYMI -- Video: Exclusive 2020 -- Furthering the Financial Discipline
In this 40+ minute video jam-packed with must-watch content, Valuentum's President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He'll talk about what companies Valuentum likes and why, and which areas he's avoiding. This and more in Valuentum's 2020 Exclusive conference call.

May 6, 2021

3 Strong Dividend Payers to Consider Within Consumer Staples
Image: Kellogg has raised its dividend payout each year since 2005. Image Source: Kellogg. Kellogg, Colgate-Palmolive, and Clorox offer investors solid exposure to the consumer staples space, while showcasing impressive track records with respect to dividend growth. Each has a net debt position, but all three generate traditional free cash flow in excess of cash dividends paid, meaning growth in each of their payouts should be expected. Clorox has the highest Dividend Cushion ratio of 1.6 at this time (Kellogg’s is 0.1, while Colgate-Palmolive’s is 1.4), and as one might expect, Clorox’s dividend growth prospects are the strongest out of this bunch. For example, Clorox raised its annual payout more than 7% during fiscal 2020, while both Kellogg and Colgate-Palmolive have had more modest dividend increases in recent years. Evaluating the cash-based sources of intrinsic value helps one derive a fair value estimate range, as it helps rank dividend health and dividend growth, as shown in this group's respective Dividend Cushion ratios. All things considered, Kellogg, Colgate-Palmolive, and Clorox could be valuable additions to a diversified dividend growth portfolio.

Apr 23, 2021

P&G and Kimberly-Clark Tell Two Different Stories
Image Shown: Since the beginning of 2019, on a price-only basis, Procter & Gamble (orange) has handily outpaced the Vanguard Consumer Staples ETF while Kimberly-Clark (turquoise) has stumbled. Procter & Gamble’s shares have been on an incredible run the past couple years, with the company driving strong organic revenue and earnings per share growth. Kimberly-Clark, on the other hand, has been executing poorly in a market environment where one might think it should be excelling. Both of these stocks are dividend growth giants, with P&G boasting a 65-year dividend growth track record and Kimberly-Clark stringing together 49 consecutive annual dividend increases. Both also have strong Dividend Cushion ratios of 1.8 at this time, suggesting resilient dividend coverage on a go-forward basis. That said, investors will have to pay up for P&G’s dividend strength and operational tailwinds, as shares are a bit pricey based on our fair value estimate range, and even Kimberly-Clark’s valuation is only slightly more reasonable after its sharp drop following the 2021 earnings guidance cut. We expect to make a few tweaks to our valuation models following their respective calendar first-quarter 2021 reports, but if we had to pick between these two dividend growth behemoths, P&G looks like the better relative play. Shares of P&G yield ~2.6%, while shares of Kimberly-Clark yield 3.3%.

Apr 8, 2021

The Best Years Are Ahead
The wind is at our backs. The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets to remain overpriced for some time). Bond yields are paltry and will likely stay that way for some time, requiring advisors to rethink their asset mixes. The stock market looks to be the place to be long term, as it has always been. With all the tools at the disposal of government officials, economic collapse (as in the Great Depression) may no longer be even a minor probability in the decades to come--unlike in the past with the capitalistic mindset that governed the Federal Reserve before the “Lehman collapse."

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Jan 29, 2021

Dividend Increases/Decreases for the Week January 29
Let's take a look at companies that raised/lowered their dividend this week.

Jan 27, 2021

ALERT: Raising Cash in the Newsletter Portfolios
Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we're raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. For more conservative investors, the high end of this range may even be larger, especially considering the vast "gains" from the March 2020 bottom and the increased systemic risks arising from price-agnostic trading (read Value Trap). The individual holdings will be reduced in proportion to arrive at the new targeted cash weighting in the respective simulated newsletter portfolios. The High Yield Dividend Newsletter and Dividend Growth Newsletter are scheduled for release February 1. We'll have more to say soon.

Jan 27, 2021

Fourth Quarter Earnings Reports Coming In: INTC, GGG, KMB, STLD
Image Source: Kimberly Clark Corporation – Second Quarter of Fiscal 2021 Earnings IR Presentation. Fourth quarter 2020 earnings season is upon us. In this note, we walk through the reports of four companies issuing results: Intel, Graco, Kimberly Clark, and Steel Dynamics. Intel is making the right call by seeking to outsource some of its production needs given its inability to produce certain current- and next-generation chips. For companies operating in the industrial sector, it appears that after a challenging first half of 2020, things are now recovering in earnest. The industrial economy appears to have entered 2021 with momentum, keeping short-term headwinds in mind. Consumer staples entities experienced strong demand growth in 2020, though it appears that many companies operating in the space now expect their organic sales growth to moderate in 2021 as the uplift from “pantry stockpiling” fades.

Dec 25, 2020

All I Want for Christmas Are Dividend Aristocrats
Image Source: 5 Furlongs. It may not be as catchy as Mariah Carey's Christmas hit, "All I Want For Christmas Is You," but if you ask a dividend growth investor what they might want for Christmas as it relates to an investment, they might start singing about a long list of Dividend Aristocrats--a list of companies that have increased their dividends in each of the past 20-25+ years. Therefore, we wanted to do something special this Christmas for members. We've aggregated a list of every non-financial Dividend Aristocrat in our 16-page stock report coverage universe and made a list conveniently available, including some key data and links directly to their 16-page stock reports (pdf). To access the 16-page stock report of any company on this list, just click on its name, and you'll be prompted to download that particular company's 16-page stock report pdf file. Remember, we provide separate Dividend Reports for stocks, too. For example, the 16-page stock report pdf file that is linked to a company's name in this article is only a portion of the research, commentary, ratings and data on that particular company. Let's take Emerson Electric as an example. Not only does it have a 16-page Stock Report and additional Valuentum commentary via articles and notes, but it also has a Dividend Report. Both pdf reports can be downloaded on its stock web page (the pdf icons are to the right of the stock chart). We hope you enjoy the vast amount of research connected to the download links on this list. Each company's fair value estimate, Dividend Cushion ratio, Economic Castle rating and much more is backed by our three-stage discounted cash flow process with fully populated financial statements, available by request from Gold and Platinum members. Please download away! What's your favorite Dividend Aristocrat? Comments welcome.