Valuentum Exclusive Analysis for the Discerning Investor

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Aug 20, 2020

ALERT: Newsletter Portfolio Changes; Investing Is Simple, Not Easy

Aug 20, 2020

BHP Group Shakes Up Long-Term Strategy
Image Source: BHP Group Ltd – Full Fiscal Year 2020 IR Earnings Presentation. Though burdened by its net debt load, BHP Group has done a solid job navigating the storm created by COVID-19 so far. While production at several of its mines was negatively impacted during the first half of calendar year 2020 (second half of BHP Group’s fiscal 2020), BHP Group has implemented new procedures to ensure its employees can stay safe while mining operations resume in earnest. We appreciate management’s pivot away from some of BHP Group’s legacy assets. To read more about BHP Group, please check out our June 2020 article highlighting our thoughts on how the firm is capitalizing on the ongoing economic recovery in China.

Aug 14, 2020

Our Thoughts on Chevron Buying Noble Energy
Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation. On July 20, Chevron Corp announced it was acquiring Noble Energy through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping in mind the firm had approximately 1.85 billion shares outstanding on a weighted-average diluted basis as of the second quarter of 2020. The deal is expected to close during the fourth quarter of this year and is forecasted to generate $0.3 billion in annualized run-rate cost synergies one year after closing.

Aug 13, 2020

Berkshire Hathaway Recovering Lost Ground
Image Shown: Shares of Berkshire Hathaway Inc Class B started to recover some of their lost ground in early-July, and the company’s second quarter earnings report has kept the momentum going in the right direction. On August 8, Berkshire Hathaway reported second quarter 2020 earnings that beat consensus top- and bottom-line estimates. Due to the impressive recovery in US equity markets since bottoming in late-March, Berkshire Hathaway’s investment portfolio put up tremendous performance last quarter, though its first quarter performance was harrowing. We include Berkshire Hathaway Class B as a holding in our Best Ideas Newsletter portfolio.

Jul 6, 2020

Berkshire Hathaway Expands Its Bet on North American Natural Gas
Image Shown: A look at the Cove Point LNG export facility in Maryland, one of half a dozen that are currently operational in the US. Image Source: Dominion Energy Inc – February/March 2018 Fixed Income Investor Meetings Presentation. On July 5, Berkshire Hathaway Energy, a majority-owned subsidiary of Berkshire Hathaway Inc, announced it was acquiring natural gas pipeline and storage assets along with an equity stake in a liquified natural gas (‘LNG’) export facility in Maryland from Dominion Energy Inc. This deal is valued at $9.7 billion by enterprise value and is expected to close by the fourth quarter of 2020. We continue to like Berkshire Hathaway in the Best Ideas Newsletter portfolio.

Jun 24, 2020

Steel Dynamics Bets Big on North America’s Industrial Economy
Image Source: Steel Dynamics Inc – June 2020 IR Presentation. Investor sentiment towards the steel industry is rebounding as the medium- and long-term outlook for global industrial activity has improved markedly since March 2020. The ongoing coronavirus (‘COVID-19’) pandemic has significantly hampered near-term industrial activity, though major fiscal stimulus packages (made feasible through major monetary stimulus programs) launched in various developed nations could provide some relief. Shares of Steel Dynamics have recovered meaningfully since their March 2020 lows and are trading a tad below our fair value estimate as of this writing. Shares of STLD yield ~3.6% on an annualized forward-looking basis as of this writing and we give the steel maker a Dividend Cushion ratio of 1.3x providing for a “GOOD” Dividend Safety rating. The company has made great strides in improving its financial position over the past several years. We will first provide some background on the fiscal stimulus measures that have either been approved and or proposed in key economies across the world, before digging deeper into Steel Dynamics.

Jun 16, 2020

Exxon Mobil Puts on a Brave Face
Image Source: Exxon Mobil Corporation – November 2019 Guyana IR Presentation. Near-term oil prices and most importantly, the oil price futures curve, have improved materially since just a couple of months ago when it looked like the sky was falling. For the first time ever, WTI turned negative in April 2020 for physical deliveries due May 2020 of light sweet oil to Cushing, Oklahoma, as storage options were limited (and arguably, many speculators had jumped into the market not fully aware of the risks they were taking on). Exxon Mobil Corp has seen its share price recover considerably since the drop, though we caution that management’s commitment to the dividend will prove a hard task if things do not improve materially in the short-term. As of this writing, near-term futures for WTI and its international counterpart Brent are trading near $40 per barrel. In the face of COVID-19, low raw energy resource prices (Exxon Mobil’s upstream operations form its largest single business segment), and subdued demand for refined petroleum and petrochemical products (from gasoline to plastics) have significantly weakened Exxon Mobil’s cash flow profile. The ongoing coronavirus (‘COVID-19’) pandemic has shaken energy markets to their core in ways we have not seen ever before. Shares of XOM yield ~7.4% as of this writing. We give Exxon Mobil a Dividend Cushion ratio at 0.2, though its Dividend Safety rating is “GOOD” given the company’s ability to tap capital markets, especially debt markets as the oil giant carries high quality “A-rated” investment grade credit ratings. There is a limit to how much debt Exxon Mobil can take on to cover its dividend obligations, however, which we will cover in greater detail in this article.

Jun 11, 2020

5 Years Later – #ThrowbackThursday on MLPs
Since Valuentum warned against the significant risks of the MLP business model June 11, 2015, on a price basis, the Alerian MLP ETF has fallen by more than 65%, while the S&P 500 has surged nearly 50%. There have been dozens and dozens of explicit (or phantom) MLP distribution cuts since we released our thesis 5 years ago to this day, and many MLPs have subsequently simplified their business models, rolling up into C-corps, as we predicted.

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

What To Do Now?
Let's get President of Investment Research Brian Nelson's thoughts...