Valuentum Exclusive Analysis for the Discerning Investor

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Oct 19, 2020

PepsiCo Earnings Update
Image Shown: PepsiCo Inc’s expansive snacks and beverage portfolio is home to 23 brands that generated $1+ billion in annual retail sales in 2019. We are big fans of PepsiCo’s business model but caution that the firm’s net debt load needs to be closely monitored going forward, especially given management’s generous approach to dividends and share repurchases. Image Source: PepsiCo Inc – CAGNY 2020 IR Presentation. PepsiCo reported third-quarter fiscal 2020 earnings (period ended September 5, 2020) that beat both top- and bottom-line consensus estimates. PepsiCo’s organic revenue growth, a non-GAAP metric, stood out. During the fiscal third quarter and the first three quarters of fiscal 2020, PepsiCo’s organic revenue growth clocked in at 4.2% and 3.6%, respectively, on a year-over-year basis. For the full fiscal year, management is guiding for ~4% annual organic sales growth at PepsiCo. In May 2020, PepsiCo increased its quarterly dividend, and the firm was happy to announce that this marked its 48th consecutive year of annual dividend increases. PepsiCo has paid out quarterly dividends since 1965 and remains very committed to rewarding its shareholders. Organic sales growth will provide a tremendous amount of support to PepsiCo’s cash flows going forward.

Oct 9, 2020

The Resilience of the US Digital Advertising Market and Alphabet
Image Shown: Shares of Alphabet Inc Class C shares, a top-weighted holding in our Best Ideas Newsletter portfolio, have performed very well over the past year. Going forward, we see room for significant capital appreciation upside as the digital advertising market has proven to be very resilient of late. To ride out the ongoing coronavirus (‘COVID-19’) pandemic, we continue to prefer large-cap tech companies with pristine balance sheets, strong cash flow profiles, and promising long-term growth outlooks. Ideally, we are searching for companies with outlooks that are supported by secular growth tailwinds, allowing for several winners in their respective end markets. Digital advertising is a prime example of a resilient high-quality market that is supported by secular growth tailwinds. Alphabet perfectly bits the bill given its ~$117.1 billion net cash position at the end of June 2020 (not including ~$13.0 billion in non-current non-marketable securities, and with no short-term debt on the books), and considering it generated over $14.0 billion in free cash flow during the first half of 2020 alone. We include Alphabet Class C shares as a top-weighted holding in our Best Ideas Newsletter portfolio, and the top end of our fair value estimate range sits at $1,795 per share of GOOG.

Oct 8, 2020

Nelson: I'm Not Worried About This Market
Image Source: The White House. President Donald J. Trump listens as U.S. Surgeon General Jerome Adams delivers remarks and urges citizens to wear masks in public at a coronavirus (COVID-19) update briefing. All things considered, not much has changed since our last update. I think the newsletter portfolios--Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio--are well-positioned for this market environment, our new options idea generation has been great, the Exclusive ideas have had tremendous success rates (we just closed another two winners recently), and we continue to add tremendous value in providing our work in full transparency for readers. Thanks for tuning in.

Oct 6, 2020

Third-Level Thinking and "Keynesian Convergence"
Image: The analytical process of the Valuentum Buying Index rating system. At Valuentum, we seek to identify strong, competitively-advantaged companies that are underpriced [with solid cash-based sources of intrinsic value (net cash, strong expected free cash flows)] whose share prices are either 1) also advancing, 2) have strong relative pricing strength, or 3) have just started to begin to advance toward an intrinsic value estimate (with a nice growing dividend to boot, where applicable). Third-level thinking is our foundation at Valuentum, and it continues to serve investors well.

Sep 3, 2020

3 Lessons in Portfolio Management Over 10 Years
Image Source: http://www.epictop10.com/. "When I left as director in the equity and credit department at Morningstar in 2011, I thought I knew a whole heck of a lot about investing. I felt like I was one in the top 5-10 in the world as it relates to the category of practical knowledge of enterprise valuation (maybe include Koller at McKinsey, Mauboussin at Counterpoint, and Damadoran at Stern on this list). After all, I oversaw the valuation infrastructure of a department that used the process extensively, and the firm was among just a few that used enterprise valuation systematically. Then, at Valuentum, our small team would go on to build/update 20,000+ more enterprise valuation models. There can always be someone else out there, of course, but I don't think anybody has worked within the DCF model as much as I have across so many different companies. That said, through the past near-10 years managing Valuentum's simulated newsletter portfolios, I've also learned a number of things to become an even better portfolio manager." -- Brian Nelson, CFA

Sep 3, 2020

Update: Frequently Asked Questions About Valuentum Securities, Inc.
Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports and dividend reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information. We address a number of questions from both subscribers and visitors to our site.

Sep 1, 2020

Valuentum Website Overview
Overview of the key features of www.valuentum.com (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information.

Jul 24, 2020

Earnings Brief: PEP, CMG, WHR, TSLA, TWTR, KMB
Image Source: Tesla has turned the corner regarding GAAP profitability, and the firm is now generating positive free cash flow, as it sits on billions of cash on the balance sheet. Q2 2020 Update. Second-quarter earnings season is coming in largely as expected. Many of the firms are reporting improving demand through the course of the quarter, and entities that were facing hardship are making the necessary adjustments to improve performance. Pandemic-driven demand has been evident across the consumer staples space, and innovative entities have not stopped innovating as a result of COVID-19. We maintain our view that the world is fighting back against COVID-19, and we expect fundamental performance to continue to improve across myriad sectors as well as a greater “return to normalcy in 2021,” which is but six months away. Accommodative Fed/Treasury policy coupled with substantial increases in money supply may keep this market moving ever-higher in the meantime.

Jul 23, 2020

Earnings Update: LMT, ISRG, KO, PM
Image Source: As with many companies these days, Coca-Cola pulled its 2020 outlook due to uncertainties surrounding COVID-19. Second Quarter 2020 Earnings Call. We released a few preliminary thoughts on second quarter earnings in our note here, but we wanted to elaborate on a few new reports, too. Lockheed Martin is included in the Dividend Growth Newsletter portfolio, while Intuitive Surgical was highlighted as a COVID-19 play during the March swoon. Coca-Cola remains an excellent bellwether on the global economy, while Philip Morris remains a holding in the High Yield Dividend Newsletter portfolio (subscribe). Let’s cover the second quarter reports from these companies in this note.

Jul 1, 2020

July Dividend Growth Newsletter
"The COVID-19 pandemic has all but shown it's not the economy, or next quarter's earnings, or last year's book-to-market ratio or last year's P/E ratio that drives market prices and returns; it's enterprise valuation. Read about the duration of value composition in Value Trap." -- Brian Nelson, CFA