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Fundamental data is updated weekly, as of the prior weekend. Please download the Full Report and Dividend Report for any changes.
Latest Valuentum Commentary

Mar 18, 2020
Banking Entities: The Technicals Tell the Story
Image: The Financial Select Sector SPDR ETF has experienced a tremendous amount of pain in recent weeks.  What is clear is that temporarily shutting down large parts of U.S. economy is absolutely unprecedented, and there will be substantial knock-on effects and difficulties in getting things restarted. This is most especially true if the coronavirus re-emerges following the periods of social distancing around the world, or when the weather turns colder again in the fall, and humanity could be facing a different strand of the coronavirus. Don’t forget that all bank institutions use a lot of financial leverage by their very nature, and the Fed and Treasury can never truly stop a run-on-the-bank dynamic (i.e. that which happened to WaMu in 2008). We think BOK Financial is in particular trouble given its energy loan exposure. Others to avoid include Cullen/Frost Bankers, Cadence Bancorp, and CIT Group. The credit card entities, Capital One and Synchrony Financial may be worth avoiding. We’d stay far away from the regional banks given their exposure to small business pain amid COVID-19. We don’t think the fiscal stimulus on the table does much to help small businesses. Deutsche Bank may be the first of the big European banks to topple, and this weakness could eventually spread to the U.S. banks given counterparty risk. Most foreign banks, including Santander, Credit Suisse, UBS, ING, and BBVA remain exposed to crisis scenarios. We’re also witnessing some very troubling developments with banking preferred shares, with the bank-preferred-heavy ETF, Global X SuperIncome Preferred ETF dropping ~15% during the trading session March 18. The preferreds of HSBC and Ally Financial are top weightings in that ETF. Banking technicals are raising some major red flags across the board, and given actions by the Fed and Treasury, this crisis has all the makings of being worse than the Great Financial Crisis. In any financial crisis perhaps excepting a depression, there can come a time to invest new money in bank stocks. Though it seems likely we have not yet reached the bottom in the markets yet, the highest-ground bank franchises in the US are JPMorgan and Bank of America, in our view. While sharp declines in their equity values may be expected (no one truly knows how deep the coming flood will be), they’re likely to make it to the other side with most of their equity capital firmly intact. With all that said, however, one doesn’t have to hold banking equities. It may be time to phone Mr. Buffett before things really start to unfold.
Mar 15, 2020
Fed Cuts 100 Basis Points, Launches More QE
“Now, stocks and other assets are being sold, some indiscriminately. It is truly becoming a stock pickers market as opposed to a quant-led and index-led market. It takes a different kind of bravery to buy on massive down days and one must have conviction in their research that the company will not go away if massive downside scenarios do in fact emerge.” – Matthew Warren. In this piece, we cover our assessment of what the global markets might be facing in a bull-case, base-case, and bear-case scenario. Our base case is a substantial recession in the US and a financial crisis of some unknown magnitude.
Mar 11, 2020
Worst in Energy Not Over, Stay Away from Leveraged Enterprises, Seeds of Financial Crisis Sown?
Image Shown: The energy and banking markets continue to be experiencing pain. Since we removed the Energy Select Sector SPDR (XLE) and Financial Select Sector SPDR (XLF) from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio, the XLE has fallen more than 50% and the XLF has fallen 13%, while the SPY has held up roughly 2%. We continue to believe staying away from energy and financials/banks will be a source of significant alpha.These are challenging times. The oil price swoon has complicated an already-dire situation with COVID-19. We’re seeing cracks in the credit markets, and the European banking system is far from healthy. The US banks may face knock-on impacts from energy loan defaults and hold significant counter-party risk from their European brethren, which have breached post-Lehman lows. We’re doubtful any fiscal stimulus will stave off this crisis, and it may just set up the markets for the next leg down, if Congress ends up in a stalemate. We will continue to keep our members informed on the state of global energy markets as more information becomes available, but we think avoiding energy and banks/financials will continue to be a source of alpha. We removed the XLE and XLF from the newsletter portfolios in August of last year. We’re reiterating our 2,350-2,750 target range on the S&P 500.
Mar 9, 2020
Oil Markets Get Decimated
Image Shown: Oil prices have been decimated year-to-date. The outlook for independent upstream names has become dire. In an industry that’s generated little to no free cash flow since 2010, and instead has relied heavily on capital markets to stay afloat; for all the hype surrounding surging US production of raw energy resources there hasn’t been much shareholder value creation to show for it. Consumers and certain US states have been big winners, sure, but equity holders and now potentially credit holders have largely taken it on the chin. We will continue following the space for our members going forward, and please note there’s a very good reason we removed the Energy Select Sector SPDR ETF from our newsletter portfolios back in August 2019 (link here), the outlook for the energy space (particularly oil & gas) was lackluster at the time and has since become dire.
Mar 9, 2020
Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?
From Value Trap: “The banking sector was not the only sector that faced considerable selling pressure during the Financial Crisis of the late 2000s, of course. Other companies that required funding to maintain their business operations faced severe liquidity risk, or a situation where refinancing, or rolling over debt, might be difficult to do on fair terms, making such financing prohibitive in some cases. Those that faced outsize debt maturities during the most severe months of the credit crunch faced a real threat of Chapter 11 restructuring had the lending environment completely seized. In thinking about share prices as a range of probable fair value outcomes, equity prices tend to face pressure as downside probabilities such as a liquidity event are baked into the market price and at a higher probability. Because debtholders are higher up on the capital structure than equity holders, shareholders can sometimes get nothing in the event of a bankruptcy filing. Entities that are extremely capital-market dependent, or those that require ongoing access to new capital to fund operations, often face the greatest risk of the worst equity price declines during deteriorating credit market conditions.” Value Trap: Theory of Universal Valuation, published 2018
Mar 8, 2020
Coronavirus Crisis Deepens, Italy on Lockdown
Image: WHO. The epidemic curve of confirmed COVID-19 cases that have been reported outside of China is steepening. Italy remains a hotspot. The situation with COVID-19 remains dire. A vaccine may not be available for another 12-18 months, which is simply too long before what could be an overwhelming of healthcare systems around the globe. The WHO has already revised the expected mortality rate of COVID-19 higher, now 3.4%, and its catastrophic impact on the large economies of China and Italy is already being felt. The US equity markets have largely lulled investors to complacency the past decade or so, and many have been conditioned to largely ignore major events as a result, employing the buy-the-dip-at-any-price mentality and championing “stocks always go up” doctrine. However, the situation with COVID-19 could be setting the stage for an all-out financial crisis, as we outline in this piece here. With the S&P 500 at 2,972, the market continues to largely ignore the long-term risks that may come from changed behavior as a result of COVID-19. We’re reiterating our near-term 2,350-2,750 target on the S&P 500, and we encourage long-term investors to evaluate long-term charts to assess how far we have come since the March 2009 panic bottom, and how even a modest 10-20% sell-off from here (supported by reasonable forward multiples and earnings) would be largely a blip over the long term. This blip, however, may cause an outright panic, made worse by price-agnostic trading. The Fed, for example, made an emergency 50 basis-point rate cut with the market just a few percentage points off all-time highs. Emotions are running high, and investors are simply not ready for COVID-19. All else equal, panic selling is not selling with the S&P 500 at 2,972, today's levels. Just because stock prices have fallen doesn't make them cheaper. Panic selling, for example, might be selling with the S&P 500 at 2,000 (if it ever reaches those levels), and that's if reasonable valuation expectations don't warrant those levels at that time. Today, we're still at relatively overpriced valuation levels on broader market indices, and the sell-off to this point has been more reasonable than overdone, in our view. Please stay safe out there!
Mar 5, 2020
2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?
Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that the decrease in spending is very real, and we’ve yet to see the brunt of the impact yet. We have written extensively about our valuation expectations and target on the S&P 500 in the past, so please don’t mistake this reference as the extent of our thinking. We do not think a sell-off on the S&P 500 to the range is 2350-2750 is too far-fetched, as it really only gets the broader markets back to late 2018 levels (a mere year ago or so), and reflects a reasonable 16x forward expected earnings, as of February 14, hair cut by 10% as a result of the impact of COVID-19. The Fed put may not matter much anymore in the wake of this “biological” crisis, and increased fiscal spending may not be enough to offset what could be sustained weakness across the global economy.
Mar 4, 2020
A ~0.1% Probability Since 1896
Image Source: Wikipedia Commons. "The market crash in the past two weeks has been truly historic: its probability of occurrence is ~0.1% since 1896; the velocity of the plunge and of the VIX surge is the fastest on record; and the 10-year [Treasury yield] is at all-time low. (Hao Hong, BOCOM International, a subsidiary of Bank of Communications, March 1)" -- Howard Marks' memo, Nobody Knows II
Mar 3, 2020
Covering Oil Markets Ahead of the Upcoming OPEC/OPEC+ Meetings
Image Source: Exxon Mobil Corporation – 2019 IR Presentation. On March 5, the Organization of Petroleum Exporting Countries (‘OPEC’) is holding an “extraordinary” meeting in Vienna, Austria, which will be followed up by a ministerial meeting between OPEC and non-OPEC members the next day. The group had already agreed to cut oil supplies by an additional 0.5 million barrels of per day (‘bpd’) back in December 2019 through an agreement that would last through March 2020 (that was on top of an existing deal to keep 1.2 million bpd off of the market which runs through the end of March 2020 as well). As part of that deal, Saudi Arabia offered to “voluntarily” reduce supplies by an additional 0.4 million bpd; however, that hasn’t been enough to prop up oil prices (even though ~1.7-2.1 million bpd of oil supplies are effectively removing removed from the market at 100% compliance). As of this writing, the internationally-oriented May 2020 Brent contracts are trading near $52 per barrel, down from the high $60s level seen at the end of 2019. The US-oriented WTI contracts haven’t fared any better, and April 2020 deliveries are trading near $47 per barrel as of this writing.
Mar 3, 2020
Fed Cuts 50 Basis Points, Expect More Market Volatility Ahead
Image Source: FOMC. The emergency 50-basis point Fed rate cut announced March 3 was largely expected by the marketplace in light of growing economic concerns due to COVID-19, but it does nothing to immunize against COVID-19 and little to stabilize the situation. We continue to monitor the situation closely, and we expect ongoing volatility in the coming days and months as the situation with COVID-19 remains fluid. Having moved to defensive positions in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio in January and having capitalized on the “crash protection” put, we are preparing for our next move. For now, we’re watching and waiting, and we encourage readers that have not yet picked up their copy of Value Trap to do so.


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The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Nelson Exclusive publication, and any reports, articles and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. The sources of the data used on this website are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor and does not offer brokerage or investment banking services. Valuentum, its employees, and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.