Valuentum Exclusive Analysis for the Discerning Investor

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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 9, 2020

Our Thoughts on Warner Music Group Going Public
Image Shown: Shares of Warner Music Group Corp were trading comfortably above their initial public offering (‘IPO’) price of $25 per share at of the end of normal trading hours on June 8, after going public on June 3. Warner Music went public on June 3, though shares were sold by the company’s stockholders in the IPO and not the firm itself, meaning these proceeds are not expected to go to Warner Music Group. The company owns various record labels including Atlantic Records, Warner Records, Elektra Records and Parlophone Records along with its global music publishing business Warner Chappell Music. For some background, please note Warner Music Group counts Ed Sheeran, Bruno Mars, and Cardi B as some of its recording artists and on the music publishing business side of things songwriters including Twenty One Pilots, Lizzo and Katy Perry are part of the firm’s team. In 2011, Access Industries purchased Warner Music Group and took the company private after the firm was previously publicly traded from 2005 to 2011.

May 28, 2020

CubeSmart’s Financial Flexibility Will Come In Handy
Image Source: CubeSmart – March 2020 Investor Presentation. On May 7, High Yield Dividend Newsletter portfolio holding CubeSmart--5.0% yield--reported first-quarter 2020 earnings. The company pulled its full-year guidance for 2020 given the uncertainties caused by the ongoing coronavirus (‘COVID-19’) pandemic. We appreciate that the self-storage real estate investment trust (‘REIT’) remained comfortably free cash flow positive last quarter, which is one of the reasons why we like CubeSmart as a high yielding play in the REIT world.

May 27, 2020

Earnings Roundup: Week Ended May 24, 2020
Image Shown: In this article we cover a variety of companies that reported earnings in May 2020. As we get deeper into 2020, more companies have reported earnings that covered how they performed during the early days of the ongoing coronavirus (‘COVID-19’) pandemic on both a financial and operational basis. In alphabetical order by ticker: DE, LOW, NVDA, TGT.

May 21, 2020

Covering the US-China “Technological Arms Race”
Image Shown: The future of geopolitical tensions will likely boil down to what some see as a “technological arms race” between the US and China. Image Source: Nvidia Corp – May 2020 Presentation. Given the rise of US-China geopolitical tensions, we wanted to cover the changing state of the semiconductor industry and the rare earth minerals landscape. Recent announcements from Taiwan Semiconductor Manufacturing Company or ‘TSMC’ caught our eye. For some background, in the world of semiconductors, there are what is referred to as fabrication facilities and foundries. The former is used to make chips for internal purposes while the latter contracts out its production capacity to third parties to make chips for external purposes. TSMC is considered a foundry operator, with the second-largest wafer production capacity (silicon wafers are slices of semiconductors) and the largest chip contract producing capacity in the world at the end of 2019 according to some reports.

May 18, 2020

Excited By COVID-19 Vaccine Candidates
Image Shown: The race is on to find a cure, or better yet a vaccine, for COVID-19. Image Source: Pfizer Inc – First Quarter 2020 Earnings IR Presentation. The race for a COVID-19 cure and vaccine is rapidly evolving with a lot of exciting press releases being put forth. Gilead has taken the lead with a viable treatment, Sorrento is working toward a cure, and it seems most all of big pharma and biotech is racing to find a vaccine, from Johnson & Johnson to Sanofi/GSK and beyond. Though the evaluation of the full data set from a Phase 2 clinical trial means a lot more than the evaluation of a limited set of data from a Phase 1 clinical trial, we think COVID-19 is on the run as modern medicine pushes forward. We’re reiterating our bullish take on the markets today, as we believe that the Fed will do anything and everything to keep this market moving higher, meaning stocks may remain divorced both from economic data and even virus data for some time as they continue to climb. We continue to point to ideas in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, High Yield Dividend Newsletter portfolio and Exclusive publication. Our top 10 capital appreciation ideas and dividend growth ideas amid COVID-19, respectively, can be found at the following link, “Valuentum's COVID-19 Ideas Have Outperformed Significantly.” As we walk through a ‘who’s who’ as it relates to COVID-19 vaccine candidates, we maintain our view that investors may be facing a “win-win” situation as we outlined in our piece, “Stay Optimistic. Stay Bullish. I Am.” We remain unequivocally bullish on stocks for the long run.

May 11, 2020

Facebook Is Roaring Higher!
Image Shown: Shares of Facebook (blue line) have roared higher since reaching their March 2020 lows, far outpacing the rebound in the S&P 500 (orange line). We continue to like shares of FB as a top-weighted holding in our Best Ideas Newsletter portfolio. Top-weighted Best Ideas Newsletter portfolio holding Facebook posted first quarter 2020 earnings on April 29 that saw its GAAP revenues jump 18% year-over-year to $17.3 billion while its GAAP diluted EPS grew by 101% year-over-year, hitting $1.71. Please note that Facebook’s bottom-line comparison was made easier due to the firm recording a $3.0 billion legal settlement with the US Federal Trade Commission (‘FTC’) during the first quarter of 2019. While digital advertising spending levels are expected to get crushed in 2020 due to the ongoing coronavirus (‘COVID-19’) pandemic, Facebook communicated to investors that its long-term growth trajectory remained very promising during the firm’s latest quarterly conference call. In our view, digital advertising spending levels will quickly bounce back once economies around the world start to reopen in earnest, though we caution that efforts to reopen the economy and resume “normal” daily activities need to keep in mind the risk another wave of infections imposes.

Apr 29, 2020

Detroit Automakers on the Ropes, Tesla Continues to Dominate
Image Source: GM. We’re not sure the Detroit automakers will ever be the same after COVID-19. The global pandemic might be the knock-out blow that keeps them on the canvas for a long time, as the group continues to face changing consumer preferences and the rise and dominance of Tesla. Cash preservation is the name of the game at the moment, as they await a restart to some of their U.S. operations May 18.

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 23, 2020

Jernigan Capital Fundamentally Transforms Its Business Model
Image Source: Jernigan Capital Inc – March 2020 IR Presentation. Jernigan Capital is now an internally managed real estate investment trust (‘REIT’) that invests in self-storage properties, either directly or by providing funding for developers that build such properties. Shares of JCAP currently yield ~7.8% (as of this writing) in the wake of Jernigan Capital’s stock price selling off aggressively this year, as investor concerns mounted due to the ongoing coronavirus (‘COVID-19’) pandemic. Jernigan Capital is in the midst of a major shift in its business model and overall corporate strategy, and we like the changes management is in the process of making. While these are still early days, plenty is already known about this seismic shift and more information will become available in the coming weeks.