Valuentum Exclusive Analysis for the Discerning Investor

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Jan 28, 2023

We Don’t Think Intel Will Spoil the Tech Rally
Image Shown: The Invesco QQQ ETF has broken through its technical downtrend, and we don’t think Intel’s poor outlook will derail this tech rally. Image Source: TradingView. Intel no longer is the bellwether it once was. Its market capitalization has dwindled significantly in recent years and now stands at ~116.5 billion, lower than Advanced Micro Devices' market capitalization of ~$121.6 billion, Texas Instruments' market capitalization of ~$158.8 billion, and Nvidia’s market capitalization of ~$501 billion. Taiwan Semiconductor has a market capitalization of ~$431 billion, while ASML Holding has a market capitalization of ~$268 billion. Intel no longer is what it once was, and as such, we don’t think its poor and borderline shocking outlook will derail a tech rally that could have significant legs. We still like these markets, and we don’t think Intel will spoil the party.

Jan 26, 2023

Market-Cap Weighted S&P 500 Breaks Out; Have We Already Seen the Bottom?
Image: The market-cap weighted S&P 500 (SPY) has broken through its downtrend. The markets could be headed meaningfully higher. Image Source: TradingView. The market-cap weighted S&P 500 has broken out of the technical downtrend that defined 2022 following the equal-weight breakout that preceded it. The pace of inflation looks like it peaked in June 2022, and while myriad risks to both the economy and stock market remain, fourth-quarter 2022 earnings season is shaping up better than feared. We maintain our view that the markets remain at critical technical levels, and we continue to monitor earnings season and technical developments closely.

Jan 24, 2023

Manpower Group’s Massive Free Cash Flow Yield Facing Some Pressures; Shares Have Dividend Yield of ~3%
Image: Manpower Group is a tremendous generator of free cash flow, though performance can be lumpy at times. Image Source: Manpower Group. Manpower Group has been acquisitive and is facing increased competition of late, but the company’s financials, particularly its free cash flow generation, remain quite attractive. The firm continues to buy back stock at a nice clip, too, as it pays its attractive semi-annual dividend of $1.36 per share. Though its free cash flow yield will face some pressure using pending 2022 results, Manpower Group could be an idea for investors seeking equities with outsized free cash flow yields in this market, in our view. We expect to fine-tune our assumptions within our discounted cash-flow model once the company’s fourth-quarter results are released in the coming weeks, but very few non-energy firms have such a strong normalized free cash flow yield as that of Manpower Group.

Jan 22, 2023

What So-Called Statistical “Value Premium?”
Image: The iShares Russell 1000 Growth ETF has outperformed the iShares Russell 1000 Value ETF by nearly 250 percentage points over the past two decades. Image Source: TradingView. This article shows that there may be hundreds, if not thousands, of ways to measure “value” versus “growth,” and different time horizons can be used to tell different stories about “value” versus “growth," but we think a 20-year horizon using the IWD versus the IWF is a great example of why relying blindly on empirical, evidence-based analysis within backtests employing realized historical data can be quite painful. Whatever one believes, however, the intelligent investor shouldn’t be surprised by any of the findings in this article. In the field of finance, there’s just not much substance behind empirical, evidence-based, backtests that are based solely on realized historical data, in our view, when markets themselves are in (large) part a function of future expectations of “coupons,” as Warren Buffett explains.

Jan 20, 2023

Why Are the Dividends of REITs So Risky?
REITs, as measured by the Vanguard ETF (VNQ), have generated a total return of 39.5% since the beginning of 2015 through the end of 2022, an eight-year period that has translated into a measly compound annual return of just 4.25%. This compares to a total return of the Vanguard S&P 500 ETF (VOO) of 116.3%, which translates into a compound annual return of 10.1% over the same time period. Not only have REITs underperformed terribly during the past 8 years, but there have been more than 100 dividend cuts by REITs over this time period, too. REITs just aren’t what some make them out to be. Be careful.

Jan 17, 2023

Goldman Sachs Drops, Morgan Stanley Pops in “Bull Market for Advice”
Image: Morgan Stanley’s ‘Wealth Management’ division has provided the company with stability, while Goldman Sachs continues to feel weakness across several of its business segments. Image Source: TradingView. Banking entities have kicked off fourth-quarter 2022 earnings season. The quarterly results across those that have reported have been mixed thus far, among the largest entities, but perhaps the dichotomy among players was no more pronounced than the market’s reaction to Goldman Sachs’ and Morgan Stanley’s respective fourth-quarter 2022 results. Goldman Sachs’ shares fell to the lower end of our fair value estimate range, while Morgan Stanley’s shares surged toward our fair value estimate. We think Morgan Stanley’s shares could run to the high end of our fair value estimate range, or $118 each, in part on the basis of technical momentum, but we’re not making any changes to our banking fair value estimates following the results at this time.

Jan 13, 2023

UnitedHealth Is A Free Cash Flow Powerhouse; Shares Yield ~1.3%
Image Source: UnitedHealth Group. Very few firms have the type of free cash flow conversion as that of UnitedHealth Group, and the company’s free cash flow coverage of its cash dividends remains phenomenal, all the while its balance sheet remains as strong as ever. We expect the firm to continue to raise its 2023 guidance throughout the year as momentum behind its UnitedHealthcare and Optum divisions accelerate. The executive team remains confident that it will achieve its long-term goal of growing earnings per share in the range of 13%-16% per annum, and while that may seem aggressive, it is achievable, in our view. Healthcare spending remains a large part of U.S. GDP, and we expect overall spending on healthcare to continue to expand at a rapid clip in coming years. We continue to like UnitedHealth Group as a dividend growth idea, and its financials speak to tremendous payout support.

Jan 12, 2023

Taiwan Semiconductor’s Shares May Have Bottomed
Image: We’re liking the technical bottom forming in Taiwan Semiconductor’s shares. Image Source: TradingView. Everyone has their eyes on Taiwan Semiconductor these days. The firm is the center of attention with respect to Sino-American relations, and the risk that China may invade Taiwan has added a degree of uncertainty to shares that is almost impossible to quantify within general valuation frameworks. Headquartered in Hsinchu, Taiwan, the world’s largest pure-play semiconductor foundry is a key bellwether for an area within technology that has faced considerable pressure during the past year. However, from our perspective, shares of Taiwan Semiconductor look to have carved out what we believe to be a technical bottom, and the high end of our fair value estimate range of $90 speaks to more upside potential.

Jan 10, 2023

Dow Laggard Walgreens Boots Alliance Yields North of 5%; Has Raised Dividend for 47 Consecutive Years
Image: Walgreens Boots Alliance’s shares have been pummeled during 2022. Image Source: TradingView. Key metrics, including free cash flow and adjusted earnings per share, aren’t presently moving in the right direction at Walgreens Boots Alliance, but free cash flow generation remains in excess of cash dividends paid. The company, and its predecessor firm, Walgreen Co., have paid 360 straight quarters of dividends over the past 90 years, too, raising the payout in each of the past 47 years. It’s absolutely amazing for a company to have such a storied history and reliable dividend track record, but it’s also worth emphasizing Walgreens Alliance Boots is far from a simple story these days. Still, with a 5%+ forward estimated dividend yield, this component of the Dow Jones Industrial Average is worth a close look.

Jan 9, 2023

Exact Sciences: Fast-Growing Molecular Diagnostic Company But Huge Risks
Image Source: Exact Sciences. Though Exact Sciences is experiencing strong top-line momentum in its business at the moment given its recent upward guidance revision for 2022, its net losses remain huge while its net debt position remains large. We also can’t forget that Exact Sciences recently lowered its full-year 2022 guidance in August, so visibility behind its operations is also somewhat limited, in our view. That said, Exact Sciences’ stool-based Cologuard test has a massive long-term market opportunity, but competition from procedure-based detection technologies and other potential new entrants looking to develop their own stool-based colorectal cancer tests means its long-run outlook is just too murky for us to get excited about shares. Regardless, Exact Sciences' equity has soared more than 20% to start 2023, and we’ve taken notice of the speculative pop.