Valuentum Exclusive Analysis for the Discerning Investor

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Nov 10, 2022

Oracle’s Long-Term Outlook Remains Bright
Image: Oracle has some lofty targets for fiscal 2026, and we were encouraged by recent commentary from the firm. Image Source: Oracle. There are always risks to achieving mid-cycle expectations, but even if Oracle comes up a bit short of fiscal 2026 targets, we like the company’s encouraging outlook. A strengthening U.S. dollar could hurt performance a bit and while we’ve expressed concerns about the company’s ~$91.6 billion debt position in the past, the company has sufficient liquidity as it optimizes its business following the Cerner transaction. In the event that dividend growth slows in the coming years due to debt service obligations, we won’t hesitate to reevaluate our views on shares, however.

Nov 9, 2022

Taiwan Semiconductor’s Operations Remain Solid But Uncertainty Has Punished the Stock
Image: Taiwan Semiconductor’s shares have faced considerable pressure during 2022, despite strong operational performance. We’re disappointed with the performance of Taiwan Semiconductor’s stock during 2022. Operational performance has been strong, but uncertainty stemming from weakness across the tech space to rising Sino-American tensions have punished shares. We continue to monitor its equity performance closely.

Nov 9, 2022

ALERT: Replacing Disney with Republic Services in BIN Portfolio
Image Source: Valuentum. With content costs on the rise and the potential for the streaming business to become irrational as rivals fight for the incremental customer, Disney has a tough road ahead of it, in our view. Its ‘Parks, Experiences and Products’ segment is recovering nicely from the COVID-19 lockdowns, but losses in its ‘Media and Entertainment Distribution’ business remain very concerning in a difficult advertising environment. Disney has already cut its dividend payout, and while the firm remains free cash flow positive, we’re not fans of its massive net debt position. Our updated fair value estimate of Disney now stands at $93 per share, and it no longer fits the bill of a best idea. We’re replacing it with Republic Services in the simulated Best Ideas Newsletter portfolio. The change will be reflected in the next edition of the Best Ideas Newsletter.

Nov 7, 2022

We’ve Updated Our Fair Value Estimate of Boeing; Has Aerospace Bottomed?
Image: Boeing is expecting to turn the corner with respect to positive free cash flow in 2022 and grow it to ~$10 billion annually by 2025/2026. We think this is achievable. Image Source: Boeing. The breakout of COVID-19 wreaked havoc on the airline business and the commercial aircraft-making business alike. But has the commercial aerospace industry finally bottomed?

Nov 6, 2022

Shares of Lithium Producer Albemarle Are Soaring So Far In 2022
Image: Albemarle's shares have rocketed higher the past few years and are soaring during 2022. We think Albemarle remains a great fit for ESG-related investment considerations, and we’re sticking with shares in the ESG Newsletter portfolio following the company’s third-quarter results, released November 2. The lithium producer remains well-positioned, and its growth rates remain fabulous in an undersupplied market. Prices for lithium can be volatile at times, but Albemarle’s financial leverage remains manageable, and the firm expects to churn out free cash flow during 2022 as it continues to invest aggressively in its business and pay out dividends to shareholders. Albemarle’s fundamental and relative share-pricing strength have been a sight to see thus far in 2022. We still like shares of Albemarle based on the high end of our fair value estimate range.

Nov 4, 2022

Life Storage Operates Within An Attractive Slice of the REIT Sector
Image Source: Life Storage. Life Storage operates in one of the most attractive areas of the REIT sector, the self-storage arena. The company has raised its dividend considerably during the past five years, and its 35-year history in the self-storage business coupled with its investment-grade credit ratings speak to sustainability. We like its diversified, coast-to-coast presence in the U.S. with roughly 60% of its owned stores positioned in the fast-growing Sun Belt states. Since 2010, Life Storage has raised its dividend at a 10.4% compound annual growth rate, and we expect further hikes to come. Shares yield ~4.2% at this time.

Nov 3, 2022

Realty Income: An Outperformer in 2022
Image Source: Realty Income. We continue to be impressed with Realty Income’s ability to keep raising its dividend payout, and while REIT economics have deteriorated in 2022, the company is doing much better than peers. We’re not fans of the capital-market dependence risk of REITs, in general, and Realty Income holds a rather elevated net debt to annualized pro forma adjusted EBITAre ratio of 5.2x, but we’re sticking with the company as an idea in the simulated Dividend Growth Newsletter portfolio at this time. The company has raised its dividend 117 times since it was listed on the New York Stock Exchange in 1994.

Nov 3, 2022

ALERT: Replacing Qualcomm with McDonald’s in Dividend Growth Newsletter Portfolio
Image: The semiconductor space is experiencing a number of headwinds, and while we still like Qualcomm’s long-term prospects, we’re replacing it with McDonald’s in the simulated Dividend Growth Newsletter portfolio. Image Source: Qualcomm. We’re huge fans of Qualcomm’s business model over the long haul, but risks continue to add up. First, the adjustment in the pace of Qualcomm’s expectations for handset volumes for calendar 2022 is rather concerning, given the delta from its commentary in July and over a period of what is only a couple months remaining this year. In light of U.S.-China geopolitical tensions, new export restrictions on chip technology to China (announced October 7) that are further complicating industry matters, and Qualcomm customers retrenching by drawing down on their inventory, we’re going to remove the small “position” in Qualcomm in the simulated Dividend Growth Newsletter portfolio. McDonald’s will be taking its place in the portfolio. This change will be reflected in the next edition of the Dividend Growth Newsletter.

Nov 2, 2022

ALERT: Replacing DLR with XLE in DGN and HYDN Portfolios; Public Storage Remains One of Our Favorite REITs
Image: Public Storage's one-time dividend issued this year has been fantastic for income investors. Image Source: Public Storage. The REIT space has had a difficult time this year. Public Storage, which reported results November 1, remains one of our favorite REITs, but we are making a change to remove DLR in the simulated Dividend Growth Newsletter (DGN) portfolio and High Yield Dividend Newsletter (HYDN) portfolio and replace it with the Energy Select Sector SPDR (XLE). The changes will be reflected upon the release of each newsletter's next edition. We continue to monitor the REIT space cautiously as interest rates rise, and as investors seek out alternatives for income, including I-Bonds yielding 6.89% and certificates of deposit approaching 4% yields.

Nov 1, 2022

Newmont Reports Challenging 3Q, But the Stock Is a Key Diversifier in the Dividend Growth Newsletter Portfolio
Image Source: Newmont Mining. Newmont’s performance in the third quarter of 2022 is not what we would be looking for in one of our best ideas. We prefer strong free cash flow generators and those with hefty net cash positions, but as one of the rare ideas in the metals and mining arena in the Dividend Growth Newsletter portfolio, we’re not rushing to remove it. Newmont boasts a solid investment-grade credit rating, and while the near term has been tough for shares, it offers a unique dividend policy that embraces a base annualized dividend of $1.00 per share, payable at $1,200/oz gold price, with an incremental dividend payment targeting 40%-60% of incremental attributable free cash flow above the base gold price assumption. Newmont’s free cash flow generation and dividend payment are heavily tied to the price of gold, and while costs have increased at the mining giant in this inflationary environment, the company remains one of the best dividend plays to gain exposure to potentially rising gold prices in an inflationary environment, in our view. We continue to like its diversification benefits in the simulated Dividend Growth Newsletter portfolio.