Valuentum Exclusive Analysis for the Discerning Investor

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May 13, 2020

Realty Income Signals Turbulence Ahead, Shores Up Liquidity Position
Image Source: Realty Income Corporation – First Quarter of 2020 Earnings IR Presentation. On May 4, the real estate investment trust (‘REIT’) Realty Income Corp posted first-quarter 2020 earnings that saw its adjusted funds from operations (‘AFFO’) per share jump by over 7% year-over-year, hitting $0.78 last quarter. Realty Income pays out a monthly dividend, and shares of O yield ~5.1% as of this writing. We like the REIT’s business model, which invests in single-tenant commercial properties, and view Realty Income as well-positioned to ride out the ongoing coronavirus (‘COVID-19’) pandemic. However, we caution that its near-term financial performance will come under fire from some of its tenants no longer being able to (or willing to) pay rent due in part to the economic downturn. As roughly half of its tenants carry investment-grade credit ratings, Realty Income is in a better position than some of its peers. Most of Realty Income’s tenants have continued to pay rent during the pandemic, at least during the early stages of the crisis, and the REIT is working with its troubled tenants to find a solution that suites the interests of both parties.

May 11, 2020

Republic Services: “The Worst Is Behind Us…”
The waste industry has a number of cost levers to pull to overcome profit pressures in its residential pick-up operations and reduced volume in its commercial and industrial operations, the latter a higher margin proposition. However, economic activity seems to be picking up, and some are saying the worst may be behind us. Our favorite waste hauler is Republic Services.

May 8, 2020

Disney’s Financials Will Eventually Rebound
Image Source: Marc Levin. On May 5, The Walt Disney Company reported second quarter earnings for fiscal 2020 (period ended March 28, 2020) that beat consensus top-line estimates but missed consensus bottom-line estimates. The firm’s financial and operational performance has taken a hit from the ongoing coronavirus (‘COVID-19’) pandemic; however, in our view the firm will bounce back once considerably a COVID-19 vaccine becomes available (which isn’t a certainty, but a lot of companies are actively pushing forward with human clinical trials as we speak including this firm). We continue to like Disney with a modest weighting in the Best Ideas Newsletter portfolio.

May 8, 2020

Dividend Increases/Decreases for the Week Ending May 8
Let's take a look at companies that raised/lowered their dividend this week.

May 7, 2020

Best Idea PayPal Soars on Very Promising Outlook
Image Shown: Best Ideas Newsletter portfolio idea PayPal is surging after a strong outlook that speaks to underlying strength of the “new” consumer in a post COVID-19 world. On May 6, one of our favorite companies PayPal reported first quarter 2020 earnings. While PayPal missed consensus estimates on both the top- and bottom-line, investors looked towards the future and shares of PYPL rose sharply after the report on May 7. We continue to like PayPal as a near top-weighted holding in our Best Ideas Newsletter portfolio. Please note we increased the weighting of PYPL shares in that newsletter portfolio back on January 13, 2020 (link here) and further increased PayPal’s weighting in our Best Ideas Newsletter portfolio after going “fully invested” in April 29, 2020 (link here). The top end of our fair value estimate range sits at $150 per share, and in our view, shares of PYPL have room to run further from current levels as of this writing (even after their strong performance of late). PayPal is very well-positioned to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic as the world continues to transition towards an era heavily reliant on digital payments.

May 7, 2020

Gold Miner Newmont Continues to Shine
Image Source: Newmont Corporation – First Quarter of 2020 Earnings IR Presentation. On May 5, the gold miner Newmont Corp reported first quarter 2020 earnings that missed both consensus top- and bottom-line estimates which prompted shares to sell off modestly during the normal trading session that day, though shares of NEM have been on an epic bull run since the start of 2020. We continue to like Newmont as an idea in our Dividend Growth Newsletter portfolio with shares of NEM up ~48% as of this writing since joining the portfolio on January 13, 2020, before taking dividend considerations into account, while the S&P 500 is down ~13% during this period before taking dividend considerations into account. At Newmont’s new annualized dividend payout of $1.00 per share, shares of NEM yield ~1.6% as of this writing.

May 7, 2020

BNP Paribas’ Shares Could Have Upside Potential
Image Source: BNP Paribas 1Q2010 Earnings Presentation. BNP Paribas’ shares are trading at a fraction of tangible book. If the bank can contain its cost of risk through this cycle and produce double-digit returns on tangible equity on the other side of this crisis, shareholders would do quite well in such a scenario. That said, we point out that Europe is overtraded when it comes to banking, which pressures earnings power at even the stronger banks like BNP Paribas. We’re paying close attention to the key banking players in Europe to assess the likelihood of a global financial contagion that may accompany the global pandemic that has become COVID-19.

May 6, 2020

Berkshire Hathaway Prepares Itself for COVID-19
Image Source: Berkshire Hathaway Inc – 2019 Annual Report. Berkshire Hathaway reported first-quarter 2020 earnings on May 2, which due to significant unrealized losses in its investment portfolio (a product of the market swoon in the early months of 2020) the firm swung to a large loss on a GAAP basis. As Berkshire Hathaway’s leadership team has often noted, the 2018 accounting rule change that forces companies to recognize unrealized gains and losses in the income statement can make GAAP net income and GAAP diluted EPS figures near meaningless without digging deeper into the firm’s financials.

May 6, 2020

Tyson Faces Operational Hurdles
Image Source: Tyson Foods Inc – Second Quarter of Fiscal 2020 Earnings IR Presentation. On May 4, the major meat and prepackaged food provider Tyson Foods reported second-quarter earnings for its fiscal 2020 (period ended March 28, 2020) that missed consensus estimates on both the top- and bottom-line, sending its shares sharply lower during the regular trading session that day. The ongoing coronavirus (‘COVID-19’) is hurting its production capabilities, in particular the operations of its meatpacking plants as numerous confirmed COVID-19 cases (that unfortunately includes fatalities) have emerged at those facilities and the facilities of its peers across the US, prompting many to close or scale back. For instance, Tyson was forced to temporarily close a large pork plant in Waterloo, Iowa, starting in late-April as many workers were calling out sick.

May 6, 2020

Public Storage Currently Has the Financial Strength to Support Its Payout
Image Source: Public Storage – 2019 Annual Report. High Yield Dividend Newsletter portfolio holding Public Storage reported its first quarter results for 2020 on May 1. The self-storage real estate investment trust’s (‘REIT’) core funds from operations (‘FFO’) per share grew by 2% year-over-year last quarter, hitting $2.58 per share, while its occupancy rate (as measured by its rentable square feet) grew by ~60 basis points year-over-year, reaching 93.1%. Public Storage was also able to push through marginal same-store rent increases, though rising operating costs (particularly property taxes, payroll expenses, and marketing expenses) chipped away at its margins last quarter. As of this writing, shares of PSA yield ~4.4%.