Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

May 8, 2020

ICYMI: Never Been More Bullish Even as Buffett Dumps Airlines
Image Source: IATA. Data Source: McKinsey & Company (IATA). Airlines haven’t been able to earn their estimated cost of capital for as long as we can remember. There have been hundreds of airline bankruptcies since deregulation in 1978. The news may be scary in coming months, and market volatility may elevate again, but we’ve never been more bullish on the longer run. The biggest advantage of an individual investor is something called time horizon arbitrage. As many professionals continue to fear a break below the March 23 lows, we’re focused on how this market absorbs the tremendous and unprecedented stimulus in the coming months and what that means for nominal equity prices in the longer run. It may not happen this month or this year, but we expect lift off as investors race to preserve purchasing power! Our favorite ideas for a portfolio setting remain in the Best Ideas Newsletter portfolio, Dividend Growth Newsletter portfolio, and High Yield Dividend Newsletter portfolio. Our favorite brand new ideas, released each month, are included in the Exclusive publication.

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.

Apr 20, 2020

Proctor & Gamble Pushes Forward
Image Source: Procter & Gamble Company – Third Quarter Fiscal 2020 Earnings IR Presentation. On April 17, Procter & Gamble reported third-quarter fiscal 2020 earnings (period ended March 31, 2020) that beat consensus estimates on the bottom-line but missed consensus top-line estimates. Most importantly, Procter & Gamble showcased strong organic growth (organic volumes were up 6% company-wide year-over-year) as its ‘Health Care’, ‘Fabric & Home Care’, and ‘Baby, Feminine & Family Care’ segments posted 7%, 8%, and 6% net sales growth, respectively, on a year-over-year basis. Strong high-single-digit volume growth was key to offsetting unfavorable foreign currency headwinds at those three segments. Procter & Gamble’s ‘Beauty’ and ‘Grooming’ segments posted mild net sales declines on a year-over-year basis due to unfavorable foreign currency headwinds and unfavorable product mix shifts.

Apr 17, 2020

Earnings Roundup for the Week Ended Sunday, April 19, Covering Companies Across the Board
Let's take a look at several earnings reports across numerous industries in this article as the ongoing coronavirus (‘COVID-19’) pandemic forces the global economy to a crawl. Please note that as these reports primarily cover the first quarter of calendar year 2020, the impact of the pandemic has yet to be truly reflected in corporate earnings. That said, these reports still provide an important glimpse into what to expect going forward and how companies are responding to the pandemic.

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 13, 2020

Dividend Increases/Decreases for the Week Ending March 13
Let's take a look at companies that raised/lowered their dividend this week.

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

Feb 21, 2020

Dividend Increases/Decreases for the Week Ending February 21
Let's take a look at companies that raised/lowered their dividend this week.

Feb 20, 2020

Newmont Posts a Great Earnings Report
Image Shown: A look at Newmont Corporation’s asset base, which is heavily centered on the Americas and Australia, with some exposure to West Africa as well. Image Source: Newmont – Fourth Quarter and Full-Year 2019 IR Earnings Presentation. On February 20, gold miner Newmont Corp reported a fourth quarter and full-year earnings report for 2019 that pleasantly surprised, with shares of NEM up sharply after the report during the trading session that Thursday. Back on January 13, we added a modest weighting of NEM shares to our Dividend Growth Newsletter portfolio as part of our pivot to more defensive names given rising exogenous headwinds to the global economy. While Newmont’s top-line marginally missed consensus expectations, its bottom-line handedly beat consensus expectations which is partially why investors were excited about the report. The other big reason shares of NEM march higher is likely due to Newmont noting its outlook had improved materially since closing on its Goldcorp acquisition and selling off some of its assets, as part of the normal portfolio optimization process one would expect after a major acquisition.

Feb 18, 2020

Newmont Updates Investors Ahead of Earnings
Image Source: Newmont Corporation – January 2020 IR Presentation. Back on January 13, we added Newmont Corp to the Dividend Growth Newsletter portfolio with a modest weighting as part of our shift towards more defensive names in light of rising exogenous headwinds to global economic activity. Some important considerations include Newmont increasing its quarterly payout to $0.25 per share from $0.14 per share, which is expected to be declared at the level in April 2020 (the fourth quarter of 2019 dividend, as management puts it, will be paid out in March 2020 at $0.14 per share). As of this writing, Newmont would yield ~2.2% at the new annualized dividend rate. We like Newmont’s dividend coverage and its Dividend Cushion ratio sits at a solid 2.2x, keeping in mind that ratio is based on its expected future dividend obligations (we have modeled in the large announced payout increase and single-digit annual payout increases on a per share basis going forward).