Valuentum Exclusive Analysis for the Discerning Investor

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Apr 28, 2022

Shares of Best Idea Meta Platforms Leap Higher After Stellar Earnings Report!
Image Shown: Shares of best idea Meta Platforms Inc surged higher by ~18% in afterhours trading on April 27 after its first quarter 2022 earnings report indicated that investor fears over its core business were overblown as its daily active user base posted solid growth in March 2022. The company behind Facebook, Instagram, and WhatsApp, Meta Platforms reported first quarter 2022 earnings on April 27 that missed consensus top-line estimates but smashed past consensus bottom-line estimates. Shares of FB surged higher in the wake of its latest earnings report as the company’s family daily active people (‘DAP’) stood at 2.87 billion in March 2022, up 6% year-over-year, while its Facebook daily active users (‘DAU’) stood at 1.96 billion in March 2022, up 4% year-over-year. Rising competition from relative newcomers like TikTok in the social media space is not chipping away at Meta Platforms’ core business as investors had expected. The launch of Facebook Reels, which is similar to TikTok, has proven to be quite popular. We include Meta Platforms as a top-weighted idea in the Best Ideas Newsletter portfolio and continue to be enormous fans of Meta Platforms. Shares of FB have tanked in recent months, though we have stuck with our thesis through thick and thin. Meta Platforms may finally regain its upward momentum in the wake of its stellar first quarter earnings update. The selloff seen in shares of FB and US equity markets more broadly over the past several months is way overdone and driven more so by panic selling than anything else, in our view. Our fair value estimate, under what we deem reasonable valuation assumptions, stands at $367 per share of FB, which is well above where Meta Platforms’ stock is trading at as of this writing.

Apr 28, 2022

Best Idea Alphabet Continues To Grow at a Robust Pace
Image Shown: Best idea Alphabet Inc continued to grow its revenues by a nice double-digit clip last quarter. Image Source: Alphabet Inc – First Quarter of 2022 Earnings Press Release. On April 26, Alphabet reported first quarter 2022 earnings that missed top-line estimates but beat bottom-line estimates. The company remains a free cash flow powerhouse with a fortress-like balance sheet and an incredibly promising growth outlook. Its core digital advertising business, its high-growth Google Cloud unit, and its longer term bets such as the self-driving company Waymo underpin our expectations that Alphabet will continue to grow its revenues at a nice premium to global GDP growth over the decades to come. We include shares of Alphabet Class A in the Best Ideas Newsletter portfolio and remain big fans of the name.

Apr 27, 2022

Public Storage Getting Ready To Report First Quarter 2022 Earnings
Image Shown: Public Storage, a longtime idea in our High Yield Dividend Newsletter portfolio, has seen its share price skyrocket over the past year with room for additional upside, in our view. After the market close on May 3, the self-storage real estate investment trust (‘REIT’) Public Storage intends to report its first-quarter earnings for 2022, which will be followed up by an earnings conference call a day later. Shares of PSA have been a long-time idea in the High Yield Dividend Newsletter portfolio, and we continue to be enormous fans of the name. The top end of our fair value estimate range sits at $445 per share of Public Storage, indicating that shares of PSA have room to keep running higher. As of this writing, shares of PSA yield ~1.9%.

Apr 27, 2022

Microsoft Soars, Strong Revenue Growth Continues Unabated
Image Shown: Microsoft Corporation put up a solid fiscal third quarter earnings report and we continue to be big fans of the name. Image Source: Microsoft Corporation – Power Point Earnings Presentation Covering the Third Quarter of Fiscal 2022. On April 26, Microsoft Corp reported third quarter earnings for fiscal 2022 (period ended March 31, 2022) that beat both consensus top- and bottom-line estimates. Shares of MSFT jumped higher by ~4%-5% in afterhours trading on April 26 as investors cheered on the good news and its promising near term outlook. Microsoft’s cloud-oriented products and services were a bright spot in the fiscal third quarter and underpinned its impressive pricing power. The firm was able to stay ahead of inflationary pressures and maintain its strong margins while growing its revenues. We include shares of MSFT as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Our fair value estimate for Microsoft sits at $332 per share, well above where Microsoft is trading at as of this writing, indicating that the company has substantial capital appreciation upside. Additionally, we view Microsoft’s dividend growth trajectory quite favorably due to its rock-solid financial position, bright longer-term growth outlook that is underpinned by secular tailwinds and recent acquisition activity, its pricing power, fortress-like balance sheet, and ability to generate sizable free cash flows in almost any operating environment. Shares of MSFT yield ~0.9% as of this writing.

Apr 26, 2022

Dividend Growth Idea Lockheed Martin Doing Its Best to Arm Western Allies
Image Shown: Dividend growth idea Lockheed Martin Corporation is very shareholder friendly. The defense contractor is doing its best to arm Ukraine and other Western allies during these difficult times. Image Source: Lockheed Martin Corporation – First Quarter of Fiscal 2022 IR Earnings Presentation. The Russian invasion of Ukraine in February 2022 and simmering geopolitical tensions in East Asia between Western aligned nations and China over Taiwan and other issues have created a backdrop that is conducive to significant increases in national defense spending. Though we hope peace prevails soon, the realities on the ground in Ukraine and elsewhere call for North Atlantic Treaty Organization (‘NATO’) member nations and other Western aligned nations to ramp up their military budgets to deter future threats and to prepare for worst case scenarios.

Apr 22, 2022

ESG Newsletter Portfolio Idea ASML Holding May Further Boost Longer Term Guidance
Image Shown: How ASML Holding Inc’s photolithography systems are used to produce semiconductor components, including the most cutting edge “chips” along with more mature semiconductor components. Image Source: ASML Holding Inc – Fiscal 2021 Annual Report. The maker of advanced photolithography systems that are used to produce the most cutting edge semiconductor components or “chips” is the Dutch firm ASML Holding NV. It has a virtual monopoly at the high-end of this market due to its technological prowess in this space and focus on R&D. The firm also produces photolithography systems to make more mature chips and offers services that are primarily geared towards its installed systems base. ASML Holding reported first quarter earnings for fiscal 2022 (period ended April 3, 2022) on April 20 that beat both consensus top- and bottom-line estimates and its order backlog remains robust.

Apr 14, 2022

We're Still Bullish; GDP Continues To March Ever Higher!
Image: "Gross domestic product (GDP), the featured measure of U.S. output, is the market value of the goods and services produced by labor and property located in the United States." Image Source: BEA. We believe there will be continued strength in the equity markets during the back half of this year and into 2023. There are myriad headwinds to this bullish underlying thesis, but big-cap company fundamentals remain strong, and we think this will become evident during first-quarter 2022 earnings season, which is already upon us.

Apr 14, 2022

Weekly: We're Bullish on This Self-Inflicted Market Sell-Off; Plus Meta (Facebook), PayPal, Consumer Staples, and HPQ
We have a lot to cover in this week's Valuentum Weekly, but one thing is clear: We remain bullish on stocks for the long run.

Apr 10, 2022

Cash-Based Sources of Intrinsic Value for Meta Platforms and PayPal Remain Strong
Image Shown: Shares of Meta Platforms Inc (blue line) and PayPal Holdings Inc (orange line) have staged a nice comeback during the past month, as of the start of April 2022. Rising interest rates and the impact that has had on the market's discount rate implicitly used within the enterprise cash flow pricing process has pressured the value of equities with long free-cash-flow growth tails--stocks that are expected to grow at a meaningful premium over global economic growth over the coming decades. The rapid increase in the 10-year Treasury rate, no doubt, has had a profound impact on the equity values of long-duration cash-flow companies such as those held in the ultra-speculative ARK Innovation ETF, for example. However, established big cap tech firms and many fintech entities shouldn't necessarily be as impacted by rising interest rates as those of many currently money-losing speculative innovation names that won't generate meaningful levels of free cash flow for 5 to 10 years, maybe longer. For example, shares of companies such as Apple Inc. or Microsoft Corp. should only have but a muted impact from rising rates; these companies have huge net cash positions and are already generating strong free cash flow. It can even be argued that higher inflation/rates will afford Apple and Microsoft pricing power to raise product and software prices. While we might expect the ARK Innovation ETF to be down nearly 40% year-to-date and more than half during the past 52 weeks, we don't think it makes a lot of sense for some of the strongest, large cap growth names to be off ~12%, on average, year-to-date. We think the market, in many instances and especially within the area of technology, is throwing the baby out with the bathwater. Shares of Meta Platforms Inc, formerly Facebook, and PayPal Holdings Inc are two such names that the market has been beating down too much, in our view. Though some weakness in Meta Platform's and PayPal's shares can be expected in the current market environment, year-to-date declines of 30%+ and 40%+, respectively, are a bit much. That said, during the past few months, we have reduced our fair value estimates for both Meta Platforms and PayPal for good reasons. For starters, Meta Platforms is investing heavily in the metaverse, a digital universe, and is scaling up its data center capacity to support its efforts on this front (which is driving its capital expenditure and operating cost expectations up sharply in the medium-term). Meta Platforms is not expected to make a meaningful amount or any money on these investments for some time. PayPal is facing headwinds from hefty customer acquisition costs to grow its active user base amid rising competitive threats. We also think that we may have been too aggressive within our valuation model when we built in too much earnings leverage during the next five years at PayPal. Said another way, the fintech company’s mid-cycle operating margin is not what we once though it was--as PayPal will find it difficult to meaningfully expand its margins in the current environment. However, putting it all together, these pressures and others have all been reflected in our current fair value estimates (and fair value estimate ranges) for Meta Platforms, which sits at $367 per share, and PayPal, which sits at $152 per share. Both companies are included as ideas in the Best Ideas Newsletter portfolio, and we are beginning to see signs of a rebound underway. For long-term investors, we think Meta Platforms is a no-brainer at current prices, though we may be a bit more cautious on PayPal, which is now more of a "show-me" story, given recent hiccups. All this having been said, let's dig in to why we still like Meta Platforms and PayPal.

Apr 4, 2022

3 Dividend Growth Ideas That Just Raised Their Payouts
Image Source: American Tower. Let’s cover the benefits of dividend growth investing and three dividend growth ideas that just raised their payouts.