Valuentum Exclusive Analysis for the Discerning Investor

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Nov 2, 2023

AMD Continues to Enhance Artificial Intelligence Capabilities
On October 31, Advanced Micro Devices reported solid third-quarter results with revenue advancing 4% on a year-over-year basis and non-GAAP earnings per share coming in slightly better than expectations, with net income up more than four-fold, to $299 million. Management expressed excitement about demand for its Ryzen 7000 series PC processors and noted that its data center business is progressing well thanks to its 4th Gen EPYC CPU portfolio and Instinct MI300 accelerator shipments across various markets, including artificial intelligence [AI].

Oct 31, 2023

3 Mid Caps With Net Cash And Strong Free Cash Flow
Image: Chewy's best-in-class customer service is paying off in strong free cash flow generation. We're huge fans of companies with net cash on their balance sheet and strong free cash flow generating potential. This view has led us to favor the areas of big cap tech and the stylistic area of large cap growth in the newsletter portfolios, but there are other companies emerging with similar economics on a smaller scale. Chewy, Inc. E.L.F Beauty and DocuSign are three that come to mind, and all three of these names boast a strong balance sheet and favorable free cash flow dynamics. Each of these companies is also benefiting from secular growth trends as they seek to gain market share against rivals. Though certainly not without valuation risk as the trajectory of free cash flow expectations will certainly cause volatility in their respective stocks, we think all three may be worthy of consideration for the aggressive, risk-seeking investor targeting long-term capital appreciation.

Oct 30, 2023

The Dividend Growth Newsletter Portfolio’s Outperformance
Image: The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. Large cap growth names in the likes of Apple, Microsoft, Oracle, and Cisco form a solid foundation for continued dividend growth across the portfolio thanks in part to their fantastic Dividend Cushion ratios. Not only this, but we like the defensive characteristics of garbage hauler Republic Services and McDonald’s, and the tried-and-true dynamics of Home Depot, Honeywell and UnitedHealth, which can handle just about any economic environment that is thrown at them. Today, the 10-year Treasury rate stands at close to 5%, so while many dividend growth stocks don’t yield as much, we still like their cash-based sources of intrinsic value, as such dynamics offer substantial support to their equity prices, despite competing sources of income.

Oct 30, 2023

3 Net-Cash-Rich, Free-Cash-Flow Generating, Secular Growth Powerhouses
Image: Shares of Microsoft, Alphabet, and Meta Platforms have trounced the market return so far in 2023. We think a holistic view to a company's fundamentals provides an upper hand when it comes to outperforming the market, but we also feel that the discounted cash-flow model is an indispensable tool to help investors collect all of their thoughts and quantitatively put them together within valuation to arrive at what a company is worth. After all, the stock market is an expectations game, where expectations of free cash flow form the baseline for value, and changes in them heavily influence the direction of share prices. We like stocks that have strong net cash positions on the books and have a high probability of achieving better-than-expected free-cash-flow generation in coming years. In this article, we'll talk about the cash-based sources of intrinsic value at three large cap growth names.

Oct 26, 2023

Chipotle’s Long-Term Growth Outlook Intact
On October 26, Chipotle Mexican Grill reported better-than-expected third-quarter results with the top line increasing 11.3% on a year-over-year basis and non-GAAP earnings per share beating the consensus estimate. Comparable store sales advanced 5% in the period, while the company drove meaningful improvement in its operating margin, despite nagging inflationary pressures in beef and cheese prices. We’re huge fans of Chipotle’s long-term unit growth story, and we expect the rollout of Chipotlane drivethru’s to pave the way for an expanded menu, maybe in the breakfast daypart in the years ahead.

Oct 25, 2023

Visa’s High Margin Business Reveals Consumer Spending Remains Resilient
Image: Visa has been a strong performer thus far in 2023. On October 24, Best Ideas Newsletter portfolio holding Visa reported excellent fourth-quarter results for its fiscal 2023. Net revenues advanced 11% on a year-over-year basis, while non-GAAP net income and non-GAAP earnings per share leapt 18% and 21% year-over-year, respectively, in the period. For the fiscal year, Visa generated an impressive 64.4% operating margin. Payments volume increased 9% and cross-border volume advanced 16%, showcasing that the consumer remains very healthy thanks in part to low unemployment rates, despite concerns over higher mortgage costs, student loan repayments, and general economic uncertainty as savings accrued during the COVID-19 pandemic wane. We continue to be big fans of Visa as our top payments-related idea.

Oct 24, 2023

Brief Take: Microsoft Blows Past Expectations in Q1 Fiscal 2024
Image: Mike Mozart. Microsoft hasn’t been a tech dinosaur for many years now, and its first-quarter fiscal 2024 (calendar third quarter 2023) results continued to show just how well the tech giant has adapted to the new economy--from the cloud to gaming to personal computing and, of course, to getting a lead in artificial intelligence [AI] with its investment in OpenAI (ChatGPT). During its fiscal first quarter, Microsoft’s revenue advanced 12% in constant currency, while operating income leapt 24% holding foreign exchange constant—breakneck levels of expansion. Azure and other cloud services sales advanced 28% on a year-over-year basis holding currency constant. The high end of our fair value estimate for shares stands at $368, and we wouldn’t be surprised if Microsoft’s equity returns to those levels in the near term.

Sep 22, 2023

Dividend Increases/Decreases for the Week of September 22
Let's take a look at firms raising/lowering their dividends this week.

Sep 20, 2023

Fed Rate Decision, UAW Strike Continues, Microsoft Ups Payout
Image Source: Mike Mozart. If you’re thinking like us about the ongoing Fed rate-hiking cycle, you’re probably thinking that perhaps we’ll see another rate hike or two down the road, even if the Fed pauses at today’s September 20 meeting. However, whether the Fed pauses from here on out or executes a couple more hikes, it really shouldn’t matter much to long-term investors. From where we stand, the conversation about interest rates should now be shifting away from worries about elevated inflation to the future positive prospects that correspond to the work that the Fed has already done. With the market-cap weighted S&P 500 just a stone’s throw away from all-time highs, despite aggressive contractionary monetary policy, we believe the market may start to view the existing levels of “high” near-term interest rates as dry powder for the Fed to stimulate the economy in the future, if or when it’s needed. The Fed has now built up a very nice insurance policy with little damage done to the U.S. stock market, and we think equities, particularly the stylistic area of large cap growth, may continue to reward investors as such a positive view is eventually factored in. New highs may once again be in the cards, and we remain bullish on the equity markets today, despite the ominous volatility experienced the past 20+ months.

Sep 18, 2023

The Role of Luck in Investing and How To Think About It
Image: EpicTop10.com.  For every Amazon that made it, there are hundreds, maybe thousands, from the dot-com era that didn't. Very few remember Pets.com or etoys.com, both of which went belly up during the dot-com meltdown. For every Tesla, there is a DeLorean Motor Co. We might have completely forgotten about DeLorean were it not for the blockbuster movie, Back To The Future, that immortalized its futuristic sports car. For every streaming enterprise like Netflix, there is a Napster that failed. Most of us probably don't even remember the original Napster, which encountered legal troubles before closing shop shortly after the dot-com bust. For every Alphabet, there's an AltaVista or Netscape. For every Apple, there is a Palm or Blackberry. Who remembers how popular the Palm Pilot and Blackberry were? How about the Motorola Razr? For every Facebook and Instagram, there is a Myspace or Friendster. As investors, we underestimate the role of luck in a company's long-term success. In February 2000, a month before the dot-com market crash, a fledgling Amazon raised $672 million in convertible notes to European investors. If the company hadn't done so, there'd likely be no Amazon today, and one of the wealthiest men in the world, Jeff Bezos, might have just been a mere footnote in stock market history. Amazon would have been insolvent in 2001-2002 just like many of its other dot-com peers.