Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Oct 9, 2019

Fair Value Estimates Matter – Case Study: Boeing
Image Source: Boeing’s share price converged to our estimate of intrinsic value in the summer of 2019. The plane maker continues to navigate tumultuous skies with its 737 MAX. In early 2019, we thought shares of Boeing were severely overpriced, and they aggressively converged to our fair value estimate by summer, only to bounce a bit since then. We’re still huge fans of the company but working through the 737 MAX issues will take some time to get “right.” We expect more headline risk as it relates to contingent liabilities associated with the disasters, but nothing so punitive to shake the plane maker to the core. Boeing is an investment-grade credit with a huge backlog, and while we expect shares to be range-bound in the near-term, investors get to collect a nice juicy dividend as they wait for Boeing to sort things out. Shares yield 2.2% at the time of this writing.

Oct 9, 2019

Oracle Makes a Big Push Into the Cloud
Image Source: Oracle Corporation – September 2019 IR Presentation. On Monday October 7, Reuters reported that Oracle Corporation planned to hire an additional ~2,000 workers to support the tech giant’s cloud expansion strategy. These new jobs would be centered around San Francisco, Seattle, and India. We continue to like Oracle as a holding in our Dividend Growth Newsletter portfolio and are excited to see how its push into new international cloud computing markets will pan out. Our fair value estimate stands at $55 per share, roughly where ORCL is trading at as of this writing, with the top end of our fair value estimate range sitting at $66 per share (Oracle could test the upper bounds of our range should its cloud computing growth story pick up steam).

Oct 8, 2019

ConocoPhillips Pushes Through a Big Dividend Increase, “Emerging” Play Is a Dud
Image Shown: Shares of ConocoPhillips traded modestly higher on October 7 after announcing a significant dividend increase and plans for additional share buybacks in 2020. However, please note ConocoPhillips is still trading far below where it was at the start of 2019 as an abundance of supplies combined with deteriorating macroeconomic conditions to weigh negatively on expected future raw energy resource pricing. Our fair value estimate for ConocoPhillips stands at $67 per share, well above where COP is trading as of this writing. However, ConocoPhillips’ Valuentum Buying Index stands at 3 given its weak technical performance and other factors (the upstream industry is a tough one to operate in).

Oct 7, 2019

General Motors and the Union Strike!
Image Source: General Motors Company – IR Presentation. A holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, shares of General Motors have come under pressure over the past month from the ongoing strike that involves roughly 46,000-48,000 of its workers (primarily in the US). Our fair value estimate for shares of General Motors stands at $48 per share, well above where GM is trading at as of this writing. We continue to like the name and will be monitoring ongoing UAW-GM talks very closely going forward. Shares of GM yield 4.4% as of this writing.

Oct 4, 2019

Economic Commentary: Apple $225+, Brokers Tumble, Auto Sales Look Tired
Image: Shares of TD Ameritrade Holdings have been punished as online trading commissions go to zero. "Though all signs point to increased volatility, we maintain our view that we’re well-positioned in the newsletter portfolios, and the ideas highlighted in the Exclusive publication consider the backdrop economic conditions we closely monitor." -- Brian Nelson, CFA

Oct 4, 2019

Dividend Increases/Decreases for the Week Ending October 4
Let's take a look at companies that raised/lowered their dividend this week.

Oct 3, 2019

Competition Heats Up in the Medical Robotics Space
Image Source: Intuitive Surgical Inc – IR Presentation. Competition is heating up in the medical robotics space, an area of the medical device industry Intuitive Surgical is a clear leader in with its Da Vinci system installed in ~5,000 hospitals and other medical centers around the world (approximately 60% of Intuitive Surgical’s installed base is in the US). Medtronic PLC seeks to launch its own robot-assisted surgery device for soft tissue surgeries, aimed not at stealing market share from Intuitive Surgical’s existing customers (no easy feat given that the upfront cost of ~$0.5-$2.0 million per Da Vinci system on top of needing to retrain surgeons on how to use a new system) but winning over new customers that have yet to adopt medical robotics systems like the Da Vinci. Medtronic’s new offering isn’t expected until 2021 at the earliest and the company plans to utilize the same business model as Intuitive Surgical given the success the market leader has had with winning over recurring business.

Oct 2, 2019

Zimmer Biomet’s Near-Term Outlook Is Less Rosy Than Management Would Have You Believe
Shares of Zimmer Biomet are trading on lofty expectations and investors may be in for a shock should Zimmer Biomet continue to underperform during the second half of 2019. Foreign currency headwinds continue to grow as seen through the strength of the US Dollar Index during the third quarter of 2019. We like Zimmer Biomet’s deleveraging activities but think its share price has gotten ahead of itself given these rising headwinds, lack of top line growth, and deteriorating net operating cash flows. We are staying away from Zimmer Biomet.

Oct 1, 2019

Carvana Seeks to Disrupt an Enormous Market
Image Source: Carvana Co. – IR Presentation. Carvana seeks to disrupt the used car and used light truck market in the United States as a leading e-commerce platform for used automobile sales. Perhaps best known for its “car vending machines” that are located in key metropolitan areas across the US, Carvana wants to fundamentally transform the way consumers buy, sell, and ultimately ascertain the proper value for used automobiles. Unlike more recent IPOs of high flying companies with absolutely no chance of becoming profitable, Carvana appears to have a scalable business model. For the established companies in this arena, we caution that Carvana may one day represent a serious competitive threat.

Sep 30, 2019

Economic Commentary: US-Listed Chinese Names, 60-40 Stock-Bond Allocation and More
Image shown for informational/illustration purposes only.  There’s an interesting saying that I came across recently...that hits at the most important component of any fiduciary approach: capital preservation. The saying was “Friends don’t let friends buy and hold.” We’ve always employed the Valuentum strategy, which we believe is much more promising that a traditional buy and hold strategy. – Brian Nelson, CFA