Valuentum Exclusive Analysis for the Discerning Investor

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Mar 7, 2022

GoodRx’s Modest Q4 Miss, Slowing Revenue Growth Expectations Send Shares Tumbling
Image: Many speculative areas have faced tremendous pressure in recent months from new issues to entities tied to the trend of disruptive innovation. Image Source: TradingView. GoodRx reported weak fourth-quarter 2021 results and issued top-line guidance for 2022 that has reset the market’s long-term growth expectations for the firm much lower. The company’s EBITDA margin outlook also speaks to continued competitive pressures at the company that may only intensify with Amazon a key player in the online pharmacy space. Though GDRX’s free cash flow profile and balance sheet remain healthy, the company’s little to no expected GAAP profits, slowing expected revenue growth, and mounting competition speak to an uphill battle ahead. GDRX’s recently announced $250 million stock buyback program will eat into its healthy balance sheet and may only provide a dead-cat bounce from today’s levels (in the mid-teens per share).

Mar 7, 2022

Valuentum Weekly: Outsized Energy Exposure Continues to Buoy Newsletter Portfolios
Image: Light crude oil futures once traded for roughly -$40 (negative $40) during the COVID-19 crisis, but have now rocketed to more than $120 in recent trading. Image Source: TradingView. The S&P 500, as measured by the SPY, is down 9% year-to-date, a modest pullback, in our view, particularly in light of the fantastic performance the past few years. Though not necessarily welcome, a down year every now and then for the broader market indexes and a modest bear market can only be expected, at times. The Dow Jones Industrial Average, as measured by the DIA, is down more than 7% year-to-date (not too bad), while the Nasdaq--as measured by the QQQ--and 'disruptive innovation' stocks--as measured by the Ark Innovation ETF--have fallen more than 15% and 36%, respectively, so far this year (data from Seeking Alpha). We like how the simulated newsletter portfolios are positioned. Energy resource prices continue to surge (with WTI crude oil prices skyrocketing north of $120 per barrel at last check), and they are bringing energy equities higher along with them. The simulated Best Ideas Newsletter portfolio, simulated Dividend Growth Newsletter portfolio, and simulated High Yield Dividend Newsletter portfolio are all materially overweight energy equities relative to the energy sector’s weighting in the S&P 500, and we expect to maintain such high tactical "exposure." Both the Energy Select Sector SPDR ETF and the Vanguard Energy ETF soared to 13-year highs last week. Our favorite energy ideas are the largest two energy majors, Exxon Mobil and Chevron, and both have hefty 'weightings' in each of the three aforementioned simulated newsletter portfolios. Russian equities, as measured by the RSX, are down nearly 80% so far this year, and we're pleased to say that we've largely avoided the fall out. We continue to like the broader areas of U.S.-heavy, large cap growth and big cap tech when it comes to long-term secular exposure, and we continue to like energy as a tactical overweight for the foreseeable future across the simulated newsletter portfolios, as much as we did even prior to the huge advance in energy resource prices and the invasion of Ukraine by Russia.

Mar 4, 2022

NextEra Energy’s Bright Outlook
Image Shown: NextEra Energy Inc, one of our favorite utilities, owns the largest regulated electric utility in Florida and has exposure to the state’s promising population and economic growth trajectory. The utility is shifting its power generation base away from coal and towards renewable energy, leaning on natural gas and nuclear power plants to make the transition feasible. Image Source: NextEra Energy Inc – Fourth Quarter of 2021 IR Earnings Presentation. We are big fans of NextEra Energy. The utility is a cash flow generating powerhouse with a bright adjusted EPS and dividend growth outlook, underpinned by its rapidly growing renewable energy division and exposure to Florida’s promising economic growth trajectory. Shares of NEE yield ~2.2% as of this writing.

Mar 4, 2022

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

Mar 2, 2022

Evaluating the Exposure of Chevron and Exxon Mobil to Russia’s Energy Industry
Image Shown: Shares of Chevron Corporation (blue line) and Exxon Mobil Corporation (orange line) have skyrocketed over the past six months. Chevron Corp and Exxon Mobil Corp, our two favorite large cap energy firms included as ideas in the newsletter portfolios, have relatively modest exposure to Russia. Peers such as BP plc and Shell plc have publicly stated that they would effectively abandon their stakes in Russian operations, and there is a decent chance Chevron and Exxon Mobil will follow suit. Let's talk about the potential impact.

Mar 1, 2022

Shares of Our Favorite Miner South32 Skyrocketed During Past Year
Image Shown: South32, an idea in our ESG Newsletter portfolio and one of our favorite miners, put up tremendous financial performance during the first half of fiscal 2022 as it capitalized on surging realized prices for its commodities sales. Image Source: South32 – First Half of Fiscal 2022 IR Earnings Presentation. Shares of the American depository receipts (‘ADRs’) of one of our favorite miners, South32, have put up tremendous performance during the past year. According to data provided by Yahoo! Finance, shares of SOUHY are up over 50% during the past year on a price only basis while the S&P 500 is up ~9% on a price only basis during this period as of late February 2022. South32 is focused on building up a portfolio around high-quality nickel, aluminum, alumina, manganese, and zinc assets (these are metals and minerals that are essential for building things such as lithium-ion batteries and electric vehicles) while retaining a meaningful presence in the metallurgical coal space. Let's follow up on this excellent idea.

Feb 28, 2022

Our Report on Stocks in the Utilities (Mid/Small) Industry
Our report on stocks in the Utilities (mid/small) industry can be found in this article. Report includes AEE, ALE, CNP, CMS, DTE, ES, LNT, MGEE, NI, PEG, PNW, SCG, SJI, SR, SRE, WEC.

Feb 28, 2022

Our Report on Stocks in the Utilities (Large) Industry
Image Source: doggo. Our report on stocks in the the Utilities (Large) industry can be found in this article. Report includes AEP, D, DUK, ED, EIK, ETR, EXC, FE, NEE, NGG, PCG, PPL, SO, XEL.

Feb 27, 2022

Valuentum Weekly: Putin, the Aggressor, But Did “the West” Cause the Conflict in Ukraine?
We think the newsletter portfolios are well-positioned for inflationary pressures and believe the areas of large cap growth and big cap tech remain the places to be—names like Alphabet, Facebook, Microsoft, Apple and the like. Not only are these equities shorter-duration, more defensive areas relative to more speculative tech, but they also are shielded more from geopolitical uncertainty than international exposure, which many managers seek under modern portfolio theory. We’re also maintaining our bullish view on the energy sector in the near to medium-term. However, please be aware that, while strategically we like the areas of large cap growth and big cap tech because of their moaty business models, attractive valuations, large net cash positions and strong free cash flow generating capacities, we view the overweight “positions” in the energy sector in the simulated newsletter portfolios as tactical short-term decisions given their cyclical nature. The simulated Best Ideas Newsletter portfolio, after coming off huge years in 2019, 2020, and 2021, is performing about in line with the major indexes so far this year and doing far better than more speculative areas, where many investors found themselves caught like a deer in headlights. We remain bullish on stocks for the long run--and our favorite individual ideas remain in the simulated newsletter portfolios, within our additional options commentary and in the Exclusive publication. Stay diversified. May we see peace in Ukraine soon.

Feb 25, 2022

Update: Analyzing Valuentum’s Economic Castle Index: A Walk Forward Case Study
There are two things generally wrong with a pure economic moat assessment, or economic “moat factor.” First, it is much easier to assess outsize economic returns in the near-term than it is to assess outsize economic returns over the long haul. Quite simply, nobody can predict what will happen tomorrow, and they certainly don’t know what will happen 20 or 30 years from now. Second, a rational investor should generally prefer expected near-term outsize economic returns than expected long-term ones given the uncertainty of the latter--somewhat related to our first point, a bird in the hand (or large economic returns in the near term) is worth two in the bush (or large economic returns in the long run that may not materialize). The time value of money reinforces this notion. Near-term economic returns are generally worth more than long-term ones in real terms, even if they may be smaller nominally. This is where our Economic Castle rating comes in. The goal of the Economic Castle rating is to identify those companies that are likely to generate a lot (or not so much) shareholder value over the foreseeable future. Instead of pondering a guess as to how the landscape will look 20 or 30 years from now, something not even the Oracle of Omaha can do with any sort of certainty (e.g. IBM, KHC), the Economic Castle rating ranks companies based on near-term expected economic returns, or returns that are more likely to be realized as opposed to those that may be built on “castles in the air” over 20-30 time horizons. By evaluating companies on the basis of the spread between their forecasted future return on invested capital (‘ROIC’) excluding goodwill less their estimated weighted-average cost of capital (‘WACC’), we measure a company’s ability to generate an “economic profit” over the foreseeable future, which we define as the next five fiscal years. Companies that generate a forecasted spread of 50 percentage points or more are given a “Very Attractive” Economic Castle rating and firms that are forecasted to generate a spread of 150 percentage points or higher are considered “Highest-Rated”. Firms that carry an Unattractive Economic Castle rating are those that are forecasted to generate a forward ROIC (ex-goodwill) less estimated WACC spread that’s meaningfully below zero (firms near economic parity can receive a Neutral Economic Castle rating, assigned by the Valuentum team).