Valuentum Exclusive Analysis for the Discerning Investor

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Feb 14, 2021

Philip Morris International Issues Favorable Guidance
Image Shown: Philip Morris International Inc’s growth outlook rests heavily on its ability to grow its non-traditional cigarette sales volumes, and so far, the tobacco giant has put up tremendous performance on this front. Additionally, pricing power at its conventional cigarette business is also key, as that helps offset headwinds arising from secular declines in its annual cigarette shipment volumes. Image Source: Philip Morris International Inc – 2021 Investor Day Presentation. Philip Morris International did a solid job navigating major exogenous headwinds during 2020 and was still able to churn out gobs of free cash flow. We appreciate management’s promising guidance and continue to like exposure to Philip Morris International and its lofty yield in the High Yield Dividend Newsletter portfolio.

Feb 12, 2021

Biofuel Producer Renewable Energy Group Is Worth a Look
Image Shown: A geographical overview of Renewable Energy Group’s operational “biorefineries” in the US and Germany. Image Source: Renewable Energy Group Inc – October 2020 IR Presentation. Renewable Energy Group is an intriguing biofuel maker with operational “biorefineries” located across the US and in Europe (specifically Germany). The company’s operations are supported by an extensive distribution network that is primarily built upon supply agreements with third parties, though Renewable Energy Group opened its own branded fuel location in 2019 for the first time. Shares of REGI have been on an upward tear of late, likely due to growing investor optimism towards green energy firms, in our view, as the new Biden administration in the US has made it clear that it would push for greater federal incentives to stimulate investment in domestic renewable energy industries. In Europe, the EU has imposed mandates and created incentives to stimulate investment in the biofuel space and non-EU members states, like Norway and the UK, have also implemented aggressive policies to support the biofuel industry. During the first nine months of 2020, Renewable Energy Group’s financial performance posted a tremendous turnaround as the company focused on higher-margin products. The company’s balance sheet is pristine, though we caution that historically, Renewable Energy Group has leaned on equity issuances to fund its growth ambitions though more recently, the firm has started to focus on reducing its outstanding diluted share count (or at the very least, limiting its shareholder dilution). We are impressed with Renewable Energy Group’s recent financial performance and are intrigued by its long-term outlook. However, we caution that the firm is highly exposed to exogenous forces. Government incentives, or lack thereof, from national government bodies (and to a lesser extent, from certain US state governments) will have an outsized impact on the trajectory of Renewable Energy Group’s growth story going forward. Investors are clearly optimistic, as shares of REGI have more than tripled over the past year. Please note Renewable Energy Group does not pay out a common dividend at this time.

Feb 12, 2021

Dividend Increases/Decreases for the Week February 12
Let's take a look at companies that raised/lowered their dividend this week.

Feb 11, 2021

Cisco Systems Expects Revenue Growth Will Resume This Fiscal Quarter
Image Source: Cisco Systems Inc – Second Quarter of Fiscal 2021 IR Earnings Presentation. On February 9, Cisco Systems reported second quarter earnings for fiscal 2021 (period ended January 23, 2021) that beat consensus top- and bottom-line estimates. Additionally, Cisco Systems raised its quarterly dividend by about 3% on a sequential basis in conjunction with its earnings report. We include Cisco Systems in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios and continue to like exposure to the name. As of this writing, shares of CSCO yield ~3.1% on a forward-looking basis, and our fair value estimate stands at $51 per share of Cisco Systems.

Feb 10, 2021

Energy Earnings Roundup: CVX and XOM
Image Source: Exxon Mobil Corporation – 2020 IR Presentation. Several integrated oil and gas companies reported earnings for the final quarter of 2020, and as expected, these were brutal reports. The coronavirus (‘COVID-19’) pandemic weighed negatively on global demand for raw energy resources (crude oil, natural gas, natural gas liquids), refined petroleum products (gasoline, diesel, kerosene), and certain petrochemicals last year, which created massive headwinds for the oil and gas industry across the board. Subdued raw energy resource pricing and lackluster refined petroleum product demand were the two big obstacles for the industry as those dynamics severely weakened the economics of upstream (involved in the extraction of raw energy resources from the ground) and downstream (refineries and petrochemical plants) operations. However, things are starting to look up as raw energy resources pricing is now recovering.

Feb 9, 2021

Free Cash Flow Machine Visa Remains One of Our Best Ideas
Image Shown: Visa’s ability to generate sizable free cash flows continues to impress. We are big fans of the payment processing giant. Image Source: Visa Inc – First Quarter of Fiscal 2021 IR Earnings Presentation. We're huge fans of Visa's business model. The credit card network’s free cash flow generating abilities are impressive, aided by its low capital-expenditure requirements. We view Visa’s long-term outlook quite favorably and include the company in the Best Ideas Newsletter portfolio as a top-weighted idea. The top end of our fair value estimate sits at $263 per share of Visa, materially above where V is trading as of this writing.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Feb 5, 2021

Earnings Roundup: Pinterest and Peloton
Image Source: Peloton Interactive Inc – Second Quarter of Fiscal 2021 Shareholder Letter. The outlook for the world economy, keeping near-term headwinds in mind, remains bright as global health authorities are actively working towards putting an end to the coronavirus (‘COVID-19’) pandemic largely through ongoing vaccine distribution efforts. As vaccine production scales up, widespread distribution efforts will become a much easier task. We’re continuing with our earnings commentary in this note by covering a social media contender (Pinterest) and an upstart exercise company (Peloton).

Feb 5, 2021

Dividend Increases/Decreases for the Week February 5
Let's take a look at companies that raised/lowered their dividend this week.

Feb 4, 2021

Earnings Roundup: Chipotle, PayPal, Qualcomm
Image Shown: PayPal Holdings Inc, a top-weighted idea in our Best Ideas Newsletter portfolio, continued to grow at a brisk pace during the final quarter of 2020. Image Source: PayPal Holdings Inc – Fourth Quarter of 2020 IR Earnings Presentation. Several of the newsletter portfolio ideas recently reported earnings, and we are quite pleased with the performance that our favorite ideas have put up so far this earnings season. Though the ongoing coronavirus (‘COVID-19’) pandemic created significant headwinds for the three companies we cover in this article (Chipotle, PayPal, and Qualcomm), each firm remained incredibly free cash flow positive, highlighting the resilience of their business models. Looking ahead, the outlook for these companies is bright and getting brighter.