Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Nov 10, 2020

Reiterating Our $229 Fair Value Estimate for Berkshire Hathaway
Image Shown: Shares of Berkshire Hathaway Inc Class B are moving on upwards. Berkshire Hathaway reported third quarter 2020 earnings this past Saturday, November 7. The insurance and industrial conglomerate reported that its GAAP income almost doubled year-over-year as its investment portfolio reported large gains. However, that masked pressures at some of Berkshire Hathaway’s myriad businesses as the company navigated the storm created by the ongoing coronavirus (‘COVID-19’) pandemic. Berkshire Hathaway continued to generate significant free cash flows during the first nine months of 2020, and we are reiterating our fair value estimate of $229 per share of Berkshire Hathaway Class B shares.

Nov 5, 2020

Another Great Day for Best Ideas Newsletter Portfolio Holdings!
Image: The holdings in the Best Ideas Newsletter during the trading session November 5. We continue to pound the table on our best ideas. We don't traditionally update members on daily performance of the Best Ideas Newsletter portfolio, but we want to continue to emphasize our best ideas (what they are and where to find them). We have written extensively in the past that we put the Valuentum Buying Index and the Dividend Cushion ratio into practice as we manage the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio, respectively. For example, it may not make much sense to be searching for other ideas without at least considering our best ideas first. As the architect behind our process, we believe we have the unique insights to put our methodologies into practice the best. That's why we always say our best ideas are included in the newsletter portfolios.

Nov 4, 2020

Best Ideas Newsletter Portfolio Holdings Are Surging!
Image: The holdings in the Best Ideas Newsletter during the trading session November 4. We continue to pound the table on our best ideas. If you were like me, you stayed up as long as you could last night watching the U.S. election coverage before it became too difficult to keep your eyes open. When I went to sleep, it seemed as though Donald Trump would be re-elected. The only state that appeared to flip to the Democrats from the 2016 election was Arizona, meaning Trump would still retain greater than the 270 electoral votes required to gain re-election. Well, that was last night, and this is today. As more and more votes came in last night and into the morning, it became evident that the races in Wisconsin and Michigan were much tighter than the news coverage last night led to believe. In fact, with just a small percentage of the votes left outstanding to count in those states, Joe Biden appears to be running ahead of Donald Trump in those states, if only ever so slightly (~20,000-30,000 votes). Donald Trump’s huge gap in Pennsylvania--about 8.7 percentage points at the time of this writing--may also narrow when it is all said and done. The bottom line is that this election is just too early to call!

Nov 4, 2020

Digital Realty’s Momentum Continues, Raises Outlook
Image Shown: An overview of Digital Realty Trust Inc’s asset base. Image Source: Digital Realty Trust Inc – Third Quarter of 2020 IR Earnings Presentation. On October 29, the data center real estate investment trust (‘REIT’) Digital Realty Trust reported third quarter 2020 earnings that beat consensus revenue estimates and consensus funds from operations (‘FFO’) estimates. Please note that while FFO is an imperfect metric, particularly because it does not incorporate the REIT in question’s need to refinance maturing debt and tap capital markets for funds for growth, it provides a useful snapshot of how well the REIT in question can maintain its dividend in the near-term. Digital Realty posted $1.54 per share in core FFO last quarter (an adjusted non-GAAP figure), down 8% year-over-year but flat sequentially. In this article, we will cover Digital Realty’s short-term headwinds and why we expect that the REIT’s financial performance will rebound. Shares of DLR yield ~3.1% as of this writing. Longer term, we use our adjusted Dividend Cushion ratio (includes funds raised via expected equity issuances over the next five full fiscal years) to gauge Digital Realty’s ability to keep making good on its dividend obligations. Digital Realty has an adjusted Dividend Cushion ratio of 1.1, earning the REIT a “GOOD” Dividend Safety rating. These metrics incorporate our expectations that the REIT will push through significant dividend increases over the coming years, and Digital Realty has an “EXCELLENT” Dividend Growth rating. We include shares of DLR as a holding in both our Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios.

Oct 30, 2020

Our $140 Fair Value Estimate of Apple Remains Unchanged
Image Shown: Apple Inc maintained its enormous net cash position at the end of fiscal 2020. In the graphic up above, Apple’s cash-like items are underlined in red and its debt-like items are underlined in blue. Image Source: Apple Inc – 8-K SEC filing covering the fourth quarter of fiscal 2020 with additions from the author. On October 29, Apple reported fourth quarter and full-year earnings for fiscal 2020 (period ended September 26, 2020). Its fiscal 2020 GAAP revenues and GAAP operating income were up 6% and 4% year-over-year, respectively. Growth was driven by its Mac, iPad, ‘Wearables, Home and Accessories,’ and ‘Services’ offerings while its iPhone revenues dropped somewhat. Longer term, we are optimistic that Apple’s high-margin Services businesses will eventually become a significantly larger part of its overall financial performance (its Services segment represented ~20% of Apple’s sales and ~34% of its gross profit in fiscal 2020). We continue to be huge fans of Apple and include shares of AAPL as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Oct 28, 2020

We’re Still Huge Fans of Microsoft
Image Shown: A snapshot of Microsoft Corporation’s first quarter fiscal 2021 performance. We continue to be huge fans of the cash-rich tech giant. Image Source: Microsoft Corporation – First Quarter Fiscal 2021 IR PowerPoint Presentation. On October 27, Microsoft Corp reported first quarter fiscal 2021 earnings (period ended September 30, 2020) that blew past both consensus top- and bottom-line estimates. Its GAAP revenues were up 12% year-over-year, hitting $37.2 billion, while its GAAP diluted EPS jumped 32% higher on a year-over-year basis, hitting $1.82 last fiscal quarter. Leading the charge was Microsoft’s cloud-computing Azure segment, which reported 48% year-over-year sales growth, and its Dynamics 365 segment (includes offerings that meet enterprise resource planning and customer relationship management applications needs), which reported 38% year-over-year sales growth last fiscal quarter. Almost all of Microsoft’s various business segments reported impressive performance last fiscal quarter. Microsoft is firing on all cylinders and we continue to be huge fans of the name. We include shares of Microsoft as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Oct 23, 2020

Our Thoughts on Intel’s Latest Earnings Report
Image Shown: An overview of Intel Corporation’s performance during the first nine months of fiscal 2020. Image Source: Intel Corporation – Third Quarter of Fiscal 2020 IR Earnings Presentation. On October 22, Intel Corp reported third quarter fiscal 2020 earnings (period ended September 26, 2020) that largely matched consensus expectations. Intel boosted its full-year outlook for fiscal 2020 on a net basis (which included an increase in its expected free cash flows this fiscal year) during its latest earnings update, though management reduced its forecast for Intel’s expected operating margins versus previous expectations. We continue to like Intel’s ability to generate sizable free cash flows, though we are concerned with its rising net debt load of late.

Oct 22, 2020

News Brief: Stay at Home Stocks, REITs, Housing, Oracle, and AT&T
Image: Number of COVID-19 cases reported weekly by WHO Region, and global deaths, 30 December 2019 through 18 October 2020. Source: WHO. The COVID-19 pandemic continues to rage on, though the healthcare community has become more adept at reducing the incidence of death given the many treatments now available to battle the disease. We continue to stay the course with the newsletter portfolios. Many of our favorites include Apple, Microsoft, Facebook, Alphabet, and PayPal, among other moaty, net-cash-rich, free-cash-flow generating powerhouses tied to secular growth trends. Our focus remains on the long haul. The business models of many stay-at-home stocks are solid as they continue to reap the rewards of the accelerated trends of home office use and e-commerce proliferation. Housing-related names are also benefiting as consumers adjust their lifestyles to accommodate a post-COVID-19 world. Many pockets of the economy still remain ill, and the slow fading of the attractiveness of commercial / office / apartment space may rear its ugly head as this new decade continues. As was the case with the department stores, they may hang around for years (decades) with myriad fits and starts, but it will be an uphill battle for REITs operating in these areas. We see little reason to bottom fish in airlines, cruise lines, or fickle mall-based retail, for example, but there may be select opportunities in the restaurant arena with Chipotle and Domino’s. The financials and energy sectors are two areas we continue to avoid, more generally, and they have continued to underperform.

Oct 21, 2020

Our Thoughts on Intel’s Big Divestiture Ahead of Its Earnings Report
Image Source: Intel Corporation – Second Quarter of Fiscal 2020 IR Earnings Presentation. On October 20, Intel Corp and South Korean-based SK Hynix announced a major transaction that will reshape the global NAND flash memory market. For reference, NAND flash memory is used in smartphones, personal computers, and other digital devices. Intel will receive $9.0 billion in cash that will be paid out in two phases, assuming everything goes as planned. In return, SK Hynix is receiving “Intel NAND memory and storage business, which includes the NAND SSD business, the NAND component and wafer business, and the Dalian NAND memory manufacturing facility in China” though Intel will retain its Intel Optane business, which caters to both the data center and personal computer markets.

Oct 14, 2020

Our Thoughts on Apple Launching Its First-Ever 5G-Capable iPhone
Image Shown: Shares of Apple Inc have surged higher year-to-date. On October 13, Apple announced its first-ever lineup of 5G-capable iPhones along with a new smart home speaker offering HomePod Mini. While the 5G-capable iPhone announcement was largely expected, we appreciate the good news all the same. We include shares of Apple as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios and are big fans of the name. The HomePod Mini offering represents Apple’s way of staying competitive with similar offerings from Amazonand Alphabet.