Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Aug 19, 2022

Nelson: The 16 Most Important Steps To Understand The Stock Market
Image Source: Tim Green. We outline the '16 Most Important Steps to Understand the Stock Market.' We think it's important to take a read of these key stock market tenets when things are going great -- and perhaps even more important when things aren't going your way. This continues to be a working document.

Apr 10, 2022

Cash-Based Sources of Intrinsic Value for Meta Platforms and PayPal Remain Strong
Image Shown: Shares of Meta Platforms Inc (blue line) and PayPal Holdings Inc (orange line) have staged a nice comeback during the past month, as of the start of April 2022. Rising interest rates and the impact that has had on the market's discount rate implicitly used within the enterprise cash flow pricing process has pressured the value of equities with long free-cash-flow growth tails--stocks that are expected to grow at a meaningful premium over global economic growth over the coming decades. The rapid increase in the 10-year Treasury rate, no doubt, has had a profound impact on the equity values of long-duration cash-flow companies such as those held in the ultra-speculative ARK Innovation ETF, for example. However, established big cap tech firms and many fintech entities shouldn't necessarily be as impacted by rising interest rates as those of many currently money-losing speculative innovation names that won't generate meaningful levels of free cash flow for 5 to 10 years, maybe longer. For example, shares of companies such as Apple Inc. or Microsoft Corp. should only have but a muted impact from rising rates; these companies have huge net cash positions and are already generating strong free cash flow. It can even be argued that higher inflation/rates will afford Apple and Microsoft pricing power to raise product and software prices. While we might expect the ARK Innovation ETF to be down nearly 40% year-to-date and more than half during the past 52 weeks, we don't think it makes a lot of sense for some of the strongest, large cap growth names to be off ~12%, on average, year-to-date. We think the market, in many instances and especially within the area of technology, is throwing the baby out with the bathwater. Shares of Meta Platforms Inc, formerly Facebook, and PayPal Holdings Inc are two such names that the market has been beating down too much, in our view. Though some weakness in Meta Platform's and PayPal's shares can be expected in the current market environment, year-to-date declines of 30%+ and 40%+, respectively, are a bit much. That said, during the past few months, we have reduced our fair value estimates for both Meta Platforms and PayPal for good reasons. For starters, Meta Platforms is investing heavily in the metaverse, a digital universe, and is scaling up its data center capacity to support its efforts on this front (which is driving its capital expenditure and operating cost expectations up sharply in the medium-term). Meta Platforms is not expected to make a meaningful amount or any money on these investments for some time. PayPal is facing headwinds from hefty customer acquisition costs to grow its active user base amid rising competitive threats. We also think that we may have been too aggressive within our valuation model when we built in too much earnings leverage during the next five years at PayPal. Said another way, the fintech company’s mid-cycle operating margin is not what we once though it was--as PayPal will find it difficult to meaningfully expand its margins in the current environment. However, putting it all together, these pressures and others have all been reflected in our current fair value estimates (and fair value estimate ranges) for Meta Platforms, which sits at $367 per share, and PayPal, which sits at $152 per share. Both companies are included as ideas in the Best Ideas Newsletter portfolio, and we are beginning to see signs of a rebound underway. For long-term investors, we think Meta Platforms is a no-brainer at current prices, though we may be a bit more cautious on PayPal, which is now more of a "show-me" story, given recent hiccups. All this having been said, let's dig in to why we still like Meta Platforms and PayPal.

Feb 4, 2022

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

Jun 1, 2021

ICYMI -- Video: Exclusive 2020 -- Furthering the Financial Discipline
In this 40+ minute video jam-packed with must-watch content, Valuentum's President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He'll talk about what companies Valuentum likes and why, and which areas he's avoiding. This and more in Valuentum's 2020 Exclusive conference call.

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

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

Sep 3, 2020

Update: Frequently Asked Questions About Valuentum Securities, Inc.
Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports and dividend reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information. We address a number of questions from both subscribers and visitors to our site.

Sep 1, 2020

Valuentum Website Overview
Overview of the key features of www.valuentum.com (03:55). Valuentum (val∙u∙n∙tum) [val-yoo-en-tuh-m] Securities Inc. is an independent investment research publisher, offering premium equity reports, dividend reports, and ETF reports, as well as commentary across all sectors/companies, a Best Ideas Newsletter (spanning market caps, asset classes), a Dividend Growth Newsletter, modeling tools/products, and more. Independence and integrity remain our core, and we strive to be a champion of the investor. Valuentum is based in the Chicagoland area. Valuentum is not a money manager, broker, or financial advisor. Valuentum is a publisher of financial information.

Jun 16, 2020

Reiterating Our Bullish Long-Term View on Stocks
Image: The NASDAQ 100 Index remains resilient, bouncing off support, after breaking out to new highs recently. Some of our best ideas are included in the NASDAQ 100, and our favorite concentrations include exposure to big cap tech and large cap growth. We continue to be bullish on equities for the long run. In addition to unlimited quantitative easing and "whatever it takes, squared" Fed policy, today, June 16, the Trump administration announced that it is weighing a $1 trillion stimulus bill to help support the economy. While uncertainties remain regarding specifics of the bill (it might include state assistance, extension of unemployment benefits, etc.), the move is consistent with the outsize spending we expect to further bolster the bull case, "ICYMI -- Stay Optimistic. Stay Bullish. I Am." We continue to emphasize that, in light of unlimited QE and runaway fiscal stimulus, the longer-duration components of intrinsic values are expanding considerably, and as a result, fair values, themselves, are actually rising during this recession and pandemic [a good estimate of the value of the S&P 500 today may be between 3,530-3,920, as outlined in the following: "Scribbles and More Newsletter Portfolio Changes.]."

Jun 15, 2020

ICYMI: Survey Coming Later Today, More Market Volatility Expected
Image: The market's levels of volatility so far in 2020 have been among the greatest in history. Expectations for increased volatility in the marketplace as a result of the proliferation of price-agnostic trading (indexing and quantitative trading) is a key theme of Valuentum's text, Value Trap: Theory of Universal Valuation. We continue to emphasize the importance of due diligence, enterprise valuation, behavioral thinking, the information contained in prices, and stock selection across equity portfolios. Page 256. This week is setting up to be yet another volatile week of trading, but nothing too surprising. We've talked extensively about outsize levels of volatility in the book Value Trap, and many of our predictions regarding the magnitude of volatility have come to fruition, as described in this note here. But as we've also noted in Value Trap, we don't think increased volatility is a transient development. The Fed and Treasury have only further emboldened price-agnostic trading (indexing/quant) with recent bailout actions, and volatility and momentum funds, which exacerbate the swings, will only grow as a percentage of trading volumes. The magnitude of market volatility during the COVID-19 crisis has certainly been immense. During March for example, the Dow Jones Industrial Average had 8 consecutive days with a 4% move in either direction (this is the first time in history this happened--not even during the tumultuous times of the Crash of 1929 or Black Monday of 1987 or the Great Financial Crisis did this happen). Intra-day volatility has also been considerable, and it has become commonplace for equity futures to swing wildly before market open. Now, more than ever, investors need a steady hand at the wheel.