Valuentum Exclusive Analysis for the Discerning Investor

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Aug 20, 2020

Johnson & Johnson Buys Momenta Pharmaceuticals
Image Source: Johnson & Johnson – Second Quarter of Fiscal 2020 IR Earnings Presentation. On August 19, Johnson & Johnson announced it was acquiring Momenta Pharmaceuticals for $52.50 per share in cash through a deal worth $6.5 billion (or $6.1 billion when including Momenta Pharmaceuticals’ net cash position). At the end of June 2020, Momenta Pharmaceuticals had ~$0.45 billion in cash and cash equivalents on hand with no debt on the books. We include shares of JNJ as a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios.

Aug 20, 2020

BHP Group Shakes Up Long-Term Strategy
Image Source: BHP Group Ltd – Full Fiscal Year 2020 IR Earnings Presentation. Though burdened by its net debt load, BHP Group has done a solid job navigating the storm created by COVID-19 so far. While production at several of its mines was negatively impacted during the first half of calendar year 2020 (second half of BHP Group’s fiscal 2020), BHP Group has implemented new procedures to ensure its employees can stay safe while mining operations resume in earnest. We appreciate management’s pivot away from some of BHP Group’s legacy assets. To read more about BHP Group, please check out our June 2020 article highlighting our thoughts on how the firm is capitalizing on the ongoing economic recovery in China.

Aug 20, 2020

Marriott International Can Survive COVID-19
Image Shown: Shares of Marriott International Inc have recovered somewhat from their March 2020 lows and are currently trading in the lower bound of our fair value estimate range. On August 10, Marriott International reported second quarter 2020 earnings that missed both consensus top- and bottom-line estimates. Marriott International’s financials have been devasted by the ongoing coronavirus (‘COVID-19’) pandemic, though its saving grace has been its asset-light business model which is built around property management and franchise fees. Most of its revenue comes from managing third-party locations and franchising out its various hotel brands to third-parties including Courtyard, Fairfield by Marriott, Residence Inn, Marriott Hotels, Sheraton, Westin, and others. Please note many of its franchised locations are also managed by Marriott International.

Aug 19, 2020

Update: COVID-19 Vaccine Race
Image Source: Johnson & Johnson – Second Quarter of Fiscal 2020 IR Earnings Presentation. The ongoing coronavirus (‘COVID-19’) pandemic has devasted the global economy (though things are starting to improve) and has fundamentally altered daily human life. According to a draft report from the World Health Organization (‘WHO’), there were 29 COVID-19 vaccine candidates undergoing clinical trials as of August 13 along with 138 other candidates undergoing preclinical evaluation. It is a race against the clock. Unfortunately, as of this writing on August 18, there have been ~170,000 COVID-19-related deaths in the US alone according to data from the US Centers for Disease Control and Prevention (‘CDC’). We are optimistic that one of the many “shots on goal” will end up proving successful. The US launched Operation Warp Speed to accelerate the development of a COVID-19 vaccine, which involves providing funding to companies with promising vaccine candidates. Furthermore, please note that major economies around the world have adjusted their rules and procedures to allow for multiple phases of clinical trials to be conducted concurrently. Before getting into some of the most promising COVID-19 vaccine candidates, we hope everyone, their loved ones, and their family members are staying safe out there as we ride out the pandemic.

Aug 18, 2020

Lockheed Martin Secures Major Aircraft Order
Image Shown: Lockheed Martin Corporation’s ‘Aeronautics’ segment is its largest in terms of operating profit. Management boosted the firm’s operating profit guidance for fiscal 2020 during Lockheed Martin’s latest earnings report. Image Source: Lockheed Martin Corporation – Second Quarter of Fiscal 2020 IR Earnings Presentation. On August 14, the US Department of Defense (‘DoD’) awarded Lockheed Martin Corporation (LMT) a ten-year $62.0 billion contract covering the sale of F-16 aircraft to overseas buyers. This is an “indefinite-delivery/indefinite-quantity (‘IDIQ’), fixed-price-incentive contract” and it is possible the ultimate sales figure under this deal will be lower than $62.0 billion. In the press release announcing the contract, the DoD noted the initial delivery order covers 90 aircraft and that this portion of the deal was worth a bit over $4.9 billion. Most of the production work on the new jet fighters will be conducted in South Carolina and Texas.

Aug 17, 2020

CyrusOne Is a High-Quality Data Center REIT
Image Shown: CyrusOne Inc’s financials and near-term growth outlook held up well during the ongoing pandemic, all things considered. Image Source: CyrusOne Inc – Second Quarter of 2020 IR Earnings Presentation. One of the newest additions to our High Yield Dividend Newsletter portfolio is CyrusOne, a data center real estate investment trust (‘REIT’). Demand for data centers has been extremely strong during the ongoing coronavirus (‘COVID-19’) pandemic as employees are often working from home (driving up demand for productivity programs which in turn is driving up data consumption worldwide) while demand for data-hungry video streaming services has surged. Over the long haul, we like the outlook for the industry, and more broadly, we prefer companies supported by secular growth tailwinds.

Aug 17, 2020

Lyft Can’t Run on Fumes Forever
Image Shown: Lyft Inc’s business model is not well suited for the pandemic. Its financial performance was decimated during the second quarter of 2020 as its active rider base opted to stay home or use other methods of transportation. Image Source: Lyft Inc – Second Quarter of 2020 Supplemental Data. On August 12, the ridesharing company Lyft announced second quarter 2020 earnings that beat consensus bottom-line estimates but missed consensus top-line estimates. The ongoing coronavirus (‘COVID-19’) pandemic has posed a major headwind for Lyft due to workers commuting less, reduced demand from late-night bar patrons, and other factors. Management did note within Lyft’s earnings release that rideshares were up 78% in the month of July 2020 versus April 2020 levels, indicating a recovery is underway, though the firm has a long way to go before getting back to pre-pandemic levels of revenue.

Aug 17, 2020

August Best Ideas Newsletter!
Image: The Best Ideas Newsletter portfolio. We migrated to weighting ranges at the beginning of 2018. The image above is as of the close April 15. Portfolio concentration among strong-performing equities has been the key to outperformance. Since the last update, we've witnessed some big moves from our top-weighted entities: Berkshire Hathaway (+10.7%), Facebook (+8.7%), and PayPal (+11.2%). These three entities comprise roughly 34% of the Best Ideas Newsletter portfolio at the high end of the weighting ranges, more than offsetting the weaker performance from lower-weighted Cisco and Intel during the month. We continue to focus on over-weighting our "best of the best" ideas within a portfolio setting, and we're hoping to get both Apple and Microsoft back near the top when the opportunity presents itself. Apple has advanced +17.6% since the last month's edition.

Aug 14, 2020

Two Exciting Names for Your Radar: PENN, SPCE
Image Source: Penn National Gaming. “Davey the Day Trader” meets space flight in this article that sums up the goings-on at two exciting companies, Penn National and Virgin Galactic. We think shares of PENN are fairly valued at the moment, and we won’t be taking a “flier” on Virgin Galactic, but we still think it is one worth watching.

Aug 14, 2020

Our Thoughts on Chevron Buying Noble Energy
Image Shown: An overview of Chevron Corporation’s all-stock acquisition of Noble Energy Inc that was announced in July 2020. Image Source: Chevron Corporation – July 2020 Noble Energy Acquisition Presentation. On July 20, Chevron Corp announced it was acquiring Noble Energy through a $5.0 billion all-stock transaction, or $13.0 billion when factoring in net debt and the book value of non-controlling interests. Shareholders of Noble Energy will receive approximately 0.12 share of Chevron for each share of Noble Energy. At the time the deal was announced, shareholders of NBL were receiving a ~12% premium based on the ten-day average closing stock prices. Chevron intends to issue ~58 million shares to cover the deal, keeping in mind the firm had approximately 1.85 billion shares outstanding on a weighted-average diluted basis as of the second quarter of 2020. The deal is expected to close during the fourth quarter of this year and is forecasted to generate $0.3 billion in annualized run-rate cost synergies one year after closing.