Valuentum Exclusive Analysis for the Discerning Investor

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Oct 25, 2023

Download the Updated 16-page Stock Report of Alphabet
Download the updated 16-page stock report of Alphabet in this article.

Oct 25, 2023

Visa’s High Margin Business Reveals Consumer Spending Remains Resilient
Image: Visa has been a strong performer thus far in 2023. On October 24, Best Ideas Newsletter portfolio holding Visa reported excellent fourth-quarter results for its fiscal 2023. Net revenues advanced 11% on a year-over-year basis, while non-GAAP net income and non-GAAP earnings per share leapt 18% and 21% year-over-year, respectively, in the period. For the fiscal year, Visa generated an impressive 64.4% operating margin. Payments volume increased 9% and cross-border volume advanced 16%, showcasing that the consumer remains very healthy thanks in part to low unemployment rates, despite concerns over higher mortgage costs, student loan repayments, and general economic uncertainty as savings accrued during the COVID-19 pandemic wane. We continue to be big fans of Visa as our top payments-related idea.

Oct 24, 2023

Brief Take: Microsoft Blows Past Expectations in Q1 Fiscal 2024
Image: Mike Mozart. Microsoft hasn’t been a tech dinosaur for many years now, and its first-quarter fiscal 2024 (calendar third quarter 2023) results continued to show just how well the tech giant has adapted to the new economy--from the cloud to gaming to personal computing and, of course, to getting a lead in artificial intelligence [AI] with its investment in OpenAI (ChatGPT). During its fiscal first quarter, Microsoft’s revenue advanced 12% in constant currency, while operating income leapt 24% holding foreign exchange constant—breakneck levels of expansion. Azure and other cloud services sales advanced 28% on a year-over-year basis holding currency constant. The high end of our fair value estimate for shares stands at $368, and we wouldn’t be surprised if Microsoft’s equity returns to those levels in the near term.

Oct 23, 2023

2 Stocks to Watch: Tesla and Chevron
Image: Tesla. Tesla’s third-quarter report could have been a lot better, and Elon Musk’s comments that they “have dug (their) own grave with the Cybertruck” weren’t reassuring. Nonetheless, the company continues to generate free cash flow, and its balance sheet remains pristine with a very nice net cash position. We won’t be adding shares of Tesla to any newsletter portfolio, but given the price drop in its equity during the past week, we think most of the bad news is already embedded in the stock. As for Chevron, the company was once a darling stock in the newsletter portfolios, but we’ve moved beyond this big winner in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio after the huge “gains” the past 12-18 months. Shares still yield an attractive 3.6%, however, and we'll have more to say about its tie-up with Hess as more details come to light.

Oct 23, 2023

Lockheed Martin Represents Key Aerospace & Defense Exposure
On October 17, Dividend Growth Newsletter portfolio holding Lockheed Martin reported decent third-quarter 2023 results with the firm growing revenue roughly 1.8% on a year-over-year basis, and the firm beating the consensus estimate for non-GAAP diluted earnings per share. We like Lockheed as our aerospace and defense exposure more than Boeing, given the latter’s long list of troubles and deteriorated financial health, punctuated in part by troubles during the height of the COVID-19 pandemic and loss of life related to its 737 MAX platform. We think Lockheed offers a much better risk/reward and a healthy dividend to boot. Lockheed Martin yields ~2.8% at the time of this writing.

Oct 23, 2023

Kinder Morgan Now Covers Cash Dividends with Traditional Free Cash Flow
On October 18, Kinder Morgan reported third-quarter results that came in lower than expectations, but we’ve taken note of the company’s improved free cash flow generation that now runs in excess of its cash dividends paid, a huge change from a decade ago, where capital spending and cash dividends paid far outweighed its operating cash flow capacity. The company’s dividend stands at $1.13 per share on an annualized basis, and Kinder Morgan now has an forward estimated dividend yield of ~6.7%, which is quite attractive. Shares are trading meaningfully below our estimate of their intrinsic value, too, and we’re warming up to the company’s financials. Its net debt position likely precludes it from being added to any simulated newsletter portfolio at this time, however. Our $21 per-share fair value estimate remains unchanged.

Oct 23, 2023

Philip Morris Raises Adjusted Diluted EPS Outlook
On October 19, Philip Morris reported excellent third-quarter 2023 results that showed currency-neutral revenue advancing 16.4%, and non-GAAP adjusted diluted earnings per share beating the consensus forecast, increasing more than 20% to $1.67 per share. The company continues to benefit from strong pricing across its combustible tobacco portfolio, its integration of its purchase of Swedish Match, and the popularity of its nicotine pouch ZYN, where shipment volume in the U.S. increased ~66% from the year-ago period.

Oct 22, 2023

There Will Be Volatility
Image: An ETF tracking Russell 1000 "growth" stocks has outperformed an ETF tracking Russell 2000 "value" stocks since the beginning of 2021. To us, the market remains hypersensitive to almost every economic data point that hits the wires, and we’re just not going to play that game. The macro headlines and never-ending news flow are what many quant and algorithmic traders are trading on, and to a very large extent, for investors with a long-term horizon, these macro data points just don’t factor into the equation. When valuing equities, we’re always after mid-cycle expectations, not peak or trough performance, so our valuations implicitly embed a "normal" recession. Warren Buffett didn’t become a billionaire buying and selling on macro data points, and volatility is simply to be expected given the proliferation of price-agnostic trading these days. Instead of panicking over higher interest rates, we think investors should view the Fed’s work thus far as future potential dry powder to stimulate both the economy and the markets. Whenever you feel like stocks are no good, have a read of Warren Buffett’s classic piece written during the Great Financial Crisis, “Buy American. I Am.” To us, we still like stocks for the long run. Happy investing!

Oct 20, 2023

Dividend Increases/Decreases for the Week of October 20
Let's take a look at firms raising/lowering their dividends this week.

Oct 9, 2023

Investors Likely Overreacting to Long-Run Impact That Weight-Loss Drugs Will Have on Snack and Food Stocks
Image: Domino’s stock has slumped recently due to weakening same-store sales expansion and concerns that weight-loss drugs will have on snack and food demand. The American eater continues to fight the “battle of the bulge” as many seek improved lifestyles and the health benefits from losing weight and getting in shape. The healthcare industry is delivering on this front, too, with diabetes drugs from Novo Nordisk and Eli Lilly called GLP-1 agonists that also have weight-loss benefits. Though we applaud what looks to be a solution in part for the obesity epidemic that has overtaken the U.S., investors are growing concerned that food that snack and food stocks will see slackening demand.