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Fundamental data is updated weekly, as of the prior weekend. Please download the Full Report and Dividend Report for any changes.
Feb 27, 2022
Valuentum Weekly: Putin, the Aggressor, But Did “the West” Cause the Conflict in Ukraine?
We think the newsletter portfolios are well-positioned for inflationary pressures and believe the areas of large cap growth and big cap tech remain the places to be—names like Alphabet, Facebook, Microsoft, Apple and the like. Not only are these equities shorter-duration, more defensive areas relative to more speculative tech, but they also are shielded more from geopolitical uncertainty than international exposure, which many managers seek under modern portfolio theory. We’re also maintaining our bullish view on the energy sector in the near to medium-term. However, please be aware that, while strategically we like the areas of large cap growth and big cap tech because of their moaty business models, attractive valuations, large net cash positions and strong free cash flow generating capacities, we view the overweight “positions” in the energy sector in the simulated newsletter portfolios as tactical short-term decisions given their cyclical nature. The simulated Best Ideas Newsletter portfolio, after coming off huge years in 2019, 2020, and 2021, is performing about in line with the major indexes so far this year and doing far better than more speculative areas, where many investors found themselves caught like a deer in headlights. We remain bullish on stocks for the long run--and our favorite individual ideas remain in the simulated newsletter portfolios, within our additional options commentary and in the Exclusive publication. Stay diversified. May we see peace in Ukraine soon.
Feb 25, 2022
Update: Analyzing Valuentum’s Economic Castle Index: A Walk Forward Case Study
There are two things generally wrong with a pure economic moat assessment, or economic “moat factor.” First, it is much easier to assess outsize economic returns in the near-term than it is to assess outsize economic returns over the long haul. Quite simply, nobody can predict what will happen tomorrow, and they certainly don’t know what will happen 20 or 30 years from now. Second, a rational investor should generally prefer expected near-term outsize economic returns than expected long-term ones given the uncertainty of the latter--somewhat related to our first point, a bird in the hand (or large economic returns in the near term) is worth two in the bush (or large economic returns in the long run that may not materialize). The time value of money reinforces this notion. Near-term economic returns are generally worth more than long-term ones in real terms, even if they may be smaller nominally. This is where our Economic Castle rating comes in. The goal of the Economic Castle rating is to identify those companies that are likely to generate a lot (or not so much) shareholder value over the foreseeable future. Instead of pondering a guess as to how the landscape will look 20 or 30 years from now, something not even the Oracle of Omaha can do with any sort of certainty (e.g. IBM, KHC), the Economic Castle rating ranks companies based on near-term expected economic returns, or returns that are more likely to be realized as opposed to those that may be built on “castles in the air” over 20-30 time horizons. By evaluating companies on the basis of the spread between their forecasted future return on invested capital (‘ROIC’) excluding goodwill less their estimated weighted-average cost of capital (‘WACC’), we measure a company’s ability to generate an “economic profit” over the foreseeable future, which we define as the next five fiscal years. Companies that generate a forecasted spread of 50 percentage points or more are given a “Very Attractive” Economic Castle rating and firms that are forecasted to generate a spread of 150 percentage points or higher are considered “Highest-Rated”. Firms that carry an Unattractive Economic Castle rating are those that are forecasted to generate a forward ROIC (ex-goodwill) less estimated WACC spread that’s meaningfully below zero (firms near economic parity can receive a Neutral Economic Castle rating, assigned by the Valuentum team).
Feb 23, 2022
High-Yielding American Tower Is a Free Cash Flow Cow
Image Shown: American Tower Corporation operates the tower structure and related land parcel of cell tower assets, while its tenants handle the remainder. Image Source: American Tower Corporation – Third Quarter of 2021 IR Earnings Presentation. Rising geopolitical tensions, inflationary headwinds, supply chain hurdles, and pressures from the rising interest rate environment are all weighing negatively on equity markets. In our view, this sell-off presents an opportunity for investors with a longer-term focus to consider high-quality REITs such as American Tower Corp, which is now trading at a significant discount to our estimate of its intrinsic value.
Feb 23, 2022
High-Yielding Life Storage Has Tremendous Dividend Strength
Image Shown: Life Storage Inc is committed to rewarding income seeking investors. Image Source: Life Storage Inc – January 2022 IR Presentation. We are huge fans of Life Storage and the self-storage industry. Life Storage owns 1,000+ self-storage properties across 30+ states and has received an investment grade credit rating (Baa2/BBB) from two of the ‘Big Three’ rating agencies. The REIT also operates a third-party management platform for self-storage properties. The company’s financials are rock-solid and recent guidance increases speak favorably towards its near term outlook. Shares yield a solid ~3.1% at the time of this writing.
Feb 21, 2022
High-Yielding Income Growth Idea Digital Realty Expects Business Will Continue Recovering
Image Shown: We are big fans of Digital Realty Trust Inc’s global footprint. Image Source: Digital Realty Trust Inc – Fourth Quarter of 2021 IR Earnings Presentation. On February 17, Digital Realty Trust reported fourth quarter 2021 earnings that beat both consensus top- and bottom-line estimates, though its near term guidance came in a tad softer than expected. The data center real estate investment trust (‘REIT’) is facing headwinds from vintage leases rolling off and concerns about surging power costs around the world. On the plus side, Digital Realty is experiencing decent growth at the part of its business where re-leasing terms have been more favorable, and its contracts generally include provisions that allow the REIT to pass on electricity expenses to its tenants. We include Digital Realty as an idea in both the Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios.
Feb 18, 2022
The Dividend Cushion Beats the Aristocrats
A prolonged period of low interest rates has driven income investors to dividend growth investing as a way to achieve retirement goals. Traditional dividend growth analysis has rested on evaluating a company’s dividend payout ratio and its track record of historical consecutive annual dividend increases. A supplement to these approaches, the forward-looking, cash-flow-based Dividend Cushion ratio maps a company’s future expected free cash flows to its future expected cash dividends paid (after considering balance sheet health) and has shown to be a superior indicator of both dividend growth (risk) and total return relative to other dividend growth analytical processes. The results in this paper showcase the outperformance of a select number of high-yielding equities with strong Dividend Cushion ratios relative to both S&P 500 firms and companies with decades of consecutive annual dividend increases.
Feb 17, 2022
Cisco Posts Great Earnings Update; Increases Dividend and Share Buyback Authority
Image Shown: Cisco Systems Inc is a very shareholder friendly company. Image Source: Cisco Systems Inc – Second Quarter of Fiscal 2022 IR Earnings Presentation. On February 16, Cisco Systems reported second quarter earnings for fiscal 2022 (period ended January 29, 2022) that smashed past both consensus top- and bottom-line estimates. Shares of CSCO surged higher initially after its earnings were made public as the company offered up promising near term guidance, indicating that its positive momentum seen of late is expected to continue. We include shares of CSCO as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. Cisco announced a 3% sequential increase in its quarterly dividend in conjunction with its latest earnings update, bringing it up to $0.38 per share or $1.52 per share on an annualized basis. The company also announced it had increased its share repurchasing capacity by $15 billion, bringing its total repurchasing capacity up to ~$18 billion. Shares of CSCO yield ~2.8% as of this writing at its new payout level, and we view its dividend strength as rock-solid due to its pristine balance sheet and stellar free cash flows. Our fair value estimate for Cisco sits at $62 per share with room for upside as the high end of our fair value estimate range sits at $74 per share. That is meaningfully above where shares of CSCO are trading at as of this writing (~$56 per share each), and we view the company’s capital appreciation upside potential quite favorably.
Feb 16, 2022
Dividend Growth Idea Realty Income Makes an Intriguing Purchase
Image Shown: Dividend growth idea Realty Income Corporation is acquiring its first real estate property in the gaming realm through a sale-leaseback transaction with Wynn Resorts Limited. Image Source: Realty Income Corporation – February 2022 IR Presentation. On February 15, dividend growth idea Realty Income Corp announced its 620th consecutive monthly dividend. Since going public in 1994, Realty Income has increased its monthly payout over 110 times. Realty Income is a real estate investment trust (‘REIT’) focused on single-tenant commercial properties. We include the REIT as an idea in the Dividend Growth Newsletter portfolio and continue to be big fans of Realty Income. Shares of O yield ~4.4% as of this writing.
Feb 14, 2022
Credit Suisse Is a Case Study in Poor Governance and Why ESG Investing Matters
Image Shown: Shares of Credit Suisse Group AG have performed poorly in recent years as a revolving door of leaders combined with several major scandals have led to billions in losses and prompted Swiss regulators to launch investigations into the bank. The company has a plan in place to turn things around, though it will take years for these efforts to be fully reflected in its financial performance. Credit Suisse recently issued lackluster guidance for 2022 that weakened investor confidence in its turnaround story. We think Credit Suisse is a good case study in poor corporate governance.A revolving door of leadership does not speak favorably towards Credit Suisse’s outlook, though the company is working hard to put its past behind it. The Swiss bank has been unable to steady the ship so far after several serious scandals cost the firm billions and prompted Swiss regulators to take a closer look at Credit Suisse. When it comes to effective governance, Credit Suisse has been lacking and that has cost investors dearly. We hope Credit Suisse can right the ship under its new management team and is able to achieve its longer term goals (such as boosting its RoTE north of 10.0% by 2024 while improving its cost structure). However, we see no reason in taking the chance and view CS more as a study on why good corporate governance matters. Our two favorite banks are Bank of America Corporation and JPMorgan Chase & Co, both of which have solid leadership teams. Berkshire Hathaway Inc, specifically Class B shares (ticker: BRK.B) and the Financial Select Sector SPDR Fund ETF are both included as ideas in the Best Ideas Newsletter portfolio. As opposed to one individual bank, we like the diversified exposure to the U.S. banking and financial services space the XLF ETF provides. Additionally, we are huge fans of Berkshire Hathaway and recently increased the company’s fair value estimate.
Feb 10, 2022
Chipotle Sees Bigger Unit Growth Opportunity in North America, Continued Pricing Power
Image: Chipotle’s shares look like they are poised to breakout of a downtrend on news that its long-term unit restaurant opportunity is bigger than expected and that its pricing power remains intact. Chipotle's fast-casual focus and premium food offerings coupled with its Chipotlane rollouts and its breakfast “call option” are a few things that give the company a runway for continued strength that may be unprecedented by an established brand, particularly as it sees an even greater opportunity for unit development in North America than it did before. Because it serves a higher-end fast-casual customer, we think product pricing ahead of inflation won’t be an issue (helping to augment margins), and we’re reiterating our fair value estimate of ~$1,640 per share, above where shares are currently trading at the time of this writing (~$1,580 per share). A more optimistic take on Chipotle could see shares reach the higher end of our fair value estimate range of ~$1,970 per share.



The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Nelson Exclusive publication, and any reports, articles and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. The sources of the data used on this website are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor and does not offer brokerage or investment banking services. Valuentum, its employees, and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.