Valuentum Exclusive Analysis for the Discerning Investor

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Feb 4, 2024

Earnings Roundup: MO, EPD, SBUX, CLX, HON
Image: Starbucks’ international store growth potential remains robust. Image Source: Starbucks. High-yielding tobacco giant Altria offered an outlook through 2028 that spoke to continued robust earnings and dividend-per-share expansion. Enterprise Products Partners, now a Dividend Aristocrat, is handling record volumes through its pipeline network, and the firm is investing heavily to drive improved long-term cash flow trends. Starbucks recently disappointed on a number of metrics, but the company's margin and earnings performance remains excellent, as is its international store growth opportunities. Clorox has recovered nicely from a recent cyberattack, and the firm is now forecasting adjusted earnings per share growth in fiscal 2024. We're monitoring its cash flow trends closely, however. Honeywell is targeting tremendous free cash flow growth in 2024 thanks to continued strength in its commercial aerospace operations.

Dec 19, 2023

In the News: Google, McDonald’s, Costco, Apple
Image: McDonald’s has released a new beverage concept, and it looks to be a hit. Image Source: CosMcs. The market continues to ebb and flow with the latest Federal Reserve commentary, but we continue to be fans of the strong foundation that is the U.S. employment market and the great promise of artificial intelligence [AI] as key themes for 2024. We're huge fans of the net-cash-rich, free cash flow generating, secular growth powerhouses found in big cap tech and the stylistic area of large cap growth. We expect these two areas to continue to lead the markets higher, if not in 2024, through the better part of this decade. Let's take a look at some of the latest news at Alphabet, McDonald's, Costco, and Apple.

Nov 3, 2023

People Love Their Starbucks
Image: Starbucks remains a strong free cash flow generator. Operational efficiencies, sales leverage and pricing strength helped drive Starbucks' GAAP operating income growth of 42.7% and non-GAAP earnings per share to $1.06 in the quarter, up 31% on a year-over-year basis. Starbucks ended its fourth quarter of fiscal 2023 with ~$3.95 billion in cash and short-term investments and short- and long-term debt of ~$15.4 billion, resulting in a net debt position on the books. Free cash flow generation remains robust at Starbucks, however, with the measure coming in at ~$3.7 billion for the fiscal year ending October 1, 2023. We’re reiterating the high end of our fair value estimate range of $120 for Starbucks’ shares.

Oct 26, 2023

Brief Take: Altria’s 10% Dividend Yield Is Too Hard to Pass Up
Altria Group’s forward estimated 10% dividend yield is too hard to pass up as it is comfortably covered by traditional free cash flow. The tobacco giant reported third-quarter 2023 results on October 26 that showcased how its asset-light business model continues to throw off tons of cash. Traditional free cash flow generation came in at ~$5.9 billion during the first nine months of 2023, while cash dividends paid came in at ~$5 billion, resulting in a very nice free cash flow cushion on a ~10%-yielding stock. Though revenue growth at Altria remains under pressure, gross profit continues to move in the right direction. Altria has raised its dividend 58 times during the past 54 years, and the firm continues to target mid-single-digit dividend growth annually. For income investors that aren’t worried about ESG-related criteria, Altria could make for a great diversifier in a high-yield dividend income portfolio. Our fair value estimate stands north of $60 per share (shares are trading under $40 at the time of this writing).

Sep 4, 2023

Report Updates -- Did You Throw the Baby Out with the Bathwater?
The markets are finally making sense again, and we remain huge fans of big cap tech and the stylistic area of large cap growth. Though entities are starting to register high ratings on the Valuentum Buying Index, we’re not pulling the trigger on either Alibaba or Korn/Ferry in light of the tremendous risks related to U.S-China relations for Alibaba and the lack of fundamental catalysts for Korn/Ferry. That said, should these firms’ technical and momentum indicators shape up, their equity prices could really catch a bid, in our view. The newsletter portfolios continue to deliver in a big way, not only generating outperformance relative to the market-cap weighted S&P 500 during 2022, but also positioning well for the boom in big cap tech and the stylistic area of large cap growth that has materialized in 2023. We’ve said it before, and we’ll say it again: Don’t throw the baby out with the bathwater.

Jan 15, 2023

Our Reports on Stocks in the Discretionary Spending Industry
Image Source: Mike Mozart. Our reports on stocks in the Discretionary Spending industry can be found in this article: BBY, CBRL, CMG, DIS, DG, DLTR, DPZ, EL, F, GM, HAS, HD, LOW, MCD, NFLX, NKE, SBUX, TSLA, YUM, DKS, TJX, ROST, WHR, KMX, AZO, RL, ULTA, LEG, GPC, VFC, CTAS, WSM.

Dec 21, 2022

Nike’s Weak Earnings Growth, Markdowns, and Lofty Inventory Levels Still Telling of a Struggling Consumer
Image Source: Valuentum. Nike’s second-quarter fiscal 2023 earnings report, released December 20, revealed strong revenue growth, but concerns lurked beneath the surface. Gross margin pressure, markdowns, lofty inventory levels, and a decline in reported sales in China were among the many concerns. Nike’s strong brand and close ties with consumers, however, offer key competitive advantages, and while consumer discretionary spending is facing considerable pressure in the near term, Nike remains a strong long-term global story, in our view. Shares yield ~1.3% and are trading modestly above the high end of our fair value estimate range at the time of this writing.

Oct 27, 2022

VBI Ratings Not as Impressive As We Would Have Liked in 2022
Image: How the VBI rating system has ranked equities so far this year. At Valuentum, we use the Valuentum Buying Index (VBI) to source ideas into diversified simulated newsletter portfolios, and the VBI may be most applicable to the simulated Best Ideas Newsletter portfolio, where we generally like to include ideas when they register a high VBI rating and remove them when they register a low VBI rating. We always use the VBI in a portfolio setting and never by itself. Let's talk more about the VBI rating system in this work.

Oct 24, 2022

Chinese Stocks Bludgeoned!
Image: Large cap Chinese equities are now back to levels first reached more than 15 years ago on a price-only basis, to levels first attained in early 2006. The stakes have never been higher on the world stage as geopolitical uncertainty between the U.S. and China continues to escalate. Shares of Chinese equites have been bludgeoned, now back to levels first reached in early 2006, some 15 years ago. The fallout has taken some of the best investors with it, legends such as Charlie Munger, whose shares in BABA hover near all-time lows. We don’t see Chinese equities as “investable” these days, and we’re steering clear of direct exposure in the simulated newsletter portfolios at this time.

Oct 12, 2022

Over the Long Haul, Domino’s Has a Bright Growth Runway Ahead of It
Image Source: Domino’s Pizza Inc – 2022 ICR Conference IR Presentation. Domino’s is contending with substantial near-term headwinds, but its longer-term growth runway remains firmly intact. There is ample room for Domino’s to grow its international unit store count and domestically, Domino’s views its unit store count growth runway favorably. Recently, its unit store count has grown at a robust pace as franchisees are drawn to the attractive unit economics of the company’s stores. We continue to like exposure to shares of Domino’s in the simulated Best Ideas Newsletter portfolio.