Valuentum Exclusive Analysis for the Discerning Investor

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Jul 27, 2021

High-Yielding AT&T Remains Free Cash Flow Cow
Image Shown: AT&T Inc’s core businesses in the wireless and fiber arenas continue to gain subscribers at a rapid pace, while its HBO/HBO Max offerings are also growing at a nice clip. Image Source: AT&T Inc – Second Quarter of 2021 IR Earnings Presentation. On July 22, AT&T reported second quarter 2021 earnings that beat both consensus top- and bottom-line estimates. The company added 1,156,000 net postpaid customers to its core ‘Mobility’ business including 789,000 net postpaid phone customers, aided by its lowest churn rates ever at just below 0.7%. AT&T also added 174,000 net prepaid phone customers while its AT&T Fiber business added 246,000 net customers last quarter. We include shares of AT&T as an idea in the High Yield Dividend Newsletter portfolio (more on that here), and shares of T yield ~7.4% as of this writing.

Jul 21, 2021

Netflix’s Free Cash Flow Remains Poor While Competition Is Intensifying
Image shown: Netflix continues to experience robust growth and improvements in its operating margin, but free cash flow remains weak. Image source: Netflix’s second-quarter earnings shareholder letter. Without a doubt, Netflix has been one of the best-performing stocks the past decade, but we have a hard time making the case for the firm, especially in light of the much better balance sheets, competitive profiles and free cash flow generation at Facebook, Apple, and Alphabet. Our fair value estimate for Netflix stands just shy of $500, and we think the company’s shares will be rangebound until the next catalyst, which we think will be a negative one, given heightened competition. We remain on the sidelines.

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.

May 24, 2021

Crown Castle Is a Great Income Growth Idea
Image Shown: Crown Castle International Corp has an expansive portfolio of shared wireless infrastructure assets that covers every major market in the US. Image Source: Crown Castle International Corp – First Quarter of 2021 IR Earnings Presentation. We're huge fans of Crown Castle and believe the REIT has a promising dividend growth outlook. Looking ahead, the ongoing buildout of 5G wireless infrastructure in the US, the Internet of Things (‘IoT’) trend, and the potential emergence of smart cities supports the outlook for data demand and ultimately Crown Castle’s ability to grow its cash flows. Its expansive portfolio includes 40,000+ towers, ~80,000 route miles of fiber, and ~80,000 small cell nodes. According to Crown Castle, the REIT has a presence in every major US market. Crown Castle’s contracts generally are long term in nature and come with rent escalators and other provisions that are favorable for the REIT. As of this writing, shares of CCI yield ~2.9%.

May 18, 2021

AT&T Right-Sizing Dividend, WarnerMedia Joining Forces with Discovery
Image Shown: AT&T Inc’s WarnerMedia unit is joining forces with Discovery Inc. This transaction, if it goes through as planned, will create another giant in the video streaming services industry. Image Source: Discovery Inc – Discovery Joining Forces with WarnerMedia IR Presentation. Despite the upcoming rightsizing of its dividend payout in light of a pending spin-off, the telecommunications and media giant AT&T continues to be one of our favorite income generation ideas. We're not making any changes to the newsletter portfolios at this time, and the recent news indicates AT&T’s balance sheet is about to improve significantly.

May 17, 2021

Best Idea Disney’s Outlook Is Bright and Getting Brighter
Image Source: The Walt Disney Company – December 2020 Investor Day Presentation. The Walt Disney Company reported second quarter fiscal 2021 earnings (period ended April 3, 2021) that beat consensus bottom-line estimates but missed consensus top-line estimates. Investors were dismayed that the company’s paid video streaming subscriber base did not grow by as much as expected. However, we are not worried as Disney’s outlook is bright and getting brighter.

May 11, 2021

Stock Markets Still Healthy, Big Cap Tech and Large Cap Growth Safe Havens
 Image Shown: Facebook’s shares are trading below the low end of our fair value estimate range at the time of this writing. The social media giant registers a 10 on the Valuentum Buying Index as it boasts a tremendous financial position with respect to net cash on the balance sheet and future expected free cash flows. Image Source: Valuentum. It’s easy to get spooked sometimes by the market’s volatility, but what we’ve witnessed the past few days is nothing compared to the volatility during the COVID-19 crisis and the Great Financial Crisis before it—and what we eventually expect the proliferation of price-agnostic trading to do to the markets in the years ahead. We continue to like the areas of big cap tech and large cap growth thanks to their strong competitive positions, solid net cash profiles, and robust and growing future expected free cash flow. Facebook remains our top idea for capital appreciation potential. Newmont Mining is our favorite “inflation hedge” within the metals and mining arena, and investors that would like greater exposure to energy and financials may look to more diversified ETFs to gain access to the broader themes of rising energy resource prices and net interest margins. AT&T is a top equity consideration for the high-yield dividend crowd. In the coming weeks and months, we’ll be looking to put some of the dry powder that we raised in January 2021 “to work” in some of the areas we outlined in this article. In the meantime, we’re going to continue to watch this orderly sell-off that’s being driven by valuation model adjustments (to factor in higher inflation expectations) and modest deleveraging from cryptocurrency volatility. All is well.

Apr 22, 2021

Good News from High Yielding AT&T
Image Source: AT&T. We liked AT&T’s first-quarter results and outlook for 2021 that calls for free cash flow generation to be well in excess of expected cash dividends paid for the year. Investors should be aware of its hefty net debt position, but with a ~7% dividend yield, the company may be hard to pass up for high yield dividend focused investors. We plan to make some tweaks to our valuation model following this report, but our fair value estimate of $34 per share remains unchanged at this time.

Apr 8, 2021

The Best Years Are Ahead
The wind is at our backs. The Federal Reserve, Treasury, and regulatory bodies of the U.S. may have no choice but to keep U.S. markets moving higher. The likelihood of the S&P 500 reaching 2,000 ever again seems remote, and I would not be surprised to see 5,000 on the S&P 500 before we see 2,500-3,000, if the latter may be in the cards. The S&P 500 is trading at ~4,100 at the time of this writing. The high end of our fair value range on the S&P 500 remains just shy of 4,000, but I foresee a massive shift in long-term capital out of traditional bonds into equities this decade (and markets to remain overpriced for some time). Bond yields are paltry and will likely stay that way for some time, requiring advisors to rethink their asset mixes. The stock market looks to be the place to be long term, as it has always been. With all the tools at the disposal of government officials, economic collapse (as in the Great Depression) may no longer be even a minor probability in the decades to come--unlike in the past with the capitalistic mindset that governed the Federal Reserve before the “Lehman collapse."

Mar 24, 2021

ViacomCBS Makes Big Bet on Streaming
Image Source: ViacomCBS Inc – Fourth Quarter of 2020 IR Earnings Presentation. After Viacom and CBS were reunited in December 2019, the new entity ViacomCBS Inc has finally started to gain some traction on the video streaming front. The service CBS All Access, which has since been rebranded as Paramount+, was largely a dud and did not gain the level of attention that Walt Disney Company’s Disney+ service, AT&T Inc’s HBO Max service, or Netflix's namesake service were able to generate. For background, ViacomCBS’s operations include various TV network and cable TV assets, TV and movie studios, various streaming services, and a book publisher. That includes various CBS networks (CBS, CBS Sports, CBS News), CBS studios, MTV, Comedy Central, Paramount, Nickelodeon, Pluto TV (another video streaming service that is free and ad-supported), BET, CMT, POP TV, half of CW (AT&T owns the remaining 50%), COLORS (focused on India), telefe (focused on Spanish-speaking content), SHOWTIME, and the book publisher Simon & Schuster. However, with ViacomCBS launching Paramount+ this month in the US and various Latin American markets, the service now has a larger slate of content than CBS All Access and is supported by ViacomCBS’ vast library (and most importantly, ViacomCBS has plans to produce dozens of original series for Paramount+ going forward). Paramount+ is leaning on properties such as Star Trek and SpongeBob SquarePants along with reboots of shows like iCarly to create engaging original content. Content is king. The combination of Viacom and CBS helped address that issue and provided the new entity with the scale required to be competitive in this business.