Valuentum Exclusive Analysis for the Discerning Investor

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Aug 31, 2020

Alibaba Mirrors the Performance of Its Western Peers
Image Shown: Alibaba Group Holding Limited posted strong results for the fiscal quarter ended June 30, 2020, mirroring the performance of its large-cap tech peers based in Western countries (particularly the US). Image Source: Alibaba Group Holding Limited – June Quarter 2020 Earnings Presentation. At a time when US-China geopolitical tensions are rising and the Trump Administration is pushing the Chinese tech firm ByteDance to divest (at least) the US-based operations of TikTok, many Chinese tech firms are still thriving. The ongoing coronavirus (‘COVID-19’) pandemic has fundamentally altered daily life for most households around the world. Social distancing practices have aggressively driven up e-commerce demand along with demand for cloud computing offerings (as more employees work from home and as households stay indoors for significantly longer periods).

Aug 21, 2020

Just How Good Have We Been?
Image: We have been absolutely pounding the table on big cap tech and large cap growth for many months now. It has been one of the rare buckets to have done well this year. By well, we mean superb. Source: Zerohedge. After capping off one of the best years in the Best Ideas Newsletter portfolio in 2019, we highlighted broad market put option ideas in late February and early March--right before the COVID-19 crash that shocked the markets. Then, just about right near the bottom, we highlighted 17 of 20 outperforming ideas--strong net-cash-rich, free-cash-flow generating powerhouses with strong secular growth tailwinds. We then went all-in in the newsletter portfolios in late April, just in time for the best 100 trading days in the S&P 500 in history. But perhaps the chart above says even more. You know that we have been absolutely pounding the table on large cap growth, big cap tech, and the NASDAQ, and the bucket of large cap growth is up 23% this year, significantly ahead of any other style. Significantly.

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.

Jul 30, 2020

Visa Remains Resilient in the Face of COVID-19
Image Shown: Visa Inc remained a free cash flow cow last fiscal quarter in the face of the pandemic. Image Source: Visa Inc – Third Quarter of Fiscal 2020 IR Earnings Presentation. On July 29, Visa reported third quarter fiscal 2020 earnings (period ended June 30, 2020) that missed consensus top-line estimates and beat consensus bottom-line estimates. The ongoing coronavirus (‘COVID-19’) pandemic weighed on travel-related purchases across Visa’s cardholder base, a dynamic that held down cross-border transactions which tend to be more lucrative for the payment processor. Keeping pandemic-related headwinds in mind, the company noted its performance was improving in several key markets around the world. We continue to like Visa as a top-weighted holding in the Best Ideas Newsletter portfolio given its high quality cash flow profile, strong balance sheet, and very promising post-pandemic growth outlook. The top end of our fair value estimate range for Visa sits at $214 per share.

Jul 30, 2020

PayPal Posts a Tremendous Quarterly Report, Reinstates Guidance
Image Shown: PayPal Holdings Inc put up tremendous performance during the first half of 2020 as consumers are increasingly shopping online. In the second quarter of 2020, PayPal continued to grow at a decent clip even in the face of the ongoing pandemic. Image Source: PayPal Holdings Inc – Second Quarter of 2020 IR Earnings Presentation. After the market close July 29, PayPal reported second quarter 2020 earnings that beat consensus top- and bottom-line estimates. Shares of PYPL moved sharply higher after the report was published, and we continue to like PayPal as a holding in the Best Ideas Newsletter portfolio. Our fair value estimate sits at $200 per share of PYPL, comfortably above where PayPal is trading at as of this writing. There is room for meaningful capital appreciation upside as the top end of our fair value estimate range sits at $240 per share of PayPal. Even in the face of the ongoing coronavirus (‘COVID-19’) pandemic PayPal continued to grow, and we appreciate the resilience of its business model. The firm’s cash flow profile is of high quality, supporting its ability to generate meaningful free cash flows in any economic environment. Additionally, having a pristine balance sheet provides PayPal with ample financial flexibility to ride out the storm.

Jul 28, 2020

Earnings Brief: SAM, MAT, TOT, HON, AXP
Image Source: Boston Beer. CEO Dave Burwick noted in Boston Beer’s second-quarter press release: “The growth of the Truly brand, led by Truly Hard Lemonade, has accelerated and continues to grow beyond our expectations. Since early January, Truly has grown its velocity and its market share sequentially while other national, regional and local hard seltzer brands have entered the category. Truly is the only hard seltzer, not introduced earlier this year, to grow its share during 2020.” We’re impressed, but still taking a cautious view on SAM’s shares.

Jul 22, 2020

Second Quarter Earnings Roundup
The figure above shows the performance of the simulated Best Ideas Newsletter portfolio from inception May 17, 2011, through December 15, 2017, relative to its declared benchmark, the S&P 500 (SPY), on an apples-to-apples basis, with dividends collected but not reinvested for both the newsletter portfolio and the SPY, as reported in the monthly newsletter. The simulated Best Ideas Newsletter portfolio outperformed the S&P 500, including reinvested dividends in the benchmark, since inception (May 17, 2011) and since the inaugural release of the newsletter (July 13, 2011) through the end of the measurement period (December 15, 2017). The results are hypothetical and do not represent returns that an investor actually earned. Past results are not indicative of future performance.

Jul 1, 2020

July Dividend Growth Newsletter
"The COVID-19 pandemic has all but shown it's not the economy, or next quarter's earnings, or last year's book-to-market ratio or last year's P/E ratio that drives market prices and returns; it's enterprise valuation. Read about the duration of value composition in Value Trap." -- Brian Nelson, CFA

Jun 18, 2020

Best Idea PayPal Hits Record High!
The Valuentum strategy continues to deliver! My goodness! One of our favorite ideas in the payment processing space PayPal is hitting a record high today. Simply incredible. For those that missed the latest edition of the Best Ideas Newsletter, it can be downloaded here (pdf). For those that missed the latest edition of the Dividend Growth Newsletter, it can be downloaded here (pdf). Thanks so much for your interest, and we're available for any questions. Cheers!

Jun 16, 2020

Reiterating Our Bullish Long-Term View on Stocks
Image: The NASDAQ 100 Index remains resilient, bouncing off support, after breaking out to new highs recently. Some of our best ideas are included in the NASDAQ 100, and our favorite concentrations include exposure to big cap tech and large cap growth. We continue to be bullish on equities for the long run. In addition to unlimited quantitative easing and "whatever it takes, squared" Fed policy, today, June 16, the Trump administration announced that it is weighing a $1 trillion stimulus bill to help support the economy. While uncertainties remain regarding specifics of the bill (it might include state assistance, extension of unemployment benefits, etc.), the move is consistent with the outsize spending we expect to further bolster the bull case, "ICYMI -- Stay Optimistic. Stay Bullish. I Am." We continue to emphasize that, in light of unlimited QE and runaway fiscal stimulus, the longer-duration components of intrinsic values are expanding considerably, and as a result, fair values, themselves, are actually rising during this recession and pandemic [a good estimate of the value of the S&P 500 today may be between 3,530-3,920, as outlined in the following: "Scribbles and More Newsletter Portfolio Changes.]."