Valuentum Exclusive Analysis for the Discerning Investor

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Mar 19, 2020

General Mills’ Pet Segment Continues to Deliver
Image Source: General Mills Inc – Third Quarter Fiscal 2020 Earnings IR Presentation. On March 18, General Mills reported third quarter fiscal 2020 (period ended February 23, 2020) earnings that provided the market with an idea of how major consumer staples brands were performing before the ongoing novel coronavirus (‘COVID-19’) pandemic started spreading around the world. In the fiscal third quarter, General Mills GAAP net sales were broadly flat year-over-year as was its GAAP operating income. The firm’s GAAP gross margin took a hit (from higher supply chain costs and input cost inflation) but that was offset by reduced restructuring costs and the lack of a major loss on divestment, allowing for its GAAP operating margin to stay broadly flat year-over-year. All-in-all, a fairly uneventful and uninspiring quarter, but General Mills’ forward guidance caught our eye.

Mar 17, 2020

Dollar General Holding Up Relatively Well in the Face of COVID-19
Image Shown: Shares of Dollar General Corporation, a holding in our Best Ideas Newsletter portfolio, have aggressively outperformed the S&P 500 Index over the past year as of the end of the normal trading session on March 12.  Retail firms, particularly companies that sell consumer staples products, have held up relatively well during the ongoing rout in global equities (including in the US). The novel coronavirus (‘COVID-19’) pandemic is the "black swan" event that could potentially tip the global economy towards recession, in our view, but please note this pandemic was the straw that broke the camel’s back, not the single source of this potential downside (rising non-financial corporate debt levels, slowing industrial activity, large national budget deficits and enormous public debt loads worldwide, rising geopolitical tensions and the impact trade wars have on global supply chains, and the lack of “dry powder” at major central banks are several reasons why the global economy has asymmetrical downside risk when it comes to growth). Best Ideas Newsletter portfolio holding Dollar General Corp is a prime example of a retail firm holding its own against major exogenous headwinds. As of the end of the normal trading session on March 12, shares of DG are up 18.7% while the S&P 500 index is down 11.1%. Dollar General reported earnings for the fourth quarter and full-year fiscal 2019 (period ended January 31, 2020) that beat on both the top- and bottom-line, and its same-store sales performance also beat expectations. Let's dig into the specifics in this note.

Mar 15, 2020

Panic Buying of Consumer Goods and Its Impact on Discounted Cash Flow Valuation
Image: Sam’s Club (Crystal Lake, IL), March 14. Water and toilet paper continue to be completely sold out at most big box retailers as COVID-19 panic buying of consumer goods continues to spread. Fear-induced purchases in the US have also helped drive up investor sentiment toward consumer staples names with a large domestic presence. We caution, however, that near-term earnings bumps emanating from “stockpiling” have little impact on a company’s intrinsic value, which is derived more from normalized conditions, and in most cases, the panic buying of consumer goods is merely pulling demand forward. “You know what’s disappearing from the supermarket shelves? Toilet paper…There’s an acute shortage of toilet paper in the United States.” – Johnny Carson, in 1973, causing a month-long shortage of toilet paper in the US at the time. The spread of COVID-19 is creating a similar panic as consumers stock up on just about everything from toilet paper to canned goods to hand sanitizer.

Feb 21, 2020

Dividend Increases/Decreases for the Week Ending February 21
Let's take a look at companies that raised/lowered their dividend this week.

Feb 19, 2020

Walmart Reports Fourth Quarter Results, Raises Dividend
Image Source: Valuentum. On February 18, global brick-and-mortar retail bellwether Walmart reported mixed fourth-quarter fiscal 2020 results (ends January 31, 2020) that showed revenue advancing 2.1% and non-GAAP earnings per share of $1.38 missing the consensus forecast. We await the filing of the firm’s 10-K to roll our valuation model forward, but we do not expect to make any material changes to our fair value estimate at this time, which stands at $109 per share. The stock is trading hands at ~$118 per share at the moment.

Jan 28, 2020

Johnson & Johnson Closes Out Fiscal 2019 With a Strong Fourth Quarter Report and Promising Fiscal 2020 Guidance
Image Shown: A look at some of Johnson & Johnson’s best selling products. Image Source: Johnson & Johnson – Fourth Quarter Fiscal 2019 IR Presentation. Best Ideas Newsletter and Dividend Growth Newsletter portfolio holding Johnson & Johnson reported fourth quarter and full-year earnings for fiscal 2019 on January 22. We liked what we saw as the company proved its fiscal 2019 wasn’t as bad as first feared, and furthermore, that Johnson & Johnson’s outlook remains bright as indicated by management’s guidance for fiscal 2020.

Dec 31, 2019

Our Reports on Stocks in the Food Retailing Industry
Image Source: Mike Mozart. We've reallocated our resources to cover more recession-resistant stocks.

Dec 27, 2019

Johnson & Johnson Rebounds
Image Shown: Shares of Johnson & Johnson are on the rebound as various analysts are coming around to the name. We continue to like Johnson & Johnson in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios and view recent technical strength in shares of JNJ as a sign that the market is finally taking into consideration the company’s numerous guidance boosts and more importantly, the strength of its expected future free cash flows. Going forward, powerful tailwinds supporting rising healthcare expenditures in the US and abroad will continue to support Johnson & Johnson. To read more about those favorable tailwinds, check out this article here.

Dec 18, 2019

FedEx’s Earnings Miss
Image Source: FedEx Corporation – 2019 Annual Stockholders Meeting September 2019 IR Presentation. In the days leading up to FedEx Corp latest earnings report where the firm missed by a mile, news broke that Amazon is now blocking third-party sellers that use its marketplace platform from using the FedEx Ground delivery service (which handles North American volumes) to ship to Prime customers. This comes on the heels of FedEx and Amazon ending two significant shipping contracts earlier this year, including the arrangement where FedEx Ground would handle some of Amazon’s packages, a deal that expired at the end of August. Please note that FedEx Ground is a small-package delivery service that caters to America and Canada, and that other FedEx options for certain packages bought through or sold by Amazon are still available. We are still staying away from FedEx as its ability to generate free cash flows remains pressured by its need to invest heavily in the business to keep up with the likes of Amazon and others. FedEx’s dividend payout could be at risk should exogenous shocks (i.e. a breakdown in the partial US-China trade war truce) continue weakening its financial performance.

Dec 9, 2019

Health Care Sector Remains Hot
Image Shown: The Health Care Select Sector SPDR ETF, a holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios, has been on an upward tear over the past several years. Strong macro tailwinds combined with the ability for industries within the health care sector to generate meaningful shareholder value have been key to supporting strong capital appreciation of equities operating in the area of late. The Health Care Select Sector SPDR ETF is a top holding in both our Best Ideas Newsletter and Dividend Growth Newsletter portfolios. We like the exposure and diversification to health care equities that XLV provides. XLV yields ~1.5% as of this writing. State Street Corp acts as advisor to the fund through State Street Global Advisors, and annual fund operating expenses come out to just 13 basis points (we like the XLV ETF’s low gross expense ratio).