Valuentum Exclusive Analysis for the Discerning Investor

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Jan 22, 2020

Morgan Stanley Expecting Substantial Improvements
Image Source: Morgan Stanley Earnings Presentation. Morgan Stanley is guiding return on tangible equity to go from 12.9% this year to 13-15% in two years and to 15-17% in the longer term. Management was quite clear that they are using the assumption that the economy and markets move ahead at normal levels, meaning no severe recessions or booms. That said, if the company hits these goals, it will drive fundamentals ahead at a steady clip, requiring a reset higher in its valuation.

Jan 21, 2020

Goldman Hit By Charge Related to 1MDB
Image Source: Goldman Sachs Earnings Presentation. Aside from dominating the global revenue pools for investment banking and trading, Goldman is doing other things right. The firm has rapidly gathered deposits in the US and UK over the past year, bringing in a lower cost of funds to help facilitate its balance sheet. Goldman has also built up Marcus, Apple Card, and the bank is in the process of growing its asset management business to better serve institutional clients.

Jan 17, 2020

Bank of America Gaining Share
Image Source: Bank of America Earnings Presentation. We are increasing our fair value estimate of Bank of America to $40 per share, as we view the market share gains at the bank and steady loan and deposit growth to be more sustainable than we had previously envisioned. We like the bank’s solid franchise, the management team, and we like the shares here as it tries to catch up with larger peer JPMorgan.

Jan 17, 2020

Citigroup Succeeding at Cross-Selling
Image Source: Citigroup Earnings Presentation. Citigroup is finally out-earning our estimate of its cost of capital with a return on tangible common equity (ROTCE) of 12.4% in the quarter, and the shares have rallied substantially more recently as a result. Management lowered expectations for the degree of return on tangible equity improvement going into 2020, but continued improvements would be welcome, nonetheless.

Jan 16, 2020

Wells Fargo Remains an Inefficient Bank Despite Regulatory Overhang
Image Source: Wells Fargo Earnings Supplement. Wells has been forced to do a lot of hiring related to remediating its problems with regulators, but the problem is simply larger than that. This is an inefficient bank, which is very odd considering the massive scale that it benefits from.

Jan 15, 2020

JPMorgan's Quarter Shows Higher Sustainable Growth Potential
Image Source: JPMorgan Earnings Presentation. We are raising our fair value estimate of JPMorgan to $160 per share to reflect higher sustainable growth than we’d previously been expecting.

Dec 30, 2019

Dividend Growth Newsletter Portfolio Delivers Again in 2019
 The story of the Dividend Growth Newsletter portfolio this year was one dominated by big tech. Apple trounced the return of what could be considered our benchmark by about 80 percentage points. It basically beat the S&P Dividend ETF SDPR by a factor of about 5 times! 2019 was simply the year to own Apple, and my goodness we had it right near the top of both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. You would think this was a no-brainer, as everyone loves Apple, but many a portfolio manager did not own Apple this year. Apple also upped its dividend 5%+ during 2019...

Dec 19, 2019

2019: Another Market Beating Year for the Best Ideas Newsletter Portfolio!
We estimate thus far the Best Ideas Newsletter portfolio return has beat the S&P 500 by 2.8 percentage points during 2019 (34.4% versus 31.6% for the S&P 500, as measured by the SPY). Our move to overweight Apple, Facebook, and Visa worked out wonderfully for members during 2019. We continue to overweight big winners, and we credit this to our team's conviction in our very best ideas. We also made quite the savvy move in rolling over a solid gain in Chipotle (60%+) into even more shares of Apple stock during the year. We're putting some of the best ideas right in front of our membership in full transparency. Berkshire Hathaway's overweighting added some stability to the Best Ideas Newsletter portfolio, but it was a large drag on returns during the year. This is okay - we like the diversification benefits. 2019 was a very, very difficult year to beat the market, but by our estimates, the Best Ideas Newsletter did so, and by a fair margin, particularly for a large cap orientation. Note this kind of outperformance is unique as many money managers continue to trail their benchmarks during 2019. We credit the outperformance to our team's work ethic and the Valuentum methodology. We are disappointed with the current state of active management, and we are working to develop solutions for our membership. We expect to roll out an important survey in the coming months. We continue to encourage members to add the Exclusive to their membership, if they haven't considered this fantastic publication just yet. More on the Exclusive >> The Best Ideas Newsletter portfolio is part of a regular premium membership to Valuentum. More here >>

Nov 25, 2019

Primer on the Banking Sector: Where Are We in the Cycle?
Image Source: GotCredit. We’ll talk about how banks make money, and the three most important costs of running a bank. The Great Financial Crisis revealed the tremendous risks of banking equities, and we’ll walk through these in depth. We’ll discuss how to conceptualize where we are in the banking cycle, and how that helps inform our valuation process for banks, which is different than traditional operating entities. The stress tests have helped many of the big banks from pursuing hazardous endeavors during the past decade, and we’ll go into how to think about the yield curve in the context of banks. Investors should expect ongoing digitization of banks and increased M&A as the competitive environment only intensifies. Three of our favorite banks are JPMorgan Chase, Bank of America, and US Bancorp, and we’ll be looking to consider adding any of these to the Best Ideas Newsletter portfolio or Dividend Growth Newsletter portfolio at the right price.

Nov 20, 2019

Economic Commentary: Marks, Dalio, and the Discount Rate
Image Source: Mike Cohen. We sat down with the Valuentum team to discuss their latest thoughts on recent economic developments. To kick off the conversation, let’s start with the team’s views on the latest memo from Oaktree’s Howard Marks: Mysterious. For those that don’t know Howard, he is the Director and Co-Chairman of Oaktree, which managed about $122 billion in AUM, as of September 2019. The memo goes into depth on the reasons for negative interest rates, the impact of negative interest rates, and opines on whether the US will ever see negative interest rates. Then, we’ll go from there!