Valuentum Exclusive Analysis for the Discerning Investor

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Oct 3, 2019

Competition Heats Up in the Medical Robotics Space
Image Source: Intuitive Surgical Inc – IR Presentation. Competition is heating up in the medical robotics space, an area of the medical device industry Intuitive Surgical is a clear leader in with its Da Vinci system installed in ~5,000 hospitals and other medical centers around the world (approximately 60% of Intuitive Surgical’s installed base is in the US). Medtronic PLC seeks to launch its own robot-assisted surgery device for soft tissue surgeries, aimed not at stealing market share from Intuitive Surgical’s existing customers (no easy feat given that the upfront cost of ~$0.5-$2.0 million per Da Vinci system on top of needing to retrain surgeons on how to use a new system) but winning over new customers that have yet to adopt medical robotics systems like the Da Vinci. Medtronic’s new offering isn’t expected until 2021 at the earliest and the company plans to utilize the same business model as Intuitive Surgical given the success the market leader has had with winning over recurring business.

Sep 24, 2019

The Orthodontics Industry Is Getting Disrupted
Image Source: SmileDirectClub Inc - S-1 SEC Filing. SmileDirectClub, the teledentistry startup that makes 3D-printed clear aligners which are a cheaper alternative to braces (albeit with drawbacks when compared to the traditional braces route), went public this September at $23/share. While SmileDirectClub’s growth trajectory is quite intriguing, we prefer to wait until we get a better idea of the regulatory landscape the start-up faces and what its financial performance will look like now that it’s a public entity in the limelight. For Align, we are staying firmly away from the company as competitive pressures will continue to mount going forward. Neither company pays out a common dividend at this time.

Sep 12, 2019

Merck Shows Impressive Margin Expansion
Image Source: Merck & Co Inc -- IR Presentation. Merck is improving its financials and we like that, but we still aren’t interested in shares after the run up during the past year and a half. The pharmaceutical giant’s net debt load is manageable given its strong free cash flows, but dividend growth will require share buybacks to be pared back first in order to make room for payout growth. It will take some time until we get an idea of how well Merck’s recent acquisitions pan out.

Aug 11, 2019

In the News: Amazon, GE, Kraft-Heinz, Disney, CVS Health, Gilead
We're reiterating the large range of fair value outcomes for Amazon. We're staying far away from General Electric and Kraft-Heinz. Netflix may have its back against the ropes with Disney Plus. CVS Health and Gilead were two setbacks in the newsletter portfolios in the past, but we kept losses to a minimum and new ideas more than offset the weakness. The Best Ideas Newsletter portfolio continues to do very well.

Jul 17, 2019

In the News: Second-Quarter Earnings Season Begins
Second-quarter earnings season is upon us. The markets aren’t expecting much growth. Core industrial names may not fare well, but thus far, big pharma is solid. We’re not making any changes to the newsletter portfolios.

Jul 1, 2019

New Highs! The December Call Has Been Well-Rewarded
"The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own." - Warren Buffett (2018)

Jun 26, 2019

Another Pharmaceutical Giant Is Born
Image Source: AbbVie Inc – IR Presentation. The combination of AbbVie and Allergan seems to have been born out of the need to do something, anything, considering how dependent AbbVie is on Humira and Allergan is on Botox. We find the transaction interesting as it ties into our view that Big Pharma will continue getting bigger and bigger while the field gets smaller, but this doesn’t change on view on either Allergan or AbbVie. We aren’t considering shares of either company at this time.

Jun 16, 2019

Valuentum's June Best Ideas Newsletter
Image: Page 49, June edition of American Library Association Booklist."I hope that my book Value Trap: Theory of Universal Valuation marks a turning point in the financial research industry. To you and me, 1) looking forward, 2) understanding that stock values are based on future expectations, and 3) calculating intrinsic value is simply par for the course. If other investors are not doing this, it should be no surprise that they are failing miserably. 90% underperformance! I hope my book serves as a wake up call for readers to demand forward-looking analysis and research that calculates a best fair value estimate." -- Brian Nelson, CFA

Mar 22, 2019

Apple Surging -- Your Competition Is News-Driven and Failing
Image shown: Apple's shares are coming back in a big way. We still like them! No change to simulated newsletter portfolios. Clarification: On March 15, we sent out an alert for the Dividend Growth Newsletter portfolio removing Novartis (NVS) and adding to the Health Care Select Sector SPDR Fund (XLV), the latter now in the 5.5%-7.5% weighting bands, a combination of its prior weighting and the new additional weighting.

Mar 20, 2019

Outperformance No Matter How You Measure It
Image shown: The performance of Valuentum's simulated Best Ideas Newsletter since the inaugural edition of the newsletter, July 13, 2011. We migrated to a weighting range format for the Best Ideas Newsletter portfolio ideas beginning in 2018. At that time, Visa (V) was the top weighting by far at 8.6%. Shares of Visa have soared since, and other ideas haven't been too shabby either! Source. Valuentum's Best Ideas Newsletter portfolio is in a class by itself. Did you know that ~90% of active fund managers are underperforming their benchmarks over prolonged periods of time? The lack of volatility of the simulated Best Ideas Newsletter portfolio had been driven by its massive average cash "weighting" of 25% during its history, something we moved to 0% at almost the precise near-term bottom December 26, 2018.