Valuentum Exclusive Analysis for the Discerning Investor

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May 26, 2021

Cisco Systems’ Financials Remain Pristine, Growth Outlook Improving
Image Shown: Shares of Cisco Systems initially moved lower after the firm reported its latest earnings update, and management provided near-term guidance that disappointed investors. However, shares of Cisco Systems quickly resumed their upward climb as the tech giant’s financials remain rock-solid. We continue to be huge fans of Cisco Systems. On May 19, networking hardware and enterprise software giant Cisco Systems reported third-quarter fiscal 2021 earnings (period ended May 1, 2021) that beat consensus top- and bottom-line estimates. The firm’s GAAP revenues grew by 7% year-over-year and its GAAP operating income moved higher by a little over 1% year-over-year, with its ‘Security’ offerings leading the way as that segment’s revenues grew by 13% year-over-year last fiscal quarter. Though investors were initially underwhelmed by Cisco Systems’ near-term guidance covering the current fiscal quarter, the company remains a free cash flow generating machine with a fortress-like balance sheet. Shares of CSCO quickly resumed their upward climb after initially falling when Cisco Systems’ latest earnings report was published. We include Cisco Systems as an idea in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. The trajectory of the company’s financial performance is beginning to turn around after Cisco Systems faced enormous headwinds in the recent past due to the coronavirus (‘COVID-19’) pandemic. Looking farther down the road, Cisco Systems’ growth outlook is quite bright, and we are big fans of the tech giant. Shares of CSCO yield ~2.8% as of this writing.

Feb 11, 2021

Cisco Systems Expects Revenue Growth Will Resume This Fiscal Quarter
Image Source: Cisco Systems Inc – Second Quarter of Fiscal 2021 IR Earnings Presentation. On February 9, Cisco Systems reported second quarter earnings for fiscal 2021 (period ended January 23, 2021) that beat consensus top- and bottom-line estimates. Additionally, Cisco Systems raised its quarterly dividend by about 3% on a sequential basis in conjunction with its earnings report. We include Cisco Systems in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios and continue to like exposure to the name. As of this writing, shares of CSCO yield ~3.1% on a forward-looking basis, and our fair value estimate stands at $51 per share of Cisco Systems.

Feb 8, 2021

Stock Market Outlook for 2021
2020 was one from the history books and a year that will live on in infamy. That said, we are excited for the future as global health authorities are steadily putting an end to the public health crisis created by COVID-19, aided by the quick discovery of safe and viable vaccines. Tech, fintech, and payment processing firms were all big winners in 2020, and we expect that to continue being the case in 2021. Digital advertising, cloud-computing, and e-commerce activities are set to continue dominating their respective fields. Cybersecurity demand is moving higher and the constant threats posed by both governments (usually nations that are hostile to Western interests) and non-state actors highlights how crucial these services are. Retailers with omni-channel selling capabilities are well-positioned to ride the global economic recovery upwards. Green energy firms will continue to grow at a brisk pace in 2021, though the oil & gas industry appears ready for a comeback. The adoption of 5G wireless technologies and smartphones will create immense growth opportunities for smartphone makers, semiconductor players and telecommunications giants. Video streaming services have become ubiquitous over the past decade with room to continue growing as households “cut the cord” and instead opt for several video streaming packages. We’re not too big of fans of old industrial names given their capital-intensive nature relative to capital-light technology or fintech, but there are select names that have appeal. Cryptocurrencies have taken the market by storm as we turn the calendar into 2021, but the traditional banking system remains healthy enough to withstand another shock should it be on the horizon. Our fair value estimate of the S&P 500 remains $3,530-$3,920, but we may still be on a roller coaster ride for the year. Here’s to a great 2021!

Jan 21, 2021

ICYMI: Valuentum's Brian Nelson on the Latest Howard Marks' Memo: "Something of Value"
Valuentum's President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks' latest memo, "Something of Value," January 11, 2021.

Nov 16, 2020

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process
With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company's revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There's a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Nov 13, 2020

Our Fair Value Estimate for Cisco Remains Unchanged at $51 Per Share
Image Shown: Cisco Systems Inc continues to focus on rewarding shareholders by deploying its sizable free cash flows towards dividend payments and share repurchases. We are big fans of the tech giant. Image Source: Cisco Systems Inc – First Quarter of Fiscal 2021 IR Earnings Presentation.  On November 12, Cisco Systems reported first quarter earnings for fiscal 2021 (period ended October 24, 2020) after the market close that beat both consensus top- and bottom-line estimates. Though its GAAP revenues and GAAP net income fell by 9% and 26% year-over-year, respectively, the market was assuming the worst given the headwinds Cisco is facing due to the coronavirus (‘COVID-19’) pandemic. More importantly, Cisco’s fiscal second quarter guidance was decent, all things considered. We include shares of Cisco in both the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. As of this writing, shares of CSCO yield a nice ~3.7%, and our fair value estimate for Cisco still stands at $51 per share.

Nov 15, 2019

Cisco Remains a Free Cash Flow Cow Supported By a Solid Net Cash Position
Image Shown: A breakdown of Cisco Systems Inc’s revenue as of the end of its fiscal 2019. Image Source: Cisco Systems – Fiscal 2019 Annual Report. On November 13, Cisco Systems reported first-quarter earnings for its fiscal 2020 (period ended October 26, 2019) that saw shares of CSCO sell off on November 14. That was likely due to the weak guidance management put out for the second quarter of the firm’s fiscal 2020, but we continue to like Cisco’s quality free cash flows and net cash balance. We’ll have plenty more to say when Cisco publishes its 10-Q filing covering the first quarter of its fiscal 2020.

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.