Valuentum Exclusive Analysis for the Discerning Investor

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Apr 7, 2024

Geopolitical Risks Driving Crude Oil Prices Higher
Image: Crude oil prices have staged a strong advance to start 2024. Geopolitical tensions continue to be elevated as concerns grow that the war in the Middle East could further escalate, and as the war in Ukraine continues to rage on. On April 1, Israel apparently staged an attack on an Iran embassy in Syria that killed several military officials, including three senior Iranian commanders. Iran has indicated that it would retaliate, and many are speculating that the possible attack may be on Israeli soil, which would further increase global tensions. Ukraine has also been actively targeting Russian energy infrastructure, cutting into Russia’s refining capacity.

Aug 17, 2023

3 High Dividend Yielders for Consideration
Image: Entities with large net cash positions and substantial free cash flow generation have outperformed not only the broader stock market, but also key high yield areas, including REITs, mortgage REITs and master limited partnerships during the past 10 years. Source: The respective ETF sponsors. The skills to successfully invest for long-term capital gains or long-term dividend growth are much different than those required for generating high yield dividend income. Income investing is a much different proposition. However, the skills do center on a similar equity evaluation process, but one that requires an acknowledgement and heightened awareness of considerably greater downside risks. Income investing, or high yield dividend income investing, should at times be considered among the riskiest forms of investing, as many high dividend-yielding securities tend to trade closer to the characteristics of junk-rated bonds than they do most net cash rich and free cash flow generating powerhouses that we like so much in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio.

Aug 9, 2023

Will Crude Oil Prices Hit $100 Again?
Image: US field production of crude oil is approaching record highs. Source: EIA. The next few weeks will likely see a rally in energy equities, but we note that U.S. field production of crude oil is approaching all-time highs and will likely eclipse all-time highs this year, given the pace of monthly year-over-year increases. With shale oil abundant and production still advancing nicely, the rise in crude oil prices this summer is largely of the speculative variety, in our view. We could see a run in black gold to the triple digits, but both supply and production remain healthy, and if crude oil prices reach the $100+ mark, we don’t see them staying there for long. We think investors are rotating out of this year’s big winners, a healthy consolidation, and we won’t be making any changes to the newsletter portfolios on account of what we believe is a temporary rotation into energy equities.

May 30, 2023

Phillips 66’s Stock May Be Volatile But Its Management Remains Very Shareholder Friendly
Image: Phillips 66’s shares have been quite volatile as refining margins ebb and flow, but shares are up nicely since the start of 2021 even as they’ve given up some ground so far in 2023. Phillips 66’s dividend yield stands at 4.4% at the time of its writing, and management remains committed to continuing to raise the payout, having done so as recently as its most recently reported quarter. Refining margins will continue to be volatile as feedstock costs fluctuate and prices at the pump vary, and while Phillips 66 retains a rather large total debt load, we think the risks are acceptable for this income generator. We continue to like shares as an idea in a well-diversified equity income portfolio.

May 30, 2023

Paper: Value and Momentum Within Stocks, Too
Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks.

Apr 1, 2023

Not Being Greedy as Shares of Exxon Mobil and Chevron Have Soared
Image: Shares of Exxon Mobil were added to the newsletter portfolios in mid-June 2021 and rocketed higher for some huge “gains” over the past year or so. We still expect upside potential at both Exxon Mobil and Chevron on the basis of our fair value estimate ranges, but we removed shares of both on March 13, 2023. We received a number of questions about why we removed Exxon Mobil Corp. and Chevron Corp. from the newsletter portfolios, despite our point estimate of their intrinsic values being higher than where their share prices are trading. As of the end of the first quarter of 2023, March 31, for example, shares of Exxon Mobil are trading at $109.66 per share with a fair value estimate of $133 per share, while shares of Chevron Mobil are trading at $163.16 per share with a fair value estimate of $198 per share. Exxon Mobil has a Dividend Cushion ratio of 2.8, while Chevron has a Dividend Cushion ratio of 2.4. Both Exxon Mobil and Chevron remain strong investment considerations, not only as it relates to valuation but also as it relates to the strength of their respective dividends. However, we don’t want to be too greedy with these “winners,” particularly as both commodity-producers have now entered "fair value" territory. Let's talk more about why we removed Exxon Mobil and Chevron from the newsletter portfolios in this article.

Nov 1, 2022

Phillips 66: A Huge Winner in 2022
Image Source: Phillips 66. Shares of Phillips 66 have soared more than 40% this year, and we believe there is still upside on the basis of the high end of our fair value estimate range ($140 per share). The company’s equity has been mighty volatile this year, however, sporting a 52-week range of ~$67-$111, so investors should continue to expect large swings. Right now, things in the energy markets are favorable, and we see no reason to sour on PSX shares at the moment. The company yields ~3.7% at the time of this writing.

Sep 8, 2022

LINK --> Massive Unrest In Europe, Energy Crisis Could Be the Catalyst to Topple the Global Markets
Europe is on the brink Over 70000 people came out in support of Russia in Prague and are forcing the Govt to resign for supporting Ukraine pic.twitter.com/lwMAjkBM2U — Mahesh 🇮🇳 (@Mahesh10816) September 3, 2022 The European energy crisis continues to unfold, and we’ve been keeping our members updated on this huge story. In the wake of the Russian invasion of Ukraine in February 2022, the European Union (‘EU’) along with key Western allies (such as the US, UK, Canada, Japan, South Korea, and Australia) imposed punishing economic sanctions on Russia to hinder its efforts in Ukraine and deter other nations from pursuing imperialistic land grabs. Russia retaliated by limiting the flow of various energy products to nations that imposed those sanctions. In particularly, energy flows from Russia to member nations within the EU were curtailed aggressively, with an eye towards France, Italy, and Germany along with Poland and the Baltic states (Latvia, Lithuania, and Estonia). Natural gas, crude oil, and petroleum product exports from Russia to EU member nations have tanked this year. The land war in Ukraine has not grown into a massive economic war in Europe, and this catalyst could be the one that topples the global markets.

Mar 14, 2022

Valuentum Weekly: Yields on New Series I Savings Bonds Have Soared!
The Dow Jones, S&P 500 and NASDAQ futures are all indicated up Sunday night (March 13), but that may not mean much when trading kicks off tomorrow. The start to 2022 has been one of the worst stretches during the past decade, but broader market indexes still aren't down much, even after factoring in several expected rate hikes by the Fed and economic sanctions on Russia due to the war in Ukraine. According to data from Seeking Alpha, the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and Nasdaq (QQQ) are off ~12%, ~10%, and ~19% so far this year, respectively. However, this weakness compares to (and is inclusive of) incredible 5-year price-only returns on the SPY, DIA, and QQQ of ~77%, ~58%, ~146%, respectively, so it's hard for stock investors to be disappointed in much of anything, even if all they were able to do was match the returns of the S&P 500 the past 5 years. Many, however, unfortunately, diluted those 5-year returns with hefty bond and international exposure and sometimes large AUM fees, so the weakness in 2022 is probably more painful for some than perhaps it should be. In any case, we remain bullish on stocks for the long run, with a heavy bent toward large cap growth and big cap tech with tactical overweight "positions" in big cap energy.

Mar 7, 2022

Valuentum Weekly: Outsized Energy Exposure Continues to Buoy Newsletter Portfolios
Image: Light crude oil futures once traded for roughly -$40 (negative $40) during the COVID-19 crisis, but have now rocketed to more than $120 in recent trading. Image Source: TradingView. The S&P 500, as measured by the SPY, is down 9% year-to-date, a modest pullback, in our view, particularly in light of the fantastic performance the past few years. Though not necessarily welcome, a down year every now and then for the broader market indexes and a modest bear market can only be expected, at times. The Dow Jones Industrial Average, as measured by the DIA, is down more than 7% year-to-date (not too bad), while the Nasdaq--as measured by the QQQ--and 'disruptive innovation' stocks--as measured by the Ark Innovation ETF--have fallen more than 15% and 36%, respectively, so far this year (data from Seeking Alpha). We like how the simulated newsletter portfolios are positioned. Energy resource prices continue to surge (with WTI crude oil prices skyrocketing north of $120 per barrel at last check), and they are bringing energy equities higher along with them. The simulated Best Ideas Newsletter portfolio, simulated Dividend Growth Newsletter portfolio, and simulated High Yield Dividend Newsletter portfolio are all materially overweight energy equities relative to the energy sector’s weighting in the S&P 500, and we expect to maintain such high tactical "exposure." Both the Energy Select Sector SPDR ETF and the Vanguard Energy ETF soared to 13-year highs last week. Our favorite energy ideas are the largest two energy majors, Exxon Mobil and Chevron, and both have hefty 'weightings' in each of the three aforementioned simulated newsletter portfolios. Russian equities, as measured by the RSX, are down nearly 80% so far this year, and we're pleased to say that we've largely avoided the fall out. We continue to like the broader areas of U.S.-heavy, large cap growth and big cap tech when it comes to long-term secular exposure, and we continue to like energy as a tactical overweight for the foreseeable future across the simulated newsletter portfolios, as much as we did even prior to the huge advance in energy resource prices and the invasion of Ukraine by Russia.