Valuentum Exclusive Analysis for the Discerning Investor

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Dec 10, 2022

Honeywell's ESG Efforts May Benefit from More Board Diversity and Moving Beyond Its Asbestos-Saddled Past
Image: Honeywell continues to put together a long resume of ESG highlights. Image Source: Honeywell’s Environmental, Social and Governance Report. Honeywell’s 100+ page Environmental Social and Governance Report for 2022 is a tremendous resource that indicates Honeywell means business when it comes to ESG-related efforts. The firm has a lot of work to do to get to carbon neutral by 2035, and we’d like to see a more diverse board and perhaps more reasonable compensation at the top, but the trajectory for ESG considerations at Honeywell is moving in the right direction. Prior asbestos-related issues weigh heavily on our ESG assessment of Honeywell, but we expect continued improvement across all areas of ESG in the years to come at the firm.

May 9, 2022

Interview with SDM Investments' Kevin Truitt -- ESG in a Few Words: "Good Ethics, Honesty, Respect, and Dignity"
Image: SDM Investments' Kevin Truitt (left) and Valuentum's Brian Nelson (right) pause for a picture at the Chicago Chapter of the American Association of Individual Investors (December 2016).We talked with SDM Investments' Kevin Truitt recently, and we’d like to share our conversation with you! Learn about the critical nature of value investing and thinking about stocks as businesses, how investors should approach macro indicators, the importance of using a margin of safety, how to think about ESG investing, and why cash-based investing helps to safeguard against downside risk. Kevin also shares five of his favorite ideas!

Jan 13, 2022

Governance: The G in ESG Investing
Image: The Valuentum Environmental, Social and Governance (ESG) Scoring System shows how “Governance” considerations are analyzed. No discussion of ESG investing would be complete without addressing the role of corporate governance (“stewardship”) in equity investing. As with the other aspects of ESG investing, corporate governance covers a lot of ground. It can include pretty much anything related to how a company is run, including leadership, executive compensation, audits and accounting, and shareholder rights. These areas are just the tip of the iceberg, however. A company with good corporate governance is one that is run well with the proper incentives and with all stakeholders in mind, from employees to suppliers to customers to shareholders and beyond. Good corporate governance practices decrease the risk to investors as it cuts through conflicts of interest, misuse of resources, and a general lack of concern for all stakeholders. A company that fails at implementing good corporate governance is at increased risk of litigation or scandal, which could wreck the share price. With the turn of the century, the dot com bust probably exposed most prominently the need for good corporate governance practices. Fraud was rampant. Whether it was the former CEO of Tyco International receiving millions in unauthorized bonuses, the actions of those at the top of Enron that created one of the biggest frauds in corporate history, the scandal at accounting and auditing firm Arthur Andersen, the demise of MCI/Worldcom, or the questionable practices that led to the Global Analyst Research Settlement, Wall Street had lost its way. In fact, a big reason why our firm Valuentum was founded is based on ensuring that investors get a fair shake and that someone is keeping a watchful eye not only on companies, but also on the sell-side stock analyst research that may still be full of conflicts of interest. As a result of the Global Analyst Research Settlement, all the big investment banks from Goldman Sachs to J.P. Morgan to Morgan Stanley to UBS Group and beyond had to pay stiff fines for producing conflicted, if not fraudulent research. In this note, we talk about the considerations that go into the G in ESG investing.

Oct 8, 2021

Putting the Environmental in ESG
Image: This excerpt from the Valuentum Environmental, Social and Governance (ESG) Scoring System shows how environmental considerations are analyzed. Environmental considerations are just one piece of the ESG analysis, but they can reveal a lot about a company and its values. Companies that make a commitment to protecting the environment, especially those that are doing it better than their peers, are not only recognizing the social importance but also protecting themselves--and their investors--from negative financial impacts related to environment issues.

Sep 8, 2021

Dividend Aristocrat Albemarle Bets Big on Lithium
Image Source: Albemarle Corporation – May 2021 IR Presentation. Dividend Aristocrat Albemarle Corp is a specialty chemicals company with three core business operating segments; ‘Lithium’ (primarily used for battery storage solutions), ‘Catalysts’ (primarily used in the oil refining industry), and ‘Bromine Specialties’ (primarily used as flame retardants). The company is focused on aggressively growing its lithium derivatives operations going forward, Albemarle’s largest in terms of revenues and most profitable in terms of non-GAAP adjusted EBITDA performance. Albemarle offers investors a way to play both the ongoing EV boom and the recovery in global refined petroleum product demand (via its Catalysts business operating segment) as the world slowly emerges from the worst of the COVID-19 pandemic. Let's learn more about this fascinating idea.

Feb 12, 2021

Biofuel Producer Renewable Energy Group Is Worth a Look
Image Shown: A geographical overview of Renewable Energy Group’s operational “biorefineries” in the US and Germany. Image Source: Renewable Energy Group Inc – October 2020 IR Presentation. Renewable Energy Group is an intriguing biofuel maker with operational “biorefineries” located across the US and in Europe (specifically Germany). The company’s operations are supported by an extensive distribution network that is primarily built upon supply agreements with third parties, though Renewable Energy Group opened its own branded fuel location in 2019 for the first time. Shares of REGI have been on an upward tear of late, likely due to growing investor optimism towards green energy firms, in our view, as the new Biden administration in the US has made it clear that it would push for greater federal incentives to stimulate investment in domestic renewable energy industries. In Europe, the EU has imposed mandates and created incentives to stimulate investment in the biofuel space and non-EU members states, like Norway and the UK, have also implemented aggressive policies to support the biofuel industry. During the first nine months of 2020, Renewable Energy Group’s financial performance posted a tremendous turnaround as the company focused on higher-margin products. The company’s balance sheet is pristine, though we caution that historically, Renewable Energy Group has leaned on equity issuances to fund its growth ambitions though more recently, the firm has started to focus on reducing its outstanding diluted share count (or at the very least, limiting its shareholder dilution). We are impressed with Renewable Energy Group’s recent financial performance and are intrigued by its long-term outlook. However, we caution that the firm is highly exposed to exogenous forces. Government incentives, or lack thereof, from national government bodies (and to a lesser extent, from certain US state governments) will have an outsized impact on the trajectory of Renewable Energy Group’s growth story going forward. Investors are clearly optimistic, as shares of REGI have more than tripled over the past year. Please note Renewable Energy Group does not pay out a common dividend at this time.

Jan 13, 2021

Surveying the Clean Energy Landscape for Ideas
Image Source: American Electric Power Company Inc (AEP) – January 2021 IR Presentation.  There’s a lot of interest in clean energy these days! Though our favorite ideas within a portfolio context are always the ideas within the Best Ideas Newsletter portfolio, the Dividend Growth Newsletter portfolio, the High Yield Dividend Newsletter portfolio, and the Exclusive publication, we also highlight interesting ideas via our articles that we publish on our website. In this article, let’s dig deep into the clean energy space. We’ll talk more about 1) Ameresco (AMRC), one of the green energy ideas we highlighted in the past that has performed incredibly well, 2) NextEra (NEE), a large utility “family” to keep an eye on (a utility firm and a merchant power spinoff), 3) First Solar (FSLR), a US-based manufacturer of solar panels, and 4) various alternative fuel and power storage companies, including Clean Energy Fuels Corp (CLNE) and Gevo Inc (GEVO). The recently-passed omnibus spending package in the US included significant funds to support various alternative and renewable energy activities. For example, the production tax credit for wind farms was extended for one year while the investment tax credit for solar plants was extended by two years. This is a major benefit for both manufacturers of solar modules and wind turbines along with the utility firms (XLU) that would own/operate such assets. Looking ahead, we expect that the US federal government will be very accommodative toward the green energy space as President-elect Biden and the incoming US Congress (which will be controlled by the Democratic Party) will likely step up federal investments in the space (such as subsidies, low or no interest loans, favorable procurement contracts, and other considerations). The share prices of various solar companies are on the rise as witnessed through the performance of funds such as Invesco Solar ETF (TAN) surging higher of late, while the impressive price performance of iShares Global Clean Energy ETF (ICLN) showcases the widespread nature of investor excitement toward almost all green energy oriented firms. Other securities in this realm include ALPS Clean Energy ETF (ACES) and SPDR S&P Kensho Clean Power ETF (CNRG).

Feb 23, 2017

Is Clean Energy Just Burning Cash?
Image Source: Chuck Coker. Clean or renewable energy sources will undoubtedly be a part of how we generate power in the future, but how investible is the space? The answer is largely dependent on your risk tolerance.