Valuentum Exclusive Analysis for the Discerning Investor

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Jul 24, 2023

Tesla Is A Net-Cash-Rich, Free-Cash-Flow Generating, Secular-Growth Powerhouse
Image: Tesla’s Cybertruck showcasing its versatility. The truck is on track to begin production at Gigafactory in Texas in the coming months. Image Source: Tesla's second-quarter press release. The cash-based sources of intrinsic value (and the trajectory of growth in them) are the most important considerations when it comes to assessing the attractiveness of an equity. Two of the most important cash-based sources of intrinsic value are net cash on the balance sheet and future expected free cash flows, and in these two areas, Tesla excels. Though we won’t be adding Tesla to any of the newsletter portfolios anytime soon, we like it within a diversified basket of large-cap growth equities, of which the Best Ideas Newsletter in some ways approximates.

Jul 4, 2023

Tesla Registers Record Total Deliveries in Second Quarter 2023
Source: Tesla. We’ve liked Tesla’s share-price strength so far this year, and record total deliveries during the second quarter of 2023 help to continue to support its impressive share-price move. The high end of our fair value estimate range of Tesla stands at $335 per share, meaning shares of Tesla still have more room to run. The company remains one of the most speculative ways to play U.S. equities.

Nov 6, 2022

Shares of Lithium Producer Albemarle Are Soaring So Far In 2022
Image: Albemarle's shares have rocketed higher the past few years and are soaring during 2022. We think Albemarle remains a great fit for ESG-related investment considerations, and we’re sticking with shares in the ESG Newsletter portfolio following the company’s third-quarter results, released November 2. The lithium producer remains well-positioned, and its growth rates remain fabulous in an undersupplied market. Prices for lithium can be volatile at times, but Albemarle’s financial leverage remains manageable, and the firm expects to churn out free cash flow during 2022 as it continues to invest aggressively in its business and pay out dividends to shareholders. Albemarle’s fundamental and relative share-pricing strength have been a sight to see thus far in 2022. We still like shares of Albemarle based on the high end of our fair value estimate range.

Jan 27, 2022

Net Cash Rich Tesla Reports Solid Free Cash Flow, Closes Out 2021 on a High Note
Image Shown: A look at Tesla Inc’s new ‘Gigafactory’ manufacturing facility in Austin, Texas, that is currently under development. Image Source: Tesla Inc – Fourth Quarter of 2021 IR Shareholder Deck. On January 26, Tesla reported that it had produced ~306,000 vehicles and delivered ~309,000 vehicles during the final quarter of 2021. The electric vehicle (‘EV’) and battery maker beat both consensus top- and bottom-line estimates in the fourth quarter as it continued to successfully ramp its production capabilities. We plan to fine-tune our cash flow valuation model covering Tesla to take its latest earnings report into account, but we still expect the point fair value estimate to be below where shares are trading at the time of this writing (~$937 per share).

May 11, 2021

Stock Markets Still Healthy, Big Cap Tech and Large Cap Growth Safe Havens
 Image Shown: Facebook’s shares are trading below the low end of our fair value estimate range at the time of this writing. The social media giant registers a 10 on the Valuentum Buying Index as it boasts a tremendous financial position with respect to net cash on the balance sheet and future expected free cash flows. Image Source: Valuentum. It’s easy to get spooked sometimes by the market’s volatility, but what we’ve witnessed the past few days is nothing compared to the volatility during the COVID-19 crisis and the Great Financial Crisis before it—and what we eventually expect the proliferation of price-agnostic trading to do to the markets in the years ahead. We continue to like the areas of big cap tech and large cap growth thanks to their strong competitive positions, solid net cash profiles, and robust and growing future expected free cash flow. Facebook remains our top idea for capital appreciation potential. Newmont Mining is our favorite “inflation hedge” within the metals and mining arena, and investors that would like greater exposure to energy and financials may look to more diversified ETFs to gain access to the broader themes of rising energy resource prices and net interest margins. AT&T is a top equity consideration for the high-yield dividend crowd. In the coming weeks and months, we’ll be looking to put some of the dry powder that we raised in January 2021 “to work” in some of the areas we outlined in this article. In the meantime, we’re going to continue to watch this orderly sell-off that’s being driven by valuation model adjustments (to factor in higher inflation expectations) and modest deleveraging from cryptocurrency volatility. All is well.

Apr 27, 2021

Tesla Scaling Up Nicely
Image Shown: Tesla is steadily working towards bringing another manufacturing facility online in the US, this time near Austin, Texas. Image Source: Tesla Inc – Shareholder Letter Covering the First Quarter of 2021. Electric vehicle (‘EV’) giant Tesla continues to impress as it smashed past consensus top- and bottom-line estimates when it reported first quarter 2021 earnings on April 26. The company delivered 184,800 vehicles (182,780 Model 3/Y variants and 2,020 Model S/X variants) and produced 180,338 vehicles in the first quarter of this year, though we note that Tesla only produced Model 3/Y variants last quarter and Model S/X vehicle deliveries were met via its inventory. In the first quarter of 2021, Tesla’s ‘automotive revenues’ of $9.0 billion were up 75% year-over-year, its GAAP revenues of $10.4 billion were up 74% year-over-year, and its GAAP net income came in north of $0.4 billion (up sharply from year-ago levels).

Apr 13, 2021

SPACs Are Good for Markets, Not SPAC-tacular for Investors
Image: Performance of the Defiance NextGen SPAC IPO ETF (SPAK), where “a 60% weighting is applied to IPO companies derived from SPACs and 40% is allocated to common stock of newly listed Special Purpose Acquisition Companies (“SPACs”), ex-warrants” has been roughly flat since inception in October 2020. According to some estimates, there were 248 Special Purpose Acquisition Companies (SPAC) that went public in 2020, raising more than $80 billion (up sixfold from a record high set in 2019). SPACs reached heightened levels of excitement in early February, but the performance of the Defiance NextGen SPAC IPO ETF (SPAK) has been roughly flat since it began trading October 2020. Most of what investors have to go on when considering a SPAC is a thorough assessment of the management team, as SPACs go public as a shell (“blank check”) company with no underlying operating business. Some forward-leaning, “out of the box” management teams may be worth rolling the dice on, but for the most part, the great many of the SPACs out there probably aren’t worth your time. Though we like the idea of more investor choice once SPACs take operations public (and new companies are listed), we’re not getting lured into the SPAC IPO boom. It’s not our style. Even diversified exposure to the SPAK ETF doesn’t sound great. We’ll be patient and evaluate the companies SPACs bring public through traditional equity analysis to see if opportunities present themselves. Prudence and care, first, always.

Jan 5, 2021

The Electric Vehicle (EV) Market Is Hot and Getting Hotter
Image Shown: A look at Tesla Inc’s new Gigafactory factory (Model Y body shop) in Shanghai, China. Image Source: Tesla Inc – Third Quarter of 2020 IR Earnings Presentation. The electric vehicle (‘EV’) market is hot and getting hotter. Aided by a combination of supportive government policies such as subsides for EVs (purchase tax credits, manufacturing tax credits), plans to ban the sale of automobiles powered by internal combustion engines (‘ICE’) in the coming years, and shifting consumer preferences (households preferring to appear “green”), the long-term outlook for EV sales is quite bright. Tesla is the posterchild of the EV boom given its first-mover advantage, though competitive headwinds are rising. Legacy auto manufacturers are looking to bulk up their EV offerings while new market entrants such as Lordstown Motors and privately-held Rivian, are set to further disrupt the industry. Ford Motor invested in Rivian back in 2019 to bulk up its presence in the EV market. By the middle of 2021, Rivian aims to begin deliveries of its EV pickup truck in the US, the R1T. Lordstown Motors also aims to bring an EV pickup truck to market, named the Endurance, with deliveries set to begin in early-2021. However, as global EV sales appear set to grow immensely, there is room for a number of winners in this space. Back in July 2020, privately-held Deloitte estimated that global EV sales will grow from an estimated 2.5 million in 2020 to 11.2 million in 2025 and then to 31.1 million by 2030, good for annual compound growth of about 29% in the coming decade, according to the research firm. EV sales in China are expected to represent about half of global EV sales in 2030, according to Deloitte, followed by the European market representing just over one quarter of global EV sales in 2030.