Fundamental data is updated weekly, as of the prior weekend. Please download the Full Report and Dividend Report for any changes.
Latest Valuentum Commentary
Apr 6, 2021
Our Equity Component Is Hard to Pass Up
The average monthly returns and standard deviation of returns for the simulated Best Ideas Newsletter portfolio relative to its declared benchmark, the S&P 500 (SPY), on an apples-to-apples basis, from inception, May 11, 2011, through December 15, 2017, with dividends collected but not reinvested for both the newsletter portfolio and the SPY. Returns are hypothetical. Past performance is not an indication of future performance. The hypothetical returns do not represent returns that any investor actually attained and do not include management or trading fees. Valuentum is a financial publisher.
Mar 31, 2021
Why You Need to Hire an Active Stock Manager and Ditch Modern Portfolio Theory
Image: Why You Need to Hire an Active Stock Manager and Ditch Modern Portfolio Theory. An Approximate Hypothetical representation of an active manager that charges a 2% active management fee that mirrors the S&P 500 benchmark versus an advisor that charges a 1% advisor fee that applies a 60/40 stock/bond rebalancing from 1990-2021. Approximate Hypothetical returns are based on the following extrapolation: “Since inception in November 9, 1992, returns after taxes on distributions and sales of fund shares for the [Vanguard Balanced Index Fund Investor Shares] VBINX came in at 6.5% through June 30, 2020, while the same measure since inception in January 22, 1993, for the S&P 500, as measured by the S&P 500 ETF Trust (SPY), came in at 8.12% through June 30, 2020.” The ‘Approximate Hypothetical 60/40 stock/bond portfolio w/ 1% advisor fee (smoothed)’ represents a hypothetical 100,000 compounded at an annual rate of 5.5% [6.5 less 1] over the period 1990-2021. The ‘Approximate Hypothetical S&P 500 (SPY) w/ 2% active management fee (smoothed)’ represents a hypothetical 100,000 compounded at an annual rate of 6.12% [8.12 less 2] over the period 1990-2021. Approximate Hypothetical results are for illustrative purposes only and are based on the data available. Let's get caught up on recent developments at Korn Ferry, Dick's Sporting Goods, Chewy, GameStop, Williams Sonoma, McCormick & Company, and CRISPR Therapeutics.
Mar 19, 2021
In the News: Facebook Optimistic, Visa Resilient, Dollar General’s Outlook Not Bad and More
The equity markets, as measured by the S&P 500, are trading above/near the high end of our fair value estimate range, but we remain focused on the long run, and there are many individual ideas that present tremendous long-term capital appreciation potential. By far, Facebook is the most undervalued stock on the market, in our view, and recent news has painted its relationship with Apple in a more positive light. The Justice Department is investigating Visa for anti-competitive behavior, but we don’t think its dominant position and lucrative business model will be challenged. Successful vaccines for coronavirus (“COVID-19”) have breathed life into shares of airline equities, but we still don’t view them as long-term investments. Dollar General will see its yearly streak of consecutive same-store sales growth come to an end in fiscal 2021 (ends January 28, 2022), but we’re still positive on the name. Some of our best ideas continue to be in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. For investors seeking higher-yielding ideas, please consider the High Yield Dividend Newsletter publication.
Jan 25, 2021
ALERT: Bull Raids, Short Squeezes and Highly Unusual Market Activity
Image: Shares of GameStop have been on an irrationally wild ride recently driven by what looks to have been an orchestrated and highly unethical (and perhaps illegal) short squeeze on the stock. According to some reports, during the pre-market session January 25, GameStop’s shares were up ~80%, and turned red during the trading session, with no fundamental news.In late 2018, Valuentum published Value Trap, a book that warned to all that would heed its warning that a collapse in the traditional quant value factor was coming and that excessive volatility in the markets caused by price-agnostic trading--or those that aren’t paying attention to fair value estimate calculations--would only build and build to eventually reach extreme and irrational levels. The book, while hugely successful winning award after award, was largely ignored by the media, despite our best efforts to get the word out. Now, the chickens are coming home to roost.
Jan 12, 2021
ALERT: We’re Still Bullish! Some Portfolio Tweaks
Trust you’re doing great, and hope you are enjoying your membership to Valuentum! We’ve received a number of questions from members during the past several weeks, and we’d like to address them briefly in this note. We will write a follow-up note in the coming days that goes into our broader outlook for 2021 and beyond. However, we want to get these takeaways to you as soon as possible, as our inboxes have been overflowing. If you haven’t read our market/analysis recap for the year 2020, please do so.
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.
Dec 31, 2020
2020 Won’t Soon Be Forgotten
2020 won’t soon be forgotten. The tumultuous year brought with it the greatest shock to the U.S. economy in modern history, ushering in the largest-ever decline in U.S. real annualized gross domestic product of 31.4% in the second quarter of the year (surpassing the prior record of a 28.6% collapse in the second quarter of 1921). Strict lockdowns to help contain the outbreak of COVID-19 created the biggest global health emergency in a century, driving a self-inflicted economic collapse worse than the Great Recession, the Great Depression, and any other recession before it (the Depression of 1873-1879, the Panic of 1893, etc.). Millions were put out of work. During the month of April alone, the economy lost a record 20.8 million jobs, with some estimating that the “real” unemployment rate during the depths of the COVID-19 crisis reached nearly 23%. The official 14.7% unemployment rate in April would obliterate prior post-World War II era records, and while it fell short of the peak Great Depression unemployment rate estimated at 24.9%, the pain of many families and households was no less severe as they battled both a financial and health crisis that materialized in a matter of weeks, with little lead time to prepare for what was to come. Pantry stuffing and panic buying of consumer goods became a sign of the times, and a great debate about the efficacy of wearing masks raged across mediums.
Dec 17, 2020
Congress Seeks to Strike a Deal
Image Shown: The S&P 500 is trading near all-time highs as of December 16, but political risk could cause some choppiness in the near term. The potential for yet another government shutdown is upon us, but according to key leaders on both sides of the aisle, a deal appears to be within reach. Certain provisions may be left out in order to reach an accord sooner rather than later, however. In any case, we remain bullish long term, as the world continues to work to put the COVID-19 pandemic behind it. Funding for most US federal government agencies may run out by the end of this week (December 18) if both sides of the aisle in Congress do not reach an agreement over a potential omnibus bill. In light of the tremendous efforts by the Fed/Treasury to support both the economy and the financial markets since the initial outbreak of COVID-19 to date, we don’t think Congress will do harm by not stepping up to the plate during the biggest global health crisis in the past 100 years. Still, we wanted to keep this news in front of you, as a prolonged shutdown presents a “fat-tail (low probability) risk” to the equity markets, particularly with respect to sentiment and momentum and especially with respect to any legal delays related to President Donald Trump leaving office in the coming weeks. We’re not making any changes to the newsletter portfolios at this time, however.
Nov 30, 2020
Analyzing Valuentum’s Economic Castle Index: A Walk Forward Case Study
There are two things generally wrong with a pure economic moat assessment, or economic “moat factor.” First, it is much easier to assess outsize economic returns in the near-term than it is to assess outsize economic returns over the long haul. Quite simply, nobody can predict what will happen tomorrow, and they certainly don’t know what will happen 20 or 30 years from now. Second, a rational investor should generally prefer expected near-term outsize economic returns than expected long-term ones given the uncertainty of the latter--somewhat related to our first point, a bird in the hand (or large economic returns in the near term) is worth two in the bush (or large economic returns in the long run that may not materialize). The time value of money reinforces this notion. Near-term economic returns are generally worth more than long-term ones in real terms, even if they may be smaller nominally. This is where our Economic Castle rating comes in. The goal of the Economic Castle rating is to identify those companies that are likely to generate a lot (or not so much) shareholder value over the foreseeable future. Instead of pondering a guess as to how the landscape will look 20 or 30 years from now, something not even the Oracle of Omaha can do with any sort of certainty (e.g. IBM, KHC), the Economic Castle rating ranks companies based on near-term expected economic returns, or returns that are more likely to be realized as opposed to those that may be built on “castles in the air” over 20-30 time horizons. By evaluating companies on the basis of the spread between their forecasted future return on invested capital (‘ROIC’) excluding goodwill less their estimated weighted-average cost of capital (‘WACC’), we measure a company’s ability to generate an “economic profit” over the foreseeable future, which we define as the next five fiscal years. Companies that generate a forecasted spread of 50 percentage points or more are given a “Very Attractive” Economic Castle rating and firms that are forecasted to generate a spread of 150 percentage points or higher are considered “Highest-Rated”. Firms that carry an Unattractive Economic Castle rating are those that are forecasted to generate a forward ROIC (ex-goodwill) less estimated WACC spread that’s meaningfully below zero (firms near economic parity can receive a Neutral Economic Castle rating, assigned by the Valuentum team).
Nov 10, 2020
Public Storage Continues to Shine
Image Shown: Shares of Public Storage have recovered from the depths of the COVID-19 pandemic and have been on an upward climb over the past few months. On November 4, Public Storage reported earnings for the third quarter of 2020. As expected, headwinds created by the coronavirus (‘COVID-19’) pandemic weighed on its financial performance during this period; however, that did not stop the self-storage real estate investment trust (‘REIT’) from being very free cash flow positive. The long-term outlook for the self-storage industry in metropolitan areas in the US and elsewhere remains quite promising given the desire for households to maximize living space within their housing unit at a given budget. We include shares of Public Storage in our High Yield Dividend Newsletter portfolio and shares of PSA yield 3.5% as of this writing.
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The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Nelson Exclusive publication, and any reports, articles and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. The sources of the data used on this website are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor and does not offer brokerage or investment banking services. Valuentum, its employees, and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.