Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Boeing Down 15%, Turbulence Still Ahead
Image: Boeing's shares have faced a perfect storm of negatives. We're still not interested.As you know, we’re *STILL* not in the business of catching falling knives, and we won’t be interested in Boeing’s shares until they have sustainably turned the corner higher. As we said in January, a sustainable turn higher won’t be for some time yet, in our view. We wouldn’t be surprised in the coming quarters if Boeing’s credit rating is cut again (Moody's recently downgraded its senior debt to Baa1 from A3, and the rating firm noted that the "ratings remain on review for downgrade"), and Boeing eventually has to cut its dividend. Upon the next report update, we expect a substantial reduction to our fair value estimate and the once-healthy 1.9 Dividend Cushion ratio (to below 1), given expectations for additional debt and reduced free cash flow forecasts.

Oil Prices Collapse, Reiterating 2,350-2,750 S&P 500 Target Range; Credit Crunch Looming?
From Value Trap: “The banking sector was not the only sector that faced considerable selling pressure during the Financial Crisis of the late 2000s, of course. Other companies that required funding to maintain their business operations faced severe liquidity risk, or a situation where refinancing, or rolling over debt, might be difficult to do on fair terms, making such financing prohibitive in some cases. Those that faced outsize debt maturities during the most severe months of the credit crunch faced a real threat of Chapter 11 restructuring had the lending environment completely seized. In thinking about share prices as a range of probable fair value outcomes, equity prices tend to face pressure as downside probabilities such as a liquidity event are baked into the market price and at a higher probability. Because debtholders are higher up on the capital structure than equity holders, shareholders can sometimes get nothing in the event of a bankruptcy filing. Entities that are extremely capital-market dependent, or those that require ongoing access to new capital to fund operations, often face the greatest risk of the worst equity price declines during deteriorating credit market conditions.” Value Trap: Theory of Universal Valuation, published 2018

Coronavirus May Trigger Long-Anticipated Global Recession
Image: Wuhan New Coronavirus. This was the catalyst that nobody was expecting, a novel coronavirus that nobody had in their economic models. We think global economic activity is slowing as we speak, and the spread of the virus may only accelerate in mainland China and elsewhere. Investors should keep a level head and perhaps think about adding protection to their portfolios before it becomes too expensive.

Fair Value Estimates Matter – Case Study: Boeing
Image Source: Boeing’s share price converged to our estimate of intrinsic value in the summer of 2019. The plane maker continues to navigate tumultuous skies with its 737 MAX. In early 2019, we thought shares of Boeing were severely overpriced, and they aggressively converged to our fair value estimate by summer, only to bounce a bit since then. We’re still huge fans of the company but working through the 737 MAX issues will take some time to get “right.” We expect more headline risk as it relates to contingent liabilities associated with the disasters, but nothing so punitive to shake the plane maker to the core. Boeing is an investment-grade credit with a huge backlog, and while we expect shares to be range-bound in the near-term, investors get to collect a nice juicy dividend as they wait for Boeing to sort things out. Shares yield 2.2% at the time of this writing.

Google, Intel -- Yes!
Let's talk Google and Intel, remind you that we've removed Chipotle, Xilinx, and Boeing from the newsletter portfolios some time ago. I'll talk a little about PayPal's run higher and address some other themes, including contingent liabilities with J&J and 3M.

Facebook Was Textbook, Intel Still About Fairly Valued After Weakness
Image: Best Ideas Newsletter portfolio holding Facebook's stock has advanced 56% since it bottomed in December. This is yet another textbook execution of the Valuentum Buying Index, a strong breakout of the downtrend on a significantly undervalued stock. See also the example with Apple on page 241 in Value Trap: Theory of Universal Valuation.

Our Reports on Stocks in the Major Airlines Industry
Image Source: Cory Hatchel. We have dropped coverage of the Airline (major) industry: AAL, ALK, DAL, HA, JBLU, LUV, SAVE, UAL.

Cisco Rallies Big Time!
Image shown: Performance of the S&P 500 (SPY) since August 2017. As US equities continue their newly-found volatility, let’s take a look at some recent earnings reports and other developments around the markets. Cisco, the workhorse of both simulated newsletter portfolios, put up a fantastic report and upped its dividend. Berkshire continues to love Apple, and we maintain the view that the 10-year Treasury rate may be the greatest determinant of how well stocks perform in the coming decades. Airlines, garbage stocks, the “gas tax,” and more.

Airlines to Start a Price War?
Some have said the airline industry has changed. We’ve always been cautious on the structural characteristics of the airline business, and United Continental has reminded us why.

The Bull Case for Airline Stocks?
Image Source: BriYYZ. Warren Buffett has famously said that airline stocks are horrible long-term investments, but his vast portfolio now owns a number of airlines. What’s the bull case for owning these capital-intensive, cyclical and often boom-and-bust stocks?