Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.

Valens Research

CPB - Embedded Expectations Analysis - 2021 05 07

Campbell Soup Company (CPB:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 21.2x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain stable, but management may have concerns about their earnings growth, household retention, and their Meals & Beverages category market share Specifically, management may lack confidence in their ability to sustain Meals & Beverages market share and consumption growth, generate significant free cash flow, and continue to improve EBIT and EPS. Moreover, they may have conce...

Valens Research

MU - Embedded Expectations Analysis - 2021 05 07

Micron Technology, Inc. (MU:USA) is currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 12.4x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain muted, and management may have concerns about revenue growth, the DRAM and NAND market outlook, and declines in capex spend Specifically, management may lack confidence in their ability to improve their storage business unit, SSD, and component revenues, sustain margin expansion from DRAM price increases and cost declines, and maintain EBITDA margin growth. Furtherm...

Valens Research

HES - Valens Credit Report - 2021 05 06

Credit markets are overstating credit risk, with a YTW of 2.236% and a CDS of 117bps relative to an Intrinsic YTW of 1.226% and Intrinsic CDS of 39bps. Furthermore, Moody's is overstating the firm's fundamental credit risk, with its Ba1 credit rating three notches lower than Valens' IG4+ (Baa1) credit rating Incentives Dictate Behavior™ analysis highlights mostly favorable signals for credit holders. Management's compensation framework should drive them to focus on all three value drivers; asset efficiency, growth, and margins, which should lead to Uniform ROA improvement and higher cash flow...

Valens Research

AYI - Embedded Expectations Analysis - 2021 05 06

Acuity Brands, Inc. (AYI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.8x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about supply chain constraints, electrical component shortages, and their EPS performance Specifically, management may have concerns about finished goods import logistics, customer inventory rebalancing, and the strength of their relationships with governments in Mexico. Furthermore, they may lack confidence in their ability to mitigate supply c...

Valens Research

Valens Credit Weekly Insights - 2021 05 05

Valens Credit Research team highlights MU, which has a compelling bond offering that we believe the market is currently mispricing, with strong fundamentals, favorable management alignment, and an actionable trade.

Valens Research

CPB - Embedded Expectations Analysis - 2021 05 07

Campbell Soup Company (CPB:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 21.2x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain stable, but management may have concerns about their earnings growth, household retention, and their Meals & Beverages category market share Specifically, management may lack confidence in their ability to sustain Meals & Beverages market share and consumption growth, generate significant free cash flow, and continue to improve EBIT and EPS. Moreover, they may have conce...

Valens Research

MU - Embedded Expectations Analysis - 2021 05 07

Micron Technology, Inc. (MU:USA) is currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 12.4x Uniform P/E. At these levels, the market is pricing in expectations for profitability to remain muted, and management may have concerns about revenue growth, the DRAM and NAND market outlook, and declines in capex spend Specifically, management may lack confidence in their ability to improve their storage business unit, SSD, and component revenues, sustain margin expansion from DRAM price increases and cost declines, and maintain EBITDA margin growth. Furtherm...

Valens Research

HES - Valens Credit Report - 2021 05 06

Credit markets are overstating credit risk, with a YTW of 2.236% and a CDS of 117bps relative to an Intrinsic YTW of 1.226% and Intrinsic CDS of 39bps. Furthermore, Moody's is overstating the firm's fundamental credit risk, with its Ba1 credit rating three notches lower than Valens' IG4+ (Baa1) credit rating Incentives Dictate Behavior™ analysis highlights mostly favorable signals for credit holders. Management's compensation framework should drive them to focus on all three value drivers; asset efficiency, growth, and margins, which should lead to Uniform ROA improvement and higher cash flow...

Valens Research

AYI - Embedded Expectations Analysis - 2021 05 06

Acuity Brands, Inc. (AYI:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.8x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about supply chain constraints, electrical component shortages, and their EPS performance Specifically, management may have concerns about finished goods import logistics, customer inventory rebalancing, and the strength of their relationships with governments in Mexico. Furthermore, they may lack confidence in their ability to mitigate supply c...

Valens Research

Valens Credit Weekly Insights - 2021 05 05

Valens Credit Research team highlights MU, which has a compelling bond offering that we believe the market is currently mispricing, with strong fundamentals, favorable management alignment, and an actionable trade.

Valens Research

Valens Credit Weekly Insights - 2018 05 09

Valens Credit Research Team highlighted ideas for CYH, DOOR, and X. They have also provided recent analyses for AL and GOGO, while CYH topped the quantitative outlier report for the week.

Valens Research

Valens Credit Weekly Insights - 2018 05 02

Valens Credit Research Team highlighted ideas for CAR, DNR, and WU. They have also provided recent analyses for RCL and UVV, while CYH topped the quantitative outlier report for the week.

Valens Research

DNR - Valens Credit Report - 2018 0 26

Cash bond markets are grossly overstating credit risk with a YTW of 7.695% relative to an iCDS of 214bps and an iYTW of 4.965%. Meanwhile, Moody's is materially overstating credit risk, viewing DNR as an extremely speculative, high-yield credit, with its Caa1 rating seven notches below Valens' credit rating of XO (Baa3) Incentives Dictate Behavior™ analysis highlights that management's compensation framework should focus them on all three value drivers, likely leading to Uniform ROA expansion and increased cash flows available for servicing obligations. Additionally, half of all NEOs hold mate...

Valens Research

Valens Credit Weekly Insights - 2018 04 25

Valens Credit Research Team highlighted ideas for BZH, MNI, and YRCW. They have also provided recent analyses for AXL and DF, while CYH topped the quantitative outlier report for the week.

Valens Research

Valens Credit Weekly Insights - 2018 04 18

Valens Credit Research Team highlighted ideas for AN, AVP, and UIS. They have also provided recent analyses for SUM and AMKR, while CYH topped the quantitative outlier report for the week.

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle - July 2020

Earnings growth and investment are likely to recover quickly from the recession, due to a need to invest, and management teams' growing confidence and lack of concern about structural issues. Fundamentals should bounce back rapidly, but after the recent rally, equity markets are pricing in a well-executed recovery, capping upside The coronavirus pandemic has pushed the world into a short-term recession, but thanks to credit fundamentals, its likely not to be a protracted deep recession or long recovery. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption s...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle - June 2020

Earnings growth and investment are likely to recover quickly from the recession, due to a need to invest, and management teams' growing confidence and lack of concern about structural issues. Fundamentals should bounce back rapidly, but after the recent rally, equity markets are pricing in a well executed recovery, capping upside The coronavirus pandemic has pushed the world into a short-term recession – but that does not mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption s...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle - May 2020

The coronavirus pandemic has pushed the world into a short-term recession and credit spreads point to near-term disruptions – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery, but credit spreads point to near-term volatility Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability and fundamental factors driving a need ...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle - April 2020

The coronavirus pandemic has pushed the world into an almost certain short-term recession – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption still point to optimism for a strong recovery Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability and management optimism about investing point to fundamental reasons for market upside after this short-term overhang is re...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle - February 2020

Fundamental and management sentiment data point to accelerating earnings growth, at the same time that credit lending standards are starting to flash signs of tightening. This is a classic set-up for the beginning of the late stage of a bull market, where growth takes over, driving a market higher. A set up like early 1999. Signs of strong 2020 earnings growth and growing management confidence on this issue point to continued reason for fundamental acceleration Credit lending standards point to early reasons for monitoring credit, as does the recent re-inversion of the yield curve even after t...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle - March 2020

Weathering a storm requires a strong foundation, which this economy has. The coronavirus pandemic has pushed the world into an almost certain short-term recession – but that does not need to mean a protracted deep recession or long recovery thanks to credit fundamentals. Favorable bank, corporate, and consumer credit fundamentals heading into this disruption give reason for optimism for a strong recovery Corporate fundamentals and valuations warrant optimism for equity upside if the recession is not protracted. Strong corporate profitability, management optimism about growth before the pa...

Joel Litman ...
  • Rob Spivey

Valens Market Phase Cycle Monitor & Corporate Credit Macro View - April 2018

In general, management teams tend to be value buyers, buying when their stocks dip and withdrawing when their equity rallies. If they don't, it can be a sign of their concern about fundamentals. Watching this statistic can be helpful in confirming other signals about the fundamental outlook. Over the past month, with earnings related black-out periods removed, company management teams have taken the opportunity to buy their stock at higher than average levels. Management teams are showing confidence in their business fundamentals, even as the market remains volatile because of the macro backdr...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle Monitor & Corporate Credit Macro View - December 2017

As the world rings in to the new year in a few days, many will sing Auld Lang Syne. The lyrics ask if we should put the past behind us, or take the opportunity to remember the friendships that got us where we are today. It is a perfect time to reflect on one old friend…the current bull market. It is approaching 7 years old (or even longer, depending on how you define the beginning of the bull)… The phase “bull markets don't die of old age” has been written a lot of use in the past year, because of the age of this one. John Templeton's statement that, instead of old age, bull markets “die on eu...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle Monitor & Corporate Credit Macro View - February 2018

In the last month's Market Phase Cycle, we highlighted inflation as a key risk that investors would be focused on as we moved through 2018. Shortly thereafter, the market had a correction due largely to this issue and its implications for interest rates and equity investors. Inflation also is a negative for equity multiples longer-term because of its implication for real returns for investors. In essence, inflation leads to lower valuations in the long-term. However, in the nearer-term, inflation is driven by a strongly growing economy that will facilitate earnings growth. Even if rising infla...

Joel Litman ...
  • Rob Spivey

Valens Research US Market Phase Cycle Monitor & Corporate Credit Macro View - January 2018

In late 2016 into early 2017, we repeatedly highlighted that fundamentals appeared to be accelerating favorably, and this would be a tailwind for markets in the coming year. As we enter 2018, we see many factors pointing similarly for the markets. Management teams continue to be ramping up investment, and corporate earnings are benefiting from the corporate tax cut. Valuations remain reasonable. Also, credit risk remains muted with strong balance sheets and income statements, and limited debt maturity headwalls. These all warrant continued equity upside in 2018. In early 2017, based on the Mar...

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