A RECESSION IS COMING … in 1.5-2 years if trends do not change before then

The yield curve has flattened dramatically in the past quarter. CDS and bond yields are trending negatively. China and Europe appear to have growth issues, and the Fed may be too hawkish. Cash levels relative to debt maturities are at levels not seen since 2007 and companies will have debt maturity headwalls in 2021 that could be a concern. A recession is coming! Run for the hills!

Each week the Valens Securities team highlights our most interesting insights from across our tools and our analysis, including individual company industry and macro insights

Top Highlight: DENTSPLY SIRONA, Inc.

Other Highlights: K, LH, PAYX Other Recent Analyses: 5108:JPN, ADM, APD, AVB, BIIB, BLL, FDX, GWW, MCO, MTD, MU, NOC, NTES, TSLA, WBA

Square, Inc. (SQ:USA) is currently trading at historical highs relative to UAFRS-based (Uniform) Earnings, with a 76.5x Uniform P/E. At these levels, the market has bullish expectations for the firm, and management is confident in the quality and variety of their product line, their ability to gain clients from free trials, and their search for a replacement CFO

The TJX Companies, Inc. (TJX:USA)) currently trades at the higher end of historical averages relative to UAFRS-based (Uniform) Earnings, with a 21.9x Uniform P/E. At these levels, the market has stable expectations for the firm, and management is confident about same-store sales and traffic growth opportunities, and their ability to mitigate freight-driven cost pressures through lease renegotiation

NetEase, Inc. (NTES:USA) currently trades below averages relative to UAFRS-based (Uniform) Assets with a 5.5x Uniform P/B, implying bearish expectations for the firm. However, management is confident about new product innovation and global market dynamics

Each week, Valens focuses on several companies that were analyzed in the prior week, where material distortions caused by as-reported GAAP accounting need to be corrected to understand a company’s economic fundamentals.

This week, we focus on Shutterfly, Inc. (SFLY), RealPage, Inc. (RP), The J.M. Smucker Company (SJM)

DENTSPLY SIRONA Inc. (XRAY:USA) is currently trading below recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.2x Uniform P/E. At these levels, the market is expecting Uniform ROA to decline from 26% in 2017 to 16% through 2022, accompanied by 3% Uniform Asset growth going forward, but management is confident about margin improvement initiatives and driving growth

This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis.

COF is set to cash in with accelerating fundamentals, strong management alignment, and a robust business strategy just as markets are overly pessimistic on the company

Highlighted Top Ideas

MDR – McDermott International, Inc.
TWTR – Twitter, Inc.

Each week the Valens Securities team highlights our most interesting insights from across our tools and our analysis, including individual company industry and macro insights

Top Highlight: eBay Inc.

Other Highlights: HSY, NXPI, TGT Other Recent Analyses: BMRN, ETN, ICE, IFF, MAR, OMC, PETR4:BRA, SBAC

Kellogg Company (K:USA) is currently trading near recent lows relative to UAFRS-based (Uniform) Earnings, with a 20.0x Uniform P/E. However, even at these levels, the market has bullish expectations for the firm, while management appears concerned about emerging market operations, declining operating profit, and the sustainability of broad-based growth

Paychex, Inc. (PAYX:USA) currently trades near recent averages relative toUAFRS-based (Uniform) Earnings, with a 21.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management appears concerned about growth, their value proposition, and client retention

Each week, Valens focuses on several companies that were analyzed in the prior week, where material distortions caused by as-reported GAAP accounting need to be corrected to understand a company’s economic fundamentals.

This week, we focus on Twitter, Inc. (TWTR), Astronics Corporation (ATRO), Marriott International, Inc. (MAR)

NXP Semiconductors N.V. (NXPI:USA) currently trades well below corporates averages relative to UAFRS-based (Uniform) Earnings, with an 11.2x Uniform P/E, implying bearish expectations for the firm. However, management is confident about revenues, utilization, and their debt ratios

This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis.

Tapestry has been changing their colors operationally, with opportunity for significant return and growth recovery, but the market has not recognized this, and the company appears undervalued

Highlighted Top Ideas

AMKR – Amkor Technology, Inc.
GM – General Motors Company
TMUS – T-Mobile US, Inc.

Other Recent Analyses

EXPE – Expedia Group, Inc.
GT – The Goodyear Tire & Rubber Company

eBay Inc. (EBAY:USA) is currently trading well below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 10.2x Uniform P/E, implying bearish expectations for the firm. However, management is confident in their ability to drive earnings growth, marketing strategies, and German platforms

The Home Depot Inc. (HD:USA) trades below recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.9x Uniform P/E. However, even at these levels, the market has bullish expectations for the firm, and management is confident about non-commodity inflation levels, their new delivery ETA technology, and hiring for the spring season

Each week the Valens Securities team highlights our most interesting insights from across our tools and our analysis, including individual company industry and macro insights

Top Highlight: Phillips 66

Other Highlights: ECL, NSC, TPR Other Recent Analyses: 7203:JPN, ALXN, AMN, BAS:DEU, BAYN:DEU, BLL, DE, GD, HD, KFY, LUV, NEM, OMC, RTN, TEVA, WMT

Value stocks top our January Valens Conviction Long List, with Capital One Financial (COF) moving to the top of our list. Our other picks this month are: CRUS, FB, WGO, LRCX, GOOGL, HIG, DHI, EBAY, FSLR, MYL, GRMN, NOV, THRM, PINC, GILD, ASGN, CTXS, TPR, PLNT, AMN, and BHC.