In a few weeks, there will be a very special guest here at Stockles. Brian Nelson, CFA and President of Equity and ETF analysis at Valentum and former Morning Star Director. 

He will answer questions regarding investing, dividends, future stock returns in the US and Emerging Markets, why Berkshire Hathaway is such a great firm and so much more.

To make sure that you are prepared and ready to absorb all of Brian’s knowledge, I’ve collected some information about Brian and his work.

You will also find the whole interview at the bottom so that you also can mentally prepare and get ready to learn and get smarter.

With that said, let’s meet Brian Nelson and Valuentum.

Introducing Brian Nelson

Brian Michael Nelson is the president of equity and dividend growth research and ETF analysis at Valuentum Securities.

He is the architect behind the company’s research methodology and processes, developing the Valuentum Buying Index rating system, the Economic Castle rating, and the Dividend Cushion ratio.

Mr. Nelson has acted as editor-in-chief of the firm’s Best Ideas Newsletter and Dividend Growth Newsletter since their inception.

Before founding Valuentum in early 2011, Brian worked as a director at Morningstar, where he was responsible for training and methodology development within the firm’s equity and credit research department.

Before joining Morningstar in February 2006, Mr. Nelson worked for a small capitalization fund covering a variety of sectors for an aggressive growth investment management firm in Chicago. 


Mr. Nelson is very experienced valuing equities, developing discounted cash-flow models used to derive the fair value estimates for companies in the equity coverage universes of two independent investment research firms, including Valuentum.

Brian worked on a small-cap fund and a micro-cap fund that were ranked within the top 10th percentile and top 1st percentile within the Small Cap Lipper Growth Universe, respectively, in 2005.

Brian led the charge in developing Morningstar’s issuer credit ratings, creating and rolling out one of the firm’s proprietary credit metrics, the Cash Flow Cushion.

How Valuentum Values Apple

At Valuentum, we often use a discounted cash-flow model as a means to back into the current share price of firms in order to ascertain whether the market is unfairly pricing their stock relative to reasonable long-term growth and profitability assumptions.

In Apple’s case, we believe the market is merely pricing in inflation-like expansion beginning toward the latter end of this decade.

Although in the land of technology, competition adapts quickly and a few years from now can be viewed as the distant future, we think the iPhone-maker represents a compelling risk-reward opportunity at current levels based on our analysis.

Often, evaluating a firm via a discounted cash-flow model and re-engineering its stock price can provide a better understanding of a company’s investment potential on a risk-reward basis than even the most clearly written prose.

16-page Equity Research Report on Apple (AAPL)

Value Trap

In the interview, you will notice I often talk about the Value Trap. This is Brian’s book and I highly recommend it.

The Interview

Independence and integrity are core elements for Valuentum. How do you incorporate those values in your service?

Your strategy is based upon selling overvalued stocks on the way down and buying undervalued stocks on the way up. For many investors,

that might sound like trying to time the market which has proven to be extremely difficult. What do you say to such statements?

In Value Trap, which is your book about your service, strategy and mental framework, you go hard on Factor Investing. You’ve said – “There’s never a backtest a researcher didn’t like”. Are there any reasons at all to invest in multifactor ETFs or funds?

In Value Trap, one can read that there are now more than 70 times as many stock indexes as there are stocks, and many of these stock indexes have been created by somewhat suspect methods and backtests.

Could you elaborate on what this means for investors? Did we see the effects of this in the micro crash in December 2018?

Valuation uncertainty is something you truly embark in your service, and you favor fair value price intervals over fair value point targets. Why is that and why aren’t all analysts presenting data like Valuentum?

There’s a whole chapter devoted to dividends and dividend growth investment. For a novice investor trying to understand dividend (growth) investing, what’s the most important lesson you would you tell them?

The dividend aristocrats and kings are very popular among dividend investors. You like them too but emphasize that one needs to focus on the outlook, not just historical data and prior dividend increase streaks.

Should young people go for reliable stocks such as AT&T, Kimberly-Clark, and Southern Company which has overperformed in terms of dividend return but significantly underperforms in terms of total return?  

You’ve invented The Dividend Cushion ratio which is a backward and forward-looking dividend safety ratio and you’ve used it to prevent investments in Kinder Morgan and General Electric, to name a few.

How can you be sure that the future expected free cash flows over a forward five-year period is correct? And if it is, why aren’t all using this great ratio?

What do you think is the strongest argument for still buying such boring stocks when the S&P 500 or a global index is such a good alternative?

You’ve weighted Berkshire Hathaway 7.5% to 12.5 in your portfolio. What is it that you like so much about this firm and what will change once Warren Buffet’s successor takes over?

The picture below is Morningstar’s predictions of future returns from various regions. Do you agree with the low returns for U.S. stocks and the high returns from emerging market stocks? If so, what’s the best way to play this outlook?

Which books, websites or resources would you recommend for those who want to strengthen their skills, both personally and business-wise?

I hope you are as excited as me. We are going to learn a lot!

Take care and remember to sign up to make sure you don’t miss out on anything,




ogellers · April 13, 2019 at 2:00 am

Looking forward to the interview 🙂

Former Morningstar Director & CFA: "We Are All Market Timers" - Stockles Blog · April 21, 2019 at 2:17 pm

[…] from savvy investors are always appreciated here at Stockles. Today, we are going to learn from Brian Nelson, a former Morningstar director, a chartered financial analyst and president of Equity and ETF […]

Former Morningstar Director & CFA: "We Are All Market Timers" - · July 10, 2019 at 9:49 am

[…] from savvy investors are always appreciated here at Stockles. Today, we are going to learn from Brian Nelson, a former Morningstar director, a chartered financial analyst and president of Equity and ETF […]

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