Post by Admin/YBB on Apr 10, 2021 10:36:10 GMT -6
Pg 12-13: Q1 earnings season starts with big banks [Wed: JPM, WFC, GS; Th: BAC, C, TFC, USB; Fri: BK, MS, PNC].
REVIEW. WASTE management companies are attractive [RSG, WCN, WM]. Barriers to entry are high and big companies are buying small operators.
PREVIEW. As economic reopening and recovery continue, BANK M&A may rise. Higher stock prices will increase cash-rich acquirer’s [PFC, SFNC, ALTA, etc] urge for M&A. Targets include BOCH, CVCY, HTBK, THFF, etc.
DATA THIS WEEK. Treasury budget on MONDAY; CPI, small business optimism index on TUESDAY; import/export prices, Fed beige book on WEDNESDAY; housing market index, retail sales, capacity utilization, industrial production, business inventories on THURSDAY; UM sentiment, housing starts on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Goldman Sachs [GS; prior recommendation June 2020; reports Q1 results mid-week along with other big banks; pg 14];
Affirm [AFRM; 2021 IPO down 50% from peak; losses, but has sufficient capital for years; buy-now-pay-later (BNPL) installment plans are interest-free up to 1 year & have no late-fees (a huge problem with credit card); basically, participating retailers eat costs that average 5.8% of sales (WMT, CSPR, PTON, etc); competition includes Australian AFTPY, PYPL, AXP, Klarna, Quadpay, Bread/ADS; founded by Levchin, PYPL cofounder; pg 16];
small-cap laser component-maker IIVI [fwd P/E 20.5; growing by acquisitions (recent Coherent/COHR, Finisar in 2019, etc); sold off on concerns about acquisition strategy but that isn’t new; main business is photonics with applications in smartphones, autonomous-driving, industrial machinery, defense; private-equity Bain Capital took significant stake and will have a board seat; pg 19];
companies developing blood tests or liquid-biopsies that rely on cancer-related DNA [ILMN (to reacquire own 2016 spinoff Grail despite FTC objections), EXAS (also has Cologuard stool tests; acquired Thrive), GH, NTRA, NVTA (SoftBank/SFTBY has a stake), BNR, Foundation Medicine/RHHBY; techniques are cheaper than tissue biopsies, endoscopies, radiographic scans; tests are used for initial diagnostic/screening & monitoring during treatment; DNA sequencing costs have come down sharply to $xyz; many tests covered by Medicare; pg 20].
BEARISH. Cruise lines [CCL, NCLH, RCL; current runup may be very premature; normalcy may be deferred to 2023 or 2024, but certainly not in 2022 that bulls hope; CDC has no firm dates or conditions for sailing, may be mid-2021 or later; no help from stimulus (because companies domiciled in offshore tax havens); lot of equity & debt raised during pandemic just to survive, and little EBITDA, so, high EV/EBITDA valuations; no dividends or buybacks anytime soon; pg 18].
Pg 14: Coming TAX hikes in the infrastructure bill pose risks forSP500 earnings [-7.4% hit?] and may especially impact techs [AAPL, LRCX, etc], biotechs/healthcare [AMGN, ILMN, etc], financials [WU, etc], consumer-discretionary and communications sectors.
Pg 23: ECONOMY. Pandemic affected WOMEN disproportionately as many were in hard-hit sectors [education, leisure, hospitality], and many had to do more childcare, eldercare. Now, the recovery would depend on women getting back into the workforce. Many of these women, especially mothers, are having harder time getting back to work. Some have given up and just retired. Post-pandemic labor force participation rate fell for women to 33-yr low [ages 20+]. The talent drain may also affect corporate DIVERSITY at higher levels. This may have long-term implications for household income and FED’s schedule for tightening [as it is watching the labor markets in greater detail]. Remote work and flexible hours may benefit women more. Businesses should be aware of these issues and realize that men and women have different responsibilities outside of work environments. Companies with favorable gender policies include ADSK, CLX, MA, VZ, ADBE, etc. Strong global inflows into ESG funds [40% of total] will keep these issues in focus. Investing implications are favorable for corporate and HY bonds and negative for sectors dependent on consumer spending.
Pg 25. MUTUAL FUNDS. SHILPA MEHRA [2018- ] of Fidelity Trend/FTRNX [1958- ; an illustrious list of past managers] looks for big trends/themes. A huge current trend is digitization/digital transformation that has been accelerated and amplified by Covid-19; companies must also have strong competitive advantage.
Pg 27: ETFs. Until a genuine crypto-ETF is approved by the SEC, here are some options: Funds that hold cryptos or crypto-futures [GBTC, GDLC, OBTC, BITW], funds that hold some cryptos [ARKW], blockchain technology ETFs [BLOK], companies that hold some cryptos [MSTR, SQ, TSLA].
Pg 28: TECH TRADER. Computer HARDWARE stocks are cyclical-techs and are attractive [DELL, HPQ, NCR, STX, WDC, AAPL, etc].
Pg30: INCOME. SP500 DIVIDENDS rose +11.1% in 2021/Q1 and may rise +5% for all of 2021. For 2020, dividends were flat at $55.28 [not bad at all] vs $55.24 in 2019.
Pg 31: ECONOMY. Worry less about INFLATION, and more about DEBT-fueled growth. Optimists say that inflation may be transient, but pessimists say that growth may be transient. Lots of data: $2 trillion in mortgages are in forbearance; consumer credit rose by $28 billion in February; 10% of subprime auto-loans are 60+ days delinquent; margin debt is up 49% in a year; buy-now-pay-later company Affirm/AFRM has $2.1 billion business on its books from 4.5 million customers; global debt/GDP rations are high [US Government debt/GDP is 109% now and may reach 127% by the yearend]. High debt with high economic growth may be fine but high growth may not be sustainable for a long time. INVEST for growth, not inflation as long as this growth persists. But at some point, high DEBT SERVICING will become a drag, and in the extreme, debt defaults or hyperinflation may occur.
Pg 32: ECONOMY. MARY DALY, President of San Francisco Fed; voting member of FOMC in 2021. 2% INFLATION has been a tough target to achieve; the Fed now has a new 2% AVERAGE INFLATION policy that means that inflation may run above 2% for a while. She minimizes the importance of Fed MBS buying and points to people who are creating housing demand. She sees strong REBOUND in the economy as Covid-19 subsides. It may be late-2022 or early-2023 for the LABOR market to recover. The Fed can only play a part in dealing with INEQUALITY. Eliminating/reducing inequality can boost economic output. Pandemic only brought the issues that have been simmering for decades to the forefront and hopefully the focus on those will remain post-pandemic. The Fed is also looking into CLIMATE risks in so far as they create disruptions in banking and financial system. DIVERSITY issue will take time to resolve through education and training as it is related to pipeline in many fields.
Pg 34: OTHER VOICES. JOYCE LAI, New York Angels [an investment group] and ConsenSys Mesh [attorneys]. Is it crypto-art or crypto/decentralized-finance [DeFi]? A “ghost” game NFT Aavegotcho allows one to create own NFT “ghost” from NFT pixel-art-pieces. Aave protocol is used for digital lending/borrowing and fungible receipts [aTokens or aETHs]. One injects aTokens “spirits” into the ghost to keep it going. New Ethereum blockchain technology standard is used to mix fungible aTokens and nonfungible “ghost” [NFT “ghost”]. This combination is guaranteed-verifiable and transferable. While this is a game, think of its implications for structured financial products [mREITs, etc]. It can also be used to create digital-assets without analog/real world corollaries, e.g. a crypto-universe with digital-land. [NFT = Nonfungible Token] [FT = Fungible Token (e.g. current money)] [All this is very vague to me, so my summary is also super vague].
[EXTRAS from online Friday that didn’t make the weekend paper version]
RETAIL investors seem to have moved away from buying calls or GME-type speculative stocks and are buying ETFs. The ETF inflows in Q1 approached those for the entire 2020. The equity exposure of hybrid funds is over 60%. Household equity allocations are above 2000 dot. com levels. Margin debt is high. When the public is all-in, consider taking some chips off the table.
REVIEW. WASTE management companies are attractive [RSG, WCN, WM]. Barriers to entry are high and big companies are buying small operators.
PREVIEW. As economic reopening and recovery continue, BANK M&A may rise. Higher stock prices will increase cash-rich acquirer’s [PFC, SFNC, ALTA, etc] urge for M&A. Targets include BOCH, CVCY, HTBK, THFF, etc.
DATA THIS WEEK. Treasury budget on MONDAY; CPI, small business optimism index on TUESDAY; import/export prices, Fed beige book on WEDNESDAY; housing market index, retail sales, capacity utilization, industrial production, business inventories on THURSDAY; UM sentiment, housing starts on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Goldman Sachs [GS; prior recommendation June 2020; reports Q1 results mid-week along with other big banks; pg 14];
Affirm [AFRM; 2021 IPO down 50% from peak; losses, but has sufficient capital for years; buy-now-pay-later (BNPL) installment plans are interest-free up to 1 year & have no late-fees (a huge problem with credit card); basically, participating retailers eat costs that average 5.8% of sales (WMT, CSPR, PTON, etc); competition includes Australian AFTPY, PYPL, AXP, Klarna, Quadpay, Bread/ADS; founded by Levchin, PYPL cofounder; pg 16];
small-cap laser component-maker IIVI [fwd P/E 20.5; growing by acquisitions (recent Coherent/COHR, Finisar in 2019, etc); sold off on concerns about acquisition strategy but that isn’t new; main business is photonics with applications in smartphones, autonomous-driving, industrial machinery, defense; private-equity Bain Capital took significant stake and will have a board seat; pg 19];
companies developing blood tests or liquid-biopsies that rely on cancer-related DNA [ILMN (to reacquire own 2016 spinoff Grail despite FTC objections), EXAS (also has Cologuard stool tests; acquired Thrive), GH, NTRA, NVTA (SoftBank/SFTBY has a stake), BNR, Foundation Medicine/RHHBY; techniques are cheaper than tissue biopsies, endoscopies, radiographic scans; tests are used for initial diagnostic/screening & monitoring during treatment; DNA sequencing costs have come down sharply to $xyz; many tests covered by Medicare; pg 20].
BEARISH. Cruise lines [CCL, NCLH, RCL; current runup may be very premature; normalcy may be deferred to 2023 or 2024, but certainly not in 2022 that bulls hope; CDC has no firm dates or conditions for sailing, may be mid-2021 or later; no help from stimulus (because companies domiciled in offshore tax havens); lot of equity & debt raised during pandemic just to survive, and little EBITDA, so, high EV/EBITDA valuations; no dividends or buybacks anytime soon; pg 18].
Pg 14: Coming TAX hikes in the infrastructure bill pose risks forSP500 earnings [-7.4% hit?] and may especially impact techs [AAPL, LRCX, etc], biotechs/healthcare [AMGN, ILMN, etc], financials [WU, etc], consumer-discretionary and communications sectors.
Pg 23: ECONOMY. Pandemic affected WOMEN disproportionately as many were in hard-hit sectors [education, leisure, hospitality], and many had to do more childcare, eldercare. Now, the recovery would depend on women getting back into the workforce. Many of these women, especially mothers, are having harder time getting back to work. Some have given up and just retired. Post-pandemic labor force participation rate fell for women to 33-yr low [ages 20+]. The talent drain may also affect corporate DIVERSITY at higher levels. This may have long-term implications for household income and FED’s schedule for tightening [as it is watching the labor markets in greater detail]. Remote work and flexible hours may benefit women more. Businesses should be aware of these issues and realize that men and women have different responsibilities outside of work environments. Companies with favorable gender policies include ADSK, CLX, MA, VZ, ADBE, etc. Strong global inflows into ESG funds [40% of total] will keep these issues in focus. Investing implications are favorable for corporate and HY bonds and negative for sectors dependent on consumer spending.
Pg 25. MUTUAL FUNDS. SHILPA MEHRA [2018- ] of Fidelity Trend/FTRNX [1958- ; an illustrious list of past managers] looks for big trends/themes. A huge current trend is digitization/digital transformation that has been accelerated and amplified by Covid-19; companies must also have strong competitive advantage.
Pg 27: ETFs. Until a genuine crypto-ETF is approved by the SEC, here are some options: Funds that hold cryptos or crypto-futures [GBTC, GDLC, OBTC, BITW], funds that hold some cryptos [ARKW], blockchain technology ETFs [BLOK], companies that hold some cryptos [MSTR, SQ, TSLA].
Pg 28: TECH TRADER. Computer HARDWARE stocks are cyclical-techs and are attractive [DELL, HPQ, NCR, STX, WDC, AAPL, etc].
Pg30: INCOME. SP500 DIVIDENDS rose +11.1% in 2021/Q1 and may rise +5% for all of 2021. For 2020, dividends were flat at $55.28 [not bad at all] vs $55.24 in 2019.
Pg 31: ECONOMY. Worry less about INFLATION, and more about DEBT-fueled growth. Optimists say that inflation may be transient, but pessimists say that growth may be transient. Lots of data: $2 trillion in mortgages are in forbearance; consumer credit rose by $28 billion in February; 10% of subprime auto-loans are 60+ days delinquent; margin debt is up 49% in a year; buy-now-pay-later company Affirm/AFRM has $2.1 billion business on its books from 4.5 million customers; global debt/GDP rations are high [US Government debt/GDP is 109% now and may reach 127% by the yearend]. High debt with high economic growth may be fine but high growth may not be sustainable for a long time. INVEST for growth, not inflation as long as this growth persists. But at some point, high DEBT SERVICING will become a drag, and in the extreme, debt defaults or hyperinflation may occur.
Pg 32: ECONOMY. MARY DALY, President of San Francisco Fed; voting member of FOMC in 2021. 2% INFLATION has been a tough target to achieve; the Fed now has a new 2% AVERAGE INFLATION policy that means that inflation may run above 2% for a while. She minimizes the importance of Fed MBS buying and points to people who are creating housing demand. She sees strong REBOUND in the economy as Covid-19 subsides. It may be late-2022 or early-2023 for the LABOR market to recover. The Fed can only play a part in dealing with INEQUALITY. Eliminating/reducing inequality can boost economic output. Pandemic only brought the issues that have been simmering for decades to the forefront and hopefully the focus on those will remain post-pandemic. The Fed is also looking into CLIMATE risks in so far as they create disruptions in banking and financial system. DIVERSITY issue will take time to resolve through education and training as it is related to pipeline in many fields.
Pg 34: OTHER VOICES. JOYCE LAI, New York Angels [an investment group] and ConsenSys Mesh [attorneys]. Is it crypto-art or crypto/decentralized-finance [DeFi]? A “ghost” game NFT Aavegotcho allows one to create own NFT “ghost” from NFT pixel-art-pieces. Aave protocol is used for digital lending/borrowing and fungible receipts [aTokens or aETHs]. One injects aTokens “spirits” into the ghost to keep it going. New Ethereum blockchain technology standard is used to mix fungible aTokens and nonfungible “ghost” [NFT “ghost”]. This combination is guaranteed-verifiable and transferable. While this is a game, think of its implications for structured financial products [mREITs, etc]. It can also be used to create digital-assets without analog/real world corollaries, e.g. a crypto-universe with digital-land. [NFT = Nonfungible Token] [FT = Fungible Token (e.g. current money)] [All this is very vague to me, so my summary is also super vague].
[EXTRAS from online Friday that didn’t make the weekend paper version]
RETAIL investors seem to have moved away from buying calls or GME-type speculative stocks and are buying ETFs. The ETF inflows in Q1 approached those for the entire 2020. The equity exposure of hybrid funds is over 60%. Household equity allocations are above 2000 dot. com levels. Margin debt is high. When the public is all-in, consider taking some chips off the table.