Post by Admin/YBB on May 1, 2021 9:12:40 GMT -6
Pg 10-11:
REVIEW. Biden’s 100 DAYS have been the best for the market since Roosevelt’s in 1945 [elsewhere, FDR’s in 1933 are mentioned]. FDR also had the worst 100 days in 1941.
PREVIEW. Spotify’s [SPOT; fwd P/S 4] growth has fallen far short of its optimistic projections. It never had profit, and lately its annual losses are increasing. It has raised prices, but margins are still falling. Overvalued.
DATA THIS WEEK. Construction spending, ISM manufacturing PMI on MONDAY; international trade balance, factory orders on TUESDAY; ADP employment report, ISM services PMI on WEDNESDAY; weekly initial jobless claims, labor cost & productivity on THURSDAY; consumer credit, jobs report [+975,000], unemployment rate [5.8%] on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Boring & unglamorous Bank of America [BAC; yield 1.8%; fwd P/E 14; P/tBV 2; high interest rate sensitivity among peers; pg 13];
auto insurer Progressive [PGR; yield 0.4%; fwd P/E 17.2; #3 in market share but catching up with #2 Geico (and may be with #1 State Farm in a few years); has app that monitors drivers in real-time; hybrid direct- and agent- sold model; data-driven company has growth in slow-growth industry; pandemic year 2020 was a strong year due to less driving and less accidents; risk from autonomous driving; pg 14];
Bristol Myers Squibb [BMY; acquired Celgene in 2019 with unusual contingent value rights (CVRs) that could pay $9 ($6 billion) to former Celgene shareholders; these CVRs were tied to timely approvals of 3 drugs by the FDA and BMY claims that they expired due to minor Covid-19 related delays, but Celgene shareholders are suing; this has put unfavorable focus on CVRs used in pharma M&A; possible settlement? pg 15];
small-cap Altra Industrial Motion [AIMC; yield 0.5%; fwd P/E 20.2; debt/EBITDA 3; acquired automation business of Fortive/FTV in 2018; makes components & systems for industrial automation; beneficiary of onshoring trend and fiscal stimulus; pg 26].
BEARISH. See other stories.
Pg 12: Alphabet/GOOGL [44% market share in ads] and Facebook/FB [27% market share in ads] are benefitting from strong rebound in digital/online ad business. Both have modest valuations among the big techs. Risks include tech regulation and data privacy issues.
Pg 12: Crocs/CROX slippers/footwear are no longer faddish. People like to wear those at home. Even after +138% rally since September 2020, its fwd P/E is 17.
Pg 16: CRYPTOCURRENCIES [Bitcoin (50% market share), Ethereum, Litecoin, etc] have new competition from central banks. Current examples include Bahamas’ Sand Dollar, Chinese digital-yuan, Cambodian e-money Bakong. Almost 85% of central banks [US Fed, ECB, BOJ, BOE (Britcoin?), Sweden (e-krona?), etc] are considering central bank digital currencies [CBDCs]. Central banks are more concerned with emerging private STABLECOINS [Tether, Diem (by Facebook/FB), etc] that are e-money pegged to currencies. In future, cryptos may be used as assets [they don’t trade much anyway], while private stablecoins and governmental CBDCs may be used for currencies and transactions. Central banks don’t want to lose control over MONETARY POLICY as these alternatives develop. In fact, CBDCs may provide additional tools for monetary policies, e.g., some stimulus CBDCs with expiration dates [use-it-or-lose-it]; other disincentives for saving. ADVANTAGES of e-money include easier real-time transaction processing [with newer technologies], bypassing bank accounts [however, banks will remain involved somehow in CBDC issuance, processing, etc].
Pg 24: MUTUAL FUNDS. LUCAS WHITE of ESG GCCLX and non-ESG/regular natural-resources GEACX. Most governments, including the US government now, are moving forward with the ESG goals. Many have decarbonization goals by 2050-60. Clean energy may come from solar, wind, geothermal, biofuels, and relies on battery and other energy storage technologies. EVs are growing in market share. But EV companies are quite overvalued now and he instead likes EV infrastructure/supply-chain companies [semis, materials, batteries/storage, EV charging]. FOSSIL-fuel companies are now the cheapest since 1920s, but those are not going away soon. There will be survivors among them, and many will grow into new businesses.
Pg 27: MUTUAL FUNDS. HENRIK STRABO of small/mid-cap growth international RISAX/RAIRX runs a focused fund with 100 holdings.
Pg 28: ETFs. When ETFs get too big, sometimes the INDEXES they follow may have to adjust [ICLN, JETS, etc; VNQ in 2018; GDXJ in 2017]. Similar issues may be faced soon by AMLP, etc. So, this isn’t just the problem of ACTIVE ARK ETFs that had to go beyond its narrow group of highflyers.
Pg 29: Obituary of deep-value investor CHARLES de VAULX, IVA cofounder who died tragically at 59 just a few weeks after shutting the firm.
Pg 30: TECH TRADER. Fabulous 5 big techs FAAMG did well during the pandemic and have bright post-pandemic futures. This will be due to strength in cloud-computing, e-commerce, digital-ads, semis, PCs [every home now needs enough PCs/laptops for parents and kids, plus some spare(s)]. RISKS include slowing sales growth, even negative in 2022; possible national policy on gig workers by the DOL. etc.
Pg 31: INCOME. Several new indexes from S&P Dow Jones combine ESG and ARISTICRATS. Global indexes among these will use different criteria for US and non-US Aristocrats. New ETFs following these indexes may come in due course.
AAP has increased its dividend to above pre-pandemic level. IBM is now a high-yield stock.
Pg 32: ECONOMY. Biden’s CORPORATE TAX plan will include higher tax rates, minimum tax rates and elimination of tax havens. Domestically focused companies will be less affected than multinationals.
Pg 33: HAMDI ULUKAYA, Chobani and DAN SCHULMAN, PayPal/PYPL. Employee compensation, incentives and financial health are important. Both companies have internal metrics for these. A uniform minimum wage isn’t a solution; net disposable income is a better measure to account for local variations.
[EXTRAS from online Friday that didn’t make the weekend paper version]
Pg 33: HOUSING. With housing prices at 15-yr high, how much further can homebuilders rally [ETF XHB +122% in 12 months] ? Housing inventories are low and mortgage rates remain low. But LUMBER prices are up +240% in 12 months and have added $24,000 to the price of an average new home. Eventually, some buyers will be priced out of the market. Risk will be from FED tapering later but strong post-pandemic demand for suburban homes should keep a floor for home prices.
REVIEW. Biden’s 100 DAYS have been the best for the market since Roosevelt’s in 1945 [elsewhere, FDR’s in 1933 are mentioned]. FDR also had the worst 100 days in 1941.
PREVIEW. Spotify’s [SPOT; fwd P/S 4] growth has fallen far short of its optimistic projections. It never had profit, and lately its annual losses are increasing. It has raised prices, but margins are still falling. Overvalued.
DATA THIS WEEK. Construction spending, ISM manufacturing PMI on MONDAY; international trade balance, factory orders on TUESDAY; ADP employment report, ISM services PMI on WEDNESDAY; weekly initial jobless claims, labor cost & productivity on THURSDAY; consumer credit, jobs report [+975,000], unemployment rate [5.8%] on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Boring & unglamorous Bank of America [BAC; yield 1.8%; fwd P/E 14; P/tBV 2; high interest rate sensitivity among peers; pg 13];
auto insurer Progressive [PGR; yield 0.4%; fwd P/E 17.2; #3 in market share but catching up with #2 Geico (and may be with #1 State Farm in a few years); has app that monitors drivers in real-time; hybrid direct- and agent- sold model; data-driven company has growth in slow-growth industry; pandemic year 2020 was a strong year due to less driving and less accidents; risk from autonomous driving; pg 14];
Bristol Myers Squibb [BMY; acquired Celgene in 2019 with unusual contingent value rights (CVRs) that could pay $9 ($6 billion) to former Celgene shareholders; these CVRs were tied to timely approvals of 3 drugs by the FDA and BMY claims that they expired due to minor Covid-19 related delays, but Celgene shareholders are suing; this has put unfavorable focus on CVRs used in pharma M&A; possible settlement? pg 15];
small-cap Altra Industrial Motion [AIMC; yield 0.5%; fwd P/E 20.2; debt/EBITDA 3; acquired automation business of Fortive/FTV in 2018; makes components & systems for industrial automation; beneficiary of onshoring trend and fiscal stimulus; pg 26].
BEARISH. See other stories.
Pg 12: Alphabet/GOOGL [44% market share in ads] and Facebook/FB [27% market share in ads] are benefitting from strong rebound in digital/online ad business. Both have modest valuations among the big techs. Risks include tech regulation and data privacy issues.
Pg 12: Crocs/CROX slippers/footwear are no longer faddish. People like to wear those at home. Even after +138% rally since September 2020, its fwd P/E is 17.
Pg 16: CRYPTOCURRENCIES [Bitcoin (50% market share), Ethereum, Litecoin, etc] have new competition from central banks. Current examples include Bahamas’ Sand Dollar, Chinese digital-yuan, Cambodian e-money Bakong. Almost 85% of central banks [US Fed, ECB, BOJ, BOE (Britcoin?), Sweden (e-krona?), etc] are considering central bank digital currencies [CBDCs]. Central banks are more concerned with emerging private STABLECOINS [Tether, Diem (by Facebook/FB), etc] that are e-money pegged to currencies. In future, cryptos may be used as assets [they don’t trade much anyway], while private stablecoins and governmental CBDCs may be used for currencies and transactions. Central banks don’t want to lose control over MONETARY POLICY as these alternatives develop. In fact, CBDCs may provide additional tools for monetary policies, e.g., some stimulus CBDCs with expiration dates [use-it-or-lose-it]; other disincentives for saving. ADVANTAGES of e-money include easier real-time transaction processing [with newer technologies], bypassing bank accounts [however, banks will remain involved somehow in CBDC issuance, processing, etc].
Pg 24: MUTUAL FUNDS. LUCAS WHITE of ESG GCCLX and non-ESG/regular natural-resources GEACX. Most governments, including the US government now, are moving forward with the ESG goals. Many have decarbonization goals by 2050-60. Clean energy may come from solar, wind, geothermal, biofuels, and relies on battery and other energy storage technologies. EVs are growing in market share. But EV companies are quite overvalued now and he instead likes EV infrastructure/supply-chain companies [semis, materials, batteries/storage, EV charging]. FOSSIL-fuel companies are now the cheapest since 1920s, but those are not going away soon. There will be survivors among them, and many will grow into new businesses.
Pg 27: MUTUAL FUNDS. HENRIK STRABO of small/mid-cap growth international RISAX/RAIRX runs a focused fund with 100 holdings.
Pg 28: ETFs. When ETFs get too big, sometimes the INDEXES they follow may have to adjust [ICLN, JETS, etc; VNQ in 2018; GDXJ in 2017]. Similar issues may be faced soon by AMLP, etc. So, this isn’t just the problem of ACTIVE ARK ETFs that had to go beyond its narrow group of highflyers.
Pg 29: Obituary of deep-value investor CHARLES de VAULX, IVA cofounder who died tragically at 59 just a few weeks after shutting the firm.
Pg 30: TECH TRADER. Fabulous 5 big techs FAAMG did well during the pandemic and have bright post-pandemic futures. This will be due to strength in cloud-computing, e-commerce, digital-ads, semis, PCs [every home now needs enough PCs/laptops for parents and kids, plus some spare(s)]. RISKS include slowing sales growth, even negative in 2022; possible national policy on gig workers by the DOL. etc.
Pg 31: INCOME. Several new indexes from S&P Dow Jones combine ESG and ARISTICRATS. Global indexes among these will use different criteria for US and non-US Aristocrats. New ETFs following these indexes may come in due course.
AAP has increased its dividend to above pre-pandemic level. IBM is now a high-yield stock.
Pg 32: ECONOMY. Biden’s CORPORATE TAX plan will include higher tax rates, minimum tax rates and elimination of tax havens. Domestically focused companies will be less affected than multinationals.
Pg 33: HAMDI ULUKAYA, Chobani and DAN SCHULMAN, PayPal/PYPL. Employee compensation, incentives and financial health are important. Both companies have internal metrics for these. A uniform minimum wage isn’t a solution; net disposable income is a better measure to account for local variations.
[EXTRAS from online Friday that didn’t make the weekend paper version]
Pg 33: HOUSING. With housing prices at 15-yr high, how much further can homebuilders rally [ETF XHB +122% in 12 months] ? Housing inventories are low and mortgage rates remain low. But LUMBER prices are up +240% in 12 months and have added $24,000 to the price of an average new home. Eventually, some buyers will be priced out of the market. Risk will be from FED tapering later but strong post-pandemic demand for suburban homes should keep a floor for home prices.
