Post by Admin/YBB on Jun 5, 2021 9:43:02 GMT -6
Pg 10-11: ECB monetary policy on THURSDAY. G-7 Summit in the UK, June 11-13, starts on FRIDAY.
REVIEW. Top performing IPOs (excluding SPAC mergers) of the pandemic period were CureVac/CVAC (mRNA Covid-19 vaccine in partnership with Bayer/BAYRY), ZIM Integrated Shipping/ZIM, Academy Sports & Outdoors/ASO, Dream Finder Homes/DFH.
PREVIEW. Auto sales (new or used) are the highest since 2005. Semi chips shortages are distorting the car market with some used cars priced the same or higher than the new cars that are not available. Auto inventories are low. Average new car price is up +11.6% y-o-y. Situation may take until 2023 to normalize. Auto stocks have done well YTD (F +82%, GM +52%, dealer AN +40%).
Outflows from HY bond funds in the past few weeks.
DATA THIS WEEK. Consumer credit on MONDAY; small business optimism index, JOLTS report, international trade balance on TUESDAY; CPI (+4.6% y-o-y, core +3.4% y-o-y; high due to base-effects), household net worth on THURSDAY; UM consumer sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Selected banks (ABTX, PNFP, PNC, SIVB (lends to techs); ETF KBE +31.7% YTD; loan growth will be difficult but will be key to drive results; several banks got new clients via PPP programs; pg 15);
PTC (fwd P/E 34; software as a service (SaaS); CAD, product life-cycle management (PLM), growing by acquisitions (recent Arena, Onshape), manufacturing, IoT; pg 16);
Brinker International (EAT; fwd P/E 11.5; brands Chili’s, Maggiano’s, Just Wings (new delivery only); strong reopening play; many restaurants didn’t survive, but those that did will do well; it is among the top holding of the restaurant ETF EATZ; pg 17).
BEARISH. Meme stocks (AMC, BB, GME, BBBY, etc; take a note of the deluge of new stock issued by AMC and it says that proceeds may be deployed opportunistically, but analysts remain quite negative; avoid short-selling as it is hard to guess when the meme stock craziness may end; pg 13).
Pg 12: FOLLOWUP. Demand for Abbott’s/ABT rapid Covid-19 tests is falling. Its earnings will be impacted negatively due to related reductions in production and write-downs. The outlook has changed significantly since April. Stock peaked in February.
Pg 12: FOLLOWUP. Bill ACKMAN’s SPAC PSTH fell sharply on the announcement of a complex/twisted deal to acquire 10% stake in the private Universal Music Group (now 80% owned by French Vivendi/VIVHY, 20% by Chinese Tencent/TCEHY). But the SPAC PSTH will distribute shares of U M G to shareholders immediately and end its status as a SPAC. PSTH shareholders will also get rights (1/share; called SPARs) for a new company SPARC (not a SPAC; notably without a 2-yr window to invest or close) formed for future M&A. Got all that? PSTH sold off sharply but is now attractive for long-term holders. (A neat trick to change SPAC PSTH with a short-fuse into a long-term M&A company SPARC; Ackman successfully tapped into a hot trend that has cooled since.)
Pg 19: TECH TRADER. Zoom Video (ZM; fwd P/E 73, P/CF 57, P/S 22) faces uncertain post-pandemic prospects. It had hypergrowth during the pandemic but what will be its 2nd act? It is trying to expand into Zoom Phone, a highly competitive area (besides existing strong players, recent new partnerships include T & CSCO Webex, DTEGY & RNG). Its main business also has growing competition from MSFT Teams, GOOGL Meet, etc. If ZM becomes just a mature tech growth company, its lofty valuations would have to adjust lower.
Pg 24: More on LV plays.
LV REITs (triple-net lease): MGP, VICI.
LV Strip: MGM, CZR (also owns Flamingo, Bally’s, LINQ). Note that LVS is pulling out of the Strip.
LV Locals: BYD, RRR. These draw more drive-in business. More gambling, less entertainment.
Pg 26. RETIREMENT. To avoid boredom, stay active and healthy, some get jobs (20% of over 65) or hobbies in retirement. Extra income may also allow deferral of Social Security. Benefits of continuing to work: Portfolio enhancement/preservation; delaying Social Security to maximize benefit (that is debatable); make Roth IRA contributions; stay socially connected; stay sharp.
Pg 28: MUTUAL FUNDs. Value manager David IBEN of international LC-value KGIRX/KGIIX (ER 1.35/1.10%) and SC/MC-value KGAAX (ER 1.30%; closed to new investors) sees values in gold-mining stocks.
Pg 30: Active small-cap MUTUAL FUND managers are avoiding meme stocks (GME, AMC, BB, EXPR, BBBY, etc). But AMC is now #1 and GME #3 in small-cap R2000/IWM. Many active SC managers who used to beat R2000 (because of its poor design and public annual rebalancing in June) are now lagging it. If these meme stocks remain high, they may move from R2000 to R1000 after the June Russell rebalancing. Active SC funds mentioned are BUFSX, NESGX, BDSAX.
Pg 31: ECONOMY. The JOBS report was below expectations but still strong. WAGE gains were very strong (+7.4% annualized). Generous UNEMPLOYMENT BENEFITS (to expire in September) are making it harder for employers to find workers; 25 states have already opted out of Federal enhancements for unemployment benefits. Rising MINIMUM WAGES also mean that some wage gains will not be temporary. The FED is counting on inflation to be transient. Danger is that the economy may end up with STAGFLATION, i.e. low economic growth but high inflation; and any Fed tightening then may throw the economy into recession. This is not the base case by the Fed and many professional investors but be prepared for it. CYCLICAL stocks in high demand sectors, energy, materials, etc, should benefit (as those can pass through higher labor costs); foreign stocks in these sectors are also attractive (Brazil, Russia, etc where labor costs are lower). (Author Lisa BEILFUSS tends to look for low-probability scenarios that one should be aware of. Her notion is to hope for the best but be prepared for the worst. On the other hand, contrarians have more conviction in their contrary views.)
Pg 32: Samantha McLEMORE, Patient Capital (2020- ) and Miller Value Partners (Comanager LGOAX). She follows Peter LYNCH’s “buy what you know” approach. She likes reopening plays (airlines (DAL), cruise lines (NCLH)), disruptive plays (ADT), some growth-techs (GOOGL, FB, AMZN, BABA; these are relative-values in MILLER school of value investing). She is not concerned about the breakup risks of big-techs as that may even be favorable. She is wary of meme stocks that are driven by unsustainable euphoria. More gender diversity is needed in asset management business.
Pg 34: OTHER VOICES. Stephen ARBOGAST, UNC-Chapel Hill. Engine No 1 won 3 seats in spite of opposition by Exxon Mobil/XOM CEO WOODS. It is unclear what low-carbon strategies will emerge at XOM, carbon-capture or alternative energy (solar, wind). But its old strategy, or messaging, didn’t resonate with its big institutional shareholders that supported tiny newbie Engine No 1.
Pg 35: INCOME. More US companies are adopting VARIABLE DIVIDENDS that are more common in Europe. There is a fixed base amount and a variable component determined by current conditions. Several examples in energy include XEC + COG (recent merger), PXD, DVN.
(EXTRAS from online Friday that didn’t make the weekend paper version)
ESG has come to MONEY-MARKET funds that now pay almost nil (0.01-0.10%): UTIXX, SEIXX, MSHXX, ENVXX, LEAXX, etc.
REVIEW. Top performing IPOs (excluding SPAC mergers) of the pandemic period were CureVac/CVAC (mRNA Covid-19 vaccine in partnership with Bayer/BAYRY), ZIM Integrated Shipping/ZIM, Academy Sports & Outdoors/ASO, Dream Finder Homes/DFH.
PREVIEW. Auto sales (new or used) are the highest since 2005. Semi chips shortages are distorting the car market with some used cars priced the same or higher than the new cars that are not available. Auto inventories are low. Average new car price is up +11.6% y-o-y. Situation may take until 2023 to normalize. Auto stocks have done well YTD (F +82%, GM +52%, dealer AN +40%).
Outflows from HY bond funds in the past few weeks.
DATA THIS WEEK. Consumer credit on MONDAY; small business optimism index, JOLTS report, international trade balance on TUESDAY; CPI (+4.6% y-o-y, core +3.4% y-o-y; high due to base-effects), household net worth on THURSDAY; UM consumer sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Selected banks (ABTX, PNFP, PNC, SIVB (lends to techs); ETF KBE +31.7% YTD; loan growth will be difficult but will be key to drive results; several banks got new clients via PPP programs; pg 15);
PTC (fwd P/E 34; software as a service (SaaS); CAD, product life-cycle management (PLM), growing by acquisitions (recent Arena, Onshape), manufacturing, IoT; pg 16);
Brinker International (EAT; fwd P/E 11.5; brands Chili’s, Maggiano’s, Just Wings (new delivery only); strong reopening play; many restaurants didn’t survive, but those that did will do well; it is among the top holding of the restaurant ETF EATZ; pg 17).
BEARISH. Meme stocks (AMC, BB, GME, BBBY, etc; take a note of the deluge of new stock issued by AMC and it says that proceeds may be deployed opportunistically, but analysts remain quite negative; avoid short-selling as it is hard to guess when the meme stock craziness may end; pg 13).
Pg 12: FOLLOWUP. Demand for Abbott’s/ABT rapid Covid-19 tests is falling. Its earnings will be impacted negatively due to related reductions in production and write-downs. The outlook has changed significantly since April. Stock peaked in February.
Pg 12: FOLLOWUP. Bill ACKMAN’s SPAC PSTH fell sharply on the announcement of a complex/twisted deal to acquire 10% stake in the private Universal Music Group (now 80% owned by French Vivendi/VIVHY, 20% by Chinese Tencent/TCEHY). But the SPAC PSTH will distribute shares of U M G to shareholders immediately and end its status as a SPAC. PSTH shareholders will also get rights (1/share; called SPARs) for a new company SPARC (not a SPAC; notably without a 2-yr window to invest or close) formed for future M&A. Got all that? PSTH sold off sharply but is now attractive for long-term holders. (A neat trick to change SPAC PSTH with a short-fuse into a long-term M&A company SPARC; Ackman successfully tapped into a hot trend that has cooled since.)
Pg 19: TECH TRADER. Zoom Video (ZM; fwd P/E 73, P/CF 57, P/S 22) faces uncertain post-pandemic prospects. It had hypergrowth during the pandemic but what will be its 2nd act? It is trying to expand into Zoom Phone, a highly competitive area (besides existing strong players, recent new partnerships include T & CSCO Webex, DTEGY & RNG). Its main business also has growing competition from MSFT Teams, GOOGL Meet, etc. If ZM becomes just a mature tech growth company, its lofty valuations would have to adjust lower.
Pg 24: More on LV plays.
LV REITs (triple-net lease): MGP, VICI.
LV Strip: MGM, CZR (also owns Flamingo, Bally’s, LINQ). Note that LVS is pulling out of the Strip.
LV Locals: BYD, RRR. These draw more drive-in business. More gambling, less entertainment.
Pg 26. RETIREMENT. To avoid boredom, stay active and healthy, some get jobs (20% of over 65) or hobbies in retirement. Extra income may also allow deferral of Social Security. Benefits of continuing to work: Portfolio enhancement/preservation; delaying Social Security to maximize benefit (that is debatable); make Roth IRA contributions; stay socially connected; stay sharp.
Pg 28: MUTUAL FUNDs. Value manager David IBEN of international LC-value KGIRX/KGIIX (ER 1.35/1.10%) and SC/MC-value KGAAX (ER 1.30%; closed to new investors) sees values in gold-mining stocks.
Pg 30: Active small-cap MUTUAL FUND managers are avoiding meme stocks (GME, AMC, BB, EXPR, BBBY, etc). But AMC is now #1 and GME #3 in small-cap R2000/IWM. Many active SC managers who used to beat R2000 (because of its poor design and public annual rebalancing in June) are now lagging it. If these meme stocks remain high, they may move from R2000 to R1000 after the June Russell rebalancing. Active SC funds mentioned are BUFSX, NESGX, BDSAX.
Pg 31: ECONOMY. The JOBS report was below expectations but still strong. WAGE gains were very strong (+7.4% annualized). Generous UNEMPLOYMENT BENEFITS (to expire in September) are making it harder for employers to find workers; 25 states have already opted out of Federal enhancements for unemployment benefits. Rising MINIMUM WAGES also mean that some wage gains will not be temporary. The FED is counting on inflation to be transient. Danger is that the economy may end up with STAGFLATION, i.e. low economic growth but high inflation; and any Fed tightening then may throw the economy into recession. This is not the base case by the Fed and many professional investors but be prepared for it. CYCLICAL stocks in high demand sectors, energy, materials, etc, should benefit (as those can pass through higher labor costs); foreign stocks in these sectors are also attractive (Brazil, Russia, etc where labor costs are lower). (Author Lisa BEILFUSS tends to look for low-probability scenarios that one should be aware of. Her notion is to hope for the best but be prepared for the worst. On the other hand, contrarians have more conviction in their contrary views.)
Pg 32: Samantha McLEMORE, Patient Capital (2020- ) and Miller Value Partners (Comanager LGOAX). She follows Peter LYNCH’s “buy what you know” approach. She likes reopening plays (airlines (DAL), cruise lines (NCLH)), disruptive plays (ADT), some growth-techs (GOOGL, FB, AMZN, BABA; these are relative-values in MILLER school of value investing). She is not concerned about the breakup risks of big-techs as that may even be favorable. She is wary of meme stocks that are driven by unsustainable euphoria. More gender diversity is needed in asset management business.
Pg 34: OTHER VOICES. Stephen ARBOGAST, UNC-Chapel Hill. Engine No 1 won 3 seats in spite of opposition by Exxon Mobil/XOM CEO WOODS. It is unclear what low-carbon strategies will emerge at XOM, carbon-capture or alternative energy (solar, wind). But its old strategy, or messaging, didn’t resonate with its big institutional shareholders that supported tiny newbie Engine No 1.
Pg 35: INCOME. More US companies are adopting VARIABLE DIVIDENDS that are more common in Europe. There is a fixed base amount and a variable component determined by current conditions. Several examples in energy include XEC + COG (recent merger), PXD, DVN.
(EXTRAS from online Friday that didn’t make the weekend paper version)
ESG has come to MONEY-MARKET funds that now pay almost nil (0.01-0.10%): UTIXX, SEIXX, MSHXX, ENVXX, LEAXX, etc.