Post by Admin/YBB on Jun 26, 2021 16:12:52 GMT -6
Pg 12-13:
REVIEW. There was a 2-day SPAC conference in-person near NYC. More than 600 companies have gone public since the last SPAC conference in 2020. They are also drawing more regulatory attention from the SEC Chair GENSLER.
PREVIEW. On strength of its Azure cloud business, Microsoft/MSFT became another $2 trillion company (the other is Apple/AAPL). There is more upside.
DATA THIS WEEK. Dallas Fed Texas manufacturing outlook on MONDAY; consumer confidence, national home price index on TUESDAY; ISM Chicago PMI, pending home sales, ADP employment report on WEDNESDAY; construction spending on THURSDAY; factory orders, international trade balance, jobs report (+625,000 to +650,000), unemployment rate (5.6%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Small-cap Chart Industries (GTLS; fwd P/E 26.2; businesses include carbon-capture, cryogenic equipment (for liquefied gases – natural gas, hydrogen, oxygen, nitrogen, CO2, etc) such as tanks, piping, storage, transportation, fueling stations; pg 23).
BEARISH. See other stories.
Pg 14: FOLLOWUP1. All 23 BANKS passed the Fed STRESS-TESTS easily. They are expected to announce boosts to dividends and buybacks (shareholder yield; may average 8.5%) after the market close on Monday (they were asked to wait by the Fed). KBWB +6.9% for the week, +30% YTD.
Pg 14. FOLLOWUP2. Bipartisan INFRASTRUCTURE bill for $600 billion in physical/capital spending (roads, bridges, transportation, water, broadband, power) will boost industrials. Beneficiaries include AMT, Ferrovial/FRRVY (Spain), ASTE, MLM, ROAD, URI, VMC, CAT, DE, MTW, OSK, TEX; ETF ASGI. Another “HUMAN INFRASTRUCTURE” part (also $600 billion) will be through the budget reconciliation process.
Pg 15: Restructured/reorganized Hertz/HTZGQ, recently trading around $7.15, has huge upside as it comes out of bankruptcy on June 30 (unusual for bankruptcies where, typically, the bond investors have partial recoveries and equity investors are wiped out). Very strong car rental market and car shortages are reasons for this. Old shares will be exchanged for a combination of new stock, warrants and cash with $10-12 total value.
Pg 16. Mortgage insurers (NMIH, ESNT, MTG) will benefit from strong HOUSING market as defaults tend to decline. Private mortgage insurance (PMI) is used when buyers put down less than 20% down payment on new purchase or re-fi. Companies have learned their lessons from the last financial crisis and are more cautious in their operations and in approving loans. RISKS include expiration of forbearances in June (triggering foreclosures in October) and the housing market reversing (if the Fed tightens too much prematurely). But these risks may be priced in these stocks as they have single-digit fwd P/E (7.x) and low P/B (1.x).
Pg 20: Joyce CHANG, JPM. The economy is REOPENING very fast. Reopening plays include energy and selected commodities. The SP500 projected earnings are $200 (2021), $225 (2022), $245 (2023); the current SP500 target is 4,400 (only 2.8% above). Companies will boost dividends and buybacks. While corporate debt is high, the interest coverage is good. Investment-grade BONDS are overvalued. There will be volatility. The FED will use average inflation target and is now more data and outcomes-oriented vs outlook-based (was in the past). The timeframes for reducing QEs and raising RATES have moved up. RISKS include Fed errors – what if inflation is not transitory; if the Fed gets behind the curve (as data tend to lag). While these are US worries, inflation will not be a global problem and some areas may even be in deflation. True JOBS picture will be seen in Fall when all federal unemployment benefits will be gone, and kids will be back in schools. Also moving fast are digitization, fintech, cryptos. The financial system relies for LIQUIDITY on banks and nonbanks (hedge-funds, mutual funds, etc). RETAIL investors have also jumped in with app-based trading. As the world will recover at different rates, some FOREIGN markets, including EMs, are attractive.
Pg 38: MUTUAL FUNDS. Comanager Brian JULIANO of floating-rate/bank-loan (FR/BL) FRFAX (ER 0.97%; no-load/NTF at Fidelity & Schwab) is cautious on credit quality. Bank-loans have variable rates that are good when rates rise but have lower credit ratings; post-bankruptcy recoveries may be 40-50%. This area requires deep and hands on credit analyses; they also stress test their companies. Fund can buy CLOs, bank preferreds and bonds of companies undergoing M&A/restructuring.
Pg 39: Several ETFs have changed their benchmark indexes (128 since 2018). Beware that the benchmark change can be material; there may be related portfolio turnover and CG distributions (that would be unexpected for ETFs); the ETFs may retain old history. Recent examples include biotech IBB, semi SOXX, transports IYT, etc. An example of dramatic change was Lat Am real estate LARE that in 2017 became marijuana MJ.
Pg 40: ECONOMY. It has been 9 months for the current FED policy of average +2% INFLATION target (recent PCE average is only +1.6%) and easy policy until the LABOR markets improve. So, the Fed may tolerate future inflation in +2.4% to +3.0% range for quite a while. But some old timers on the Fed haven’t bought into that and 7 of them indicated rate hike in 2022 in the dot-plots (both voting and nonvoting members of the FOMC contribute to the dot-plots); their economic projections also show similar disconnect from what the FOMC and the Fed Chair POWELL have been saying. Market INFLATION-EXPECTATIONS ( = Treasury yield – TIPS yield; available at FRED) are also much higher than the PCE. (This is Matthew KLEIN’s final column. He is leaving to start a subscription-based service.)
Pg 41: TECH TRADER. Just Eat Takeaway/GRUB is a combination of former Just Eat (Netherlands), Takeaway (UK) and Grubhub (US). 70% of the business is forwarding web orders to restaurants that handle their own delivery, 30% is orders plus delivery. Models differ in Europe: Delivery staff are full-time employees (vs the US where most are contractors), and tipping is nonexistent (that would be rude in the US).
Some odds & ends: Small-cap software company SharpSprint/SHSP is being acquired by Constant Contact (owned by private-equity firms Clearlake Capital and Siris Capiral); a potential takeover target is Momentive Global/MNTV (former Survey Monkey/SVMK); cloud software company Splunk/SPLK is making the difficult transition to subscription-based model and the stock is down sharply, but is attractive long-term.
Pg 42. OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex. Emergence of CRYPTOS is a sign of EXCESS CAPITAL/MONEY in the system. Another way of saying that is that we are literally drowning in excess capital. Governments globally are able to borrow at negative, zero or low rates. Credit spreads are tight. Cash rich companies are increasing dividends and buybacks. Asset prices are elevated (stocks, real estate, many commodities). Savings are high. The US GDP is now above the pre-pandemic level with 7.5 million fewer workers. Industrial capacity use is only 75%. It is like CAPITALISM has King Midas touch. SYMPTOMS of this “disease” of excess capital include low rates, low returns, redundant investments, high M&A activity, excessive speculation (including gamification of trading). Cryptos have provided release/relief for this excess capital. Despite the talk of decentralized money, cryptos have concentrated ownership and rather centralized operations. They have high volatility and have environmental issues (i.e. high consumption of cheap and dirty power). Unfortunately, cryptos will not be a solution for this excess capital problem of capitalism.
Pg 43: DIVIDEND ideas from LINEHAN/PRFDX include WFC, FITB, MET, SO.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
(NOTE. This is delayed Part 2)
REVIEW. There was a 2-day SPAC conference in-person near NYC. More than 600 companies have gone public since the last SPAC conference in 2020. They are also drawing more regulatory attention from the SEC Chair GENSLER.
PREVIEW. On strength of its Azure cloud business, Microsoft/MSFT became another $2 trillion company (the other is Apple/AAPL). There is more upside.
DATA THIS WEEK. Dallas Fed Texas manufacturing outlook on MONDAY; consumer confidence, national home price index on TUESDAY; ISM Chicago PMI, pending home sales, ADP employment report on WEDNESDAY; construction spending on THURSDAY; factory orders, international trade balance, jobs report (+625,000 to +650,000), unemployment rate (5.6%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Small-cap Chart Industries (GTLS; fwd P/E 26.2; businesses include carbon-capture, cryogenic equipment (for liquefied gases – natural gas, hydrogen, oxygen, nitrogen, CO2, etc) such as tanks, piping, storage, transportation, fueling stations; pg 23).
BEARISH. See other stories.
Pg 14: FOLLOWUP1. All 23 BANKS passed the Fed STRESS-TESTS easily. They are expected to announce boosts to dividends and buybacks (shareholder yield; may average 8.5%) after the market close on Monday (they were asked to wait by the Fed). KBWB +6.9% for the week, +30% YTD.
Pg 14. FOLLOWUP2. Bipartisan INFRASTRUCTURE bill for $600 billion in physical/capital spending (roads, bridges, transportation, water, broadband, power) will boost industrials. Beneficiaries include AMT, Ferrovial/FRRVY (Spain), ASTE, MLM, ROAD, URI, VMC, CAT, DE, MTW, OSK, TEX; ETF ASGI. Another “HUMAN INFRASTRUCTURE” part (also $600 billion) will be through the budget reconciliation process.
Pg 15: Restructured/reorganized Hertz/HTZGQ, recently trading around $7.15, has huge upside as it comes out of bankruptcy on June 30 (unusual for bankruptcies where, typically, the bond investors have partial recoveries and equity investors are wiped out). Very strong car rental market and car shortages are reasons for this. Old shares will be exchanged for a combination of new stock, warrants and cash with $10-12 total value.
Pg 16. Mortgage insurers (NMIH, ESNT, MTG) will benefit from strong HOUSING market as defaults tend to decline. Private mortgage insurance (PMI) is used when buyers put down less than 20% down payment on new purchase or re-fi. Companies have learned their lessons from the last financial crisis and are more cautious in their operations and in approving loans. RISKS include expiration of forbearances in June (triggering foreclosures in October) and the housing market reversing (if the Fed tightens too much prematurely). But these risks may be priced in these stocks as they have single-digit fwd P/E (7.x) and low P/B (1.x).
Pg 20: Joyce CHANG, JPM. The economy is REOPENING very fast. Reopening plays include energy and selected commodities. The SP500 projected earnings are $200 (2021), $225 (2022), $245 (2023); the current SP500 target is 4,400 (only 2.8% above). Companies will boost dividends and buybacks. While corporate debt is high, the interest coverage is good. Investment-grade BONDS are overvalued. There will be volatility. The FED will use average inflation target and is now more data and outcomes-oriented vs outlook-based (was in the past). The timeframes for reducing QEs and raising RATES have moved up. RISKS include Fed errors – what if inflation is not transitory; if the Fed gets behind the curve (as data tend to lag). While these are US worries, inflation will not be a global problem and some areas may even be in deflation. True JOBS picture will be seen in Fall when all federal unemployment benefits will be gone, and kids will be back in schools. Also moving fast are digitization, fintech, cryptos. The financial system relies for LIQUIDITY on banks and nonbanks (hedge-funds, mutual funds, etc). RETAIL investors have also jumped in with app-based trading. As the world will recover at different rates, some FOREIGN markets, including EMs, are attractive.
Pg 38: MUTUAL FUNDS. Comanager Brian JULIANO of floating-rate/bank-loan (FR/BL) FRFAX (ER 0.97%; no-load/NTF at Fidelity & Schwab) is cautious on credit quality. Bank-loans have variable rates that are good when rates rise but have lower credit ratings; post-bankruptcy recoveries may be 40-50%. This area requires deep and hands on credit analyses; they also stress test their companies. Fund can buy CLOs, bank preferreds and bonds of companies undergoing M&A/restructuring.
Pg 39: Several ETFs have changed their benchmark indexes (128 since 2018). Beware that the benchmark change can be material; there may be related portfolio turnover and CG distributions (that would be unexpected for ETFs); the ETFs may retain old history. Recent examples include biotech IBB, semi SOXX, transports IYT, etc. An example of dramatic change was Lat Am real estate LARE that in 2017 became marijuana MJ.
Pg 40: ECONOMY. It has been 9 months for the current FED policy of average +2% INFLATION target (recent PCE average is only +1.6%) and easy policy until the LABOR markets improve. So, the Fed may tolerate future inflation in +2.4% to +3.0% range for quite a while. But some old timers on the Fed haven’t bought into that and 7 of them indicated rate hike in 2022 in the dot-plots (both voting and nonvoting members of the FOMC contribute to the dot-plots); their economic projections also show similar disconnect from what the FOMC and the Fed Chair POWELL have been saying. Market INFLATION-EXPECTATIONS ( = Treasury yield – TIPS yield; available at FRED) are also much higher than the PCE. (This is Matthew KLEIN’s final column. He is leaving to start a subscription-based service.)
Pg 41: TECH TRADER. Just Eat Takeaway/GRUB is a combination of former Just Eat (Netherlands), Takeaway (UK) and Grubhub (US). 70% of the business is forwarding web orders to restaurants that handle their own delivery, 30% is orders plus delivery. Models differ in Europe: Delivery staff are full-time employees (vs the US where most are contractors), and tipping is nonexistent (that would be rude in the US).
Some odds & ends: Small-cap software company SharpSprint/SHSP is being acquired by Constant Contact (owned by private-equity firms Clearlake Capital and Siris Capiral); a potential takeover target is Momentive Global/MNTV (former Survey Monkey/SVMK); cloud software company Splunk/SPLK is making the difficult transition to subscription-based model and the stock is down sharply, but is attractive long-term.
Pg 42. OTHER VOICES. Marc CHANDLER, Bannockburn Global Forex. Emergence of CRYPTOS is a sign of EXCESS CAPITAL/MONEY in the system. Another way of saying that is that we are literally drowning in excess capital. Governments globally are able to borrow at negative, zero or low rates. Credit spreads are tight. Cash rich companies are increasing dividends and buybacks. Asset prices are elevated (stocks, real estate, many commodities). Savings are high. The US GDP is now above the pre-pandemic level with 7.5 million fewer workers. Industrial capacity use is only 75%. It is like CAPITALISM has King Midas touch. SYMPTOMS of this “disease” of excess capital include low rates, low returns, redundant investments, high M&A activity, excessive speculation (including gamification of trading). Cryptos have provided release/relief for this excess capital. Despite the talk of decentralized money, cryptos have concentrated ownership and rather centralized operations. They have high volatility and have environmental issues (i.e. high consumption of cheap and dirty power). Unfortunately, cryptos will not be a solution for this excess capital problem of capitalism.
Pg 43: DIVIDEND ideas from LINEHAN/PRFDX include WFC, FITB, MET, SO.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
(NOTE. This is delayed Part 2)