Post by Admin/YBB on Aug 21, 2021 9:18:41 GMT -6
Pg 10-11. Fed annual conference (virtual) at Jackson Hole, THURSDAY-SATURDAY (August 26-28).
REVIEW. Warren BUFFETT/BRK-A/B is sitting on $144 billion in cash but sold more stock in Q2 (ABBV, BMY, MRK, GM, CVX). BRK’s stock portfolio was at $300 billion and $134 billion was just in AAPL. Bought were small amounts of KR and BRK-A/B.
PREVIEW. Supply-chain squeezes due to rising Covid-19-Delta are affecting several companies: ALB (specialty chemicals), PH (motion and control systems), APTV (auto-parts), WDC (data storage), ANET (computer network systems), etc.
DATA THIS WEEK. Existing home sales, manufacturing PMI, services PMI on MONDAY; new home sales on TUESDAY; durable goods report on WEDNESDAY; Q2 GDP (2nd est) on THURSDAY; personal income and consumption, PCE index (+4.2% y-o-y), wholesale inventories on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Jefferies Financial Group (JEF; yield 2.9%; fwd P/E 11; P/tBV 1.1; buybacks; aggressive and opportunistic investment banker; mid-cap growth; beneficiary of pullback of European banks from the US capital markets; Rich HANDLER (60) has been CEO for 20 years and owns 7%; pg 15); small-cap battery storage systems producer STEM (EV/sales 7.7: profitable by 2022? Became public via SPAC merger with Star Peak Energy Transition in April; it doesn’t make batteries (a commoditized product) but makes hardware/software systems to manage battery arrays for uninterrupted power for industrial/commercial applications, the so-called “behind-the-meter” power systems (term unclear) with 30% market share; new stimulus may have tax credits for green energy; pg 17).
BEARISH. See other stories.
Pg 9: FOLLOWUP. After being stuck at home for so long, shoppers are returning to STORES. Even Amazon/AMZN wants more physical store presence. While online sales will remain strong, the reports of the death of bricks-and-mortar stores were greatly exaggerated (paraphrasing Mark TWAIN). OUTDOOR/open mall traffic is now above the pre-pandemic level, and INDOOR mall traffic is close to the pre-pandemic level. Most retailers have beaten expectations (M. KSS, TJX, TGT, JWN, W, ROSS, ULTA, DG, HD, TSCO); retail ETF is XRT.
Pg 9: FOLLOWUP. More creativity from Bill ACKMAN. After the failed Universal Music deal on regulatory issues, he now wants to liquidate his SPAC PSTH (the biggest SPAC; termination date July 2022) with each shareholder getting back $20 cash and 1 warrant for a newly imagined entity SPARC (R means “right”). Most of the warrants will be exercisable at $20 at the time of M&A (whenever that happens), but some will be exercisable at $23 5 years after the M&A. But there wouldn’t be any time limit for the M&A (like 2 years for the SPAC). This blank-check-IOU structure will need approvals by the NYSE and SEC, and would that happen by July 2022 deadline for the termination of SPAC PSTH? There is also a shareholder lawsuit against PSTH arguing that it isn’t really a SPAC but a regular investment company and that could interfere with its search for the next M&A before July 2022 deadline.
Pg 13: DRUGMAKERS will benefit from the emergence of various Covid-19 VARIANTS: Alpha/UK, Beta/S Africa, Gamma/Brazil. Delta/India, Eta, Iota, Kappa, Lambda (of course, the original Covid-19 was from Wuhan, China). These variants seem to come in waves and then dissipate, as seen in Brazil, India, UK, and now the US. In the US, there are now some reopening delays due to Covid-19-Delta. Viruses replicate fast and MUTATE like lightning. It is possible that a variant may emerge that may not respond any of the current vaccines. Typically, such unusual virus variants are not deadly or widespread but there is disagreement on this. It seems clear now that there will be need for revaccinations/BOOSTERS for a long time. Some say that Covid-19 will never fully go away, and Covid-19 shots may become annual events like flu shots. There may also be some effective DRUGS (IV, oral); some that are available now work marginally. GLOBAL vaccination levels must also improve before victory over Covid-19 can be declared. Booster shots in the developed countries will soon be in competition with the initial vaccinations in many developing countries. Several drug companies will benefit from these developments: Moderna/MRNA, Pfizer/PFE, BioNTech/BNTX (a current partner of PFE), AstraZeneca/AZN, Novavax/NVAX, Roche/RHHBY, etc.
Pg 24: FUNDS. Comanager Rafe RESENDES of large-cap valueAFLVX AFVLX looks for relative-values and intrinsic-values and likes AAPL, GOOGL, FB, MA, unusual for a value fund. Fund started in 2017 but he was a corporate consultant focusing on overall corporate and internal unit valuations; ER 1%; holds only 50 stocks but is sector neutral; low turnover.
Pg 26: Infrastructure ETFs should benefit from the infrastructure stimulus: PAVE, IFRA, TOLZ. Some related thematic ETFs are SIMS, GRID, PHO.
Pg 27: TECH TRADER. Data analytics company Palantir (PLTR; fwd P/S 25) direct-listed in September 2020. It offers software Gotham for government businesses and Foundry for commercial businesses (and is aggressively selling it). Controversially, it has invested in several SPACs, and then these companies start using PLTR software; it also bought $51 million in gold bars. It recently moved HQ to Palo Alto, CA. Institutions own only 25% due to controversies but retail investors love it.
Pg 29: ECONOMY. Claudia SAHM, Stay-at-Home Macro and Jain Family Institute; formerly at Washington Center for Equitable Growth; formerly at Federal Reserve. Known for Fed’s SAHM Rule for determining recession in real-time (headline U3 unemployment 3-mMA > +0.50% above its 12-mo low). Covid-19 has exacerbated several SOCIAL and ECONOMIC issues – inequality; lack of diversity; job mismatches and dissatisfactions (recent 10 million job openings with 8.7 unemployed is a symptom of that); weak social safety net; inadequacy of childcare, etc. The silver lining was that Covid-19 struck near the end of the longest economic expansion. It will take time for the LABOR situation to return to normal in the US and elsewhere. Even after the financial crisis (2008-09), the long-term unemployment lingered for a long time but not much attention was paid to the related issues. In time, new generations of young employees replaced the older ones. But the labor issues are global and that is what is now disrupting the global SUPPLY-CHAINS – the semi chips shortage is just one example. Growing Covid-19-Delta may slow things down a bit in Fall, but it shouldn’t be a repeat of the last year due to huge STIMULUS and availability of VACCINES.
There have been huge changes in monetary and fiscal policies with a new framework at the FED in Summer 2020 to focus on AVERAGE INFLATION rate (+2%). This new framework is being tested now in practice when there is more progress on inflation than on jobs. It is good that the Fed moves slowly because it doesn’t flip-flop easily. The Fed has hundreds of PhD-economists who watch, analyze and understand (or, try to) the economic data. The Fed knows what it is doing better than what the outsiders give it credit for. Somethings affecting inflation now (e.g. used-car prices, etc) have never contributed to inflation before and that weighs on the TRANSITORY side of the argument. CONGRESS did its part by kicking in $5 trillion stimulus within a year into $21 trillion economy and that was just huge (vs only $1 trillion in 2008-09). Also, the post-financial-crisis stimulus stopped only by 2013. The ECONOMICS PROFESSION has a terrible record on diversity, and it has openly mocked/attacked related initiatives within its circles/websites. That is what was pointed out by Alice WU in 2017 and SAHM in 2020. Her post on it last year started out as a private note to a student under vicious attack, and when she circulated her note among colleagues and friends, they (including YELLEN and BERNANKE) encouraged her to make it public.
Pg 30: ECONOMY. Growth is slowing/STALLING – retail sales are falling; the UM consumer sentiment fell; inventories are rising (but from a low inventories/sales ratio, so not a concern yet); backlogs are rising (due to supply chain constraints). The FED is signaling tapering (watch the news from Fed annual conference at Jackson Hole, August 26-28). The 2021/H2 projections for economic growth are now in doubt. This may cool INFLATION, as the Fed has been saying. Rising Covid-19-Delta is also a wild card. (How is moderating inflation from slowing economy good?)
Pg 31: INCOME. mREITs with attractive yields include MFA, RWT (recently acquired CoreVest). (Caution: mREITs are highly leveraged portfolios of mortgages, so they are highly rate sensitive and may perform poorly with rising rates)
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
REVIEW. Warren BUFFETT/BRK-A/B is sitting on $144 billion in cash but sold more stock in Q2 (ABBV, BMY, MRK, GM, CVX). BRK’s stock portfolio was at $300 billion and $134 billion was just in AAPL. Bought were small amounts of KR and BRK-A/B.
PREVIEW. Supply-chain squeezes due to rising Covid-19-Delta are affecting several companies: ALB (specialty chemicals), PH (motion and control systems), APTV (auto-parts), WDC (data storage), ANET (computer network systems), etc.
DATA THIS WEEK. Existing home sales, manufacturing PMI, services PMI on MONDAY; new home sales on TUESDAY; durable goods report on WEDNESDAY; Q2 GDP (2nd est) on THURSDAY; personal income and consumption, PCE index (+4.2% y-o-y), wholesale inventories on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Jefferies Financial Group (JEF; yield 2.9%; fwd P/E 11; P/tBV 1.1; buybacks; aggressive and opportunistic investment banker; mid-cap growth; beneficiary of pullback of European banks from the US capital markets; Rich HANDLER (60) has been CEO for 20 years and owns 7%; pg 15); small-cap battery storage systems producer STEM (EV/sales 7.7: profitable by 2022? Became public via SPAC merger with Star Peak Energy Transition in April; it doesn’t make batteries (a commoditized product) but makes hardware/software systems to manage battery arrays for uninterrupted power for industrial/commercial applications, the so-called “behind-the-meter” power systems (term unclear) with 30% market share; new stimulus may have tax credits for green energy; pg 17).
BEARISH. See other stories.
Pg 9: FOLLOWUP. After being stuck at home for so long, shoppers are returning to STORES. Even Amazon/AMZN wants more physical store presence. While online sales will remain strong, the reports of the death of bricks-and-mortar stores were greatly exaggerated (paraphrasing Mark TWAIN). OUTDOOR/open mall traffic is now above the pre-pandemic level, and INDOOR mall traffic is close to the pre-pandemic level. Most retailers have beaten expectations (M. KSS, TJX, TGT, JWN, W, ROSS, ULTA, DG, HD, TSCO); retail ETF is XRT.
Pg 9: FOLLOWUP. More creativity from Bill ACKMAN. After the failed Universal Music deal on regulatory issues, he now wants to liquidate his SPAC PSTH (the biggest SPAC; termination date July 2022) with each shareholder getting back $20 cash and 1 warrant for a newly imagined entity SPARC (R means “right”). Most of the warrants will be exercisable at $20 at the time of M&A (whenever that happens), but some will be exercisable at $23 5 years after the M&A. But there wouldn’t be any time limit for the M&A (like 2 years for the SPAC). This blank-check-IOU structure will need approvals by the NYSE and SEC, and would that happen by July 2022 deadline for the termination of SPAC PSTH? There is also a shareholder lawsuit against PSTH arguing that it isn’t really a SPAC but a regular investment company and that could interfere with its search for the next M&A before July 2022 deadline.
Pg 13: DRUGMAKERS will benefit from the emergence of various Covid-19 VARIANTS: Alpha/UK, Beta/S Africa, Gamma/Brazil. Delta/India, Eta, Iota, Kappa, Lambda (of course, the original Covid-19 was from Wuhan, China). These variants seem to come in waves and then dissipate, as seen in Brazil, India, UK, and now the US. In the US, there are now some reopening delays due to Covid-19-Delta. Viruses replicate fast and MUTATE like lightning. It is possible that a variant may emerge that may not respond any of the current vaccines. Typically, such unusual virus variants are not deadly or widespread but there is disagreement on this. It seems clear now that there will be need for revaccinations/BOOSTERS for a long time. Some say that Covid-19 will never fully go away, and Covid-19 shots may become annual events like flu shots. There may also be some effective DRUGS (IV, oral); some that are available now work marginally. GLOBAL vaccination levels must also improve before victory over Covid-19 can be declared. Booster shots in the developed countries will soon be in competition with the initial vaccinations in many developing countries. Several drug companies will benefit from these developments: Moderna/MRNA, Pfizer/PFE, BioNTech/BNTX (a current partner of PFE), AstraZeneca/AZN, Novavax/NVAX, Roche/RHHBY, etc.
Pg 24: FUNDS. Comanager Rafe RESENDES of large-cap value
Pg 26: Infrastructure ETFs should benefit from the infrastructure stimulus: PAVE, IFRA, TOLZ. Some related thematic ETFs are SIMS, GRID, PHO.
Pg 27: TECH TRADER. Data analytics company Palantir (PLTR; fwd P/S 25) direct-listed in September 2020. It offers software Gotham for government businesses and Foundry for commercial businesses (and is aggressively selling it). Controversially, it has invested in several SPACs, and then these companies start using PLTR software; it also bought $51 million in gold bars. It recently moved HQ to Palo Alto, CA. Institutions own only 25% due to controversies but retail investors love it.
Pg 29: ECONOMY. Claudia SAHM, Stay-at-Home Macro and Jain Family Institute; formerly at Washington Center for Equitable Growth; formerly at Federal Reserve. Known for Fed’s SAHM Rule for determining recession in real-time (headline U3 unemployment 3-mMA > +0.50% above its 12-mo low). Covid-19 has exacerbated several SOCIAL and ECONOMIC issues – inequality; lack of diversity; job mismatches and dissatisfactions (recent 10 million job openings with 8.7 unemployed is a symptom of that); weak social safety net; inadequacy of childcare, etc. The silver lining was that Covid-19 struck near the end of the longest economic expansion. It will take time for the LABOR situation to return to normal in the US and elsewhere. Even after the financial crisis (2008-09), the long-term unemployment lingered for a long time but not much attention was paid to the related issues. In time, new generations of young employees replaced the older ones. But the labor issues are global and that is what is now disrupting the global SUPPLY-CHAINS – the semi chips shortage is just one example. Growing Covid-19-Delta may slow things down a bit in Fall, but it shouldn’t be a repeat of the last year due to huge STIMULUS and availability of VACCINES.
There have been huge changes in monetary and fiscal policies with a new framework at the FED in Summer 2020 to focus on AVERAGE INFLATION rate (+2%). This new framework is being tested now in practice when there is more progress on inflation than on jobs. It is good that the Fed moves slowly because it doesn’t flip-flop easily. The Fed has hundreds of PhD-economists who watch, analyze and understand (or, try to) the economic data. The Fed knows what it is doing better than what the outsiders give it credit for. Somethings affecting inflation now (e.g. used-car prices, etc) have never contributed to inflation before and that weighs on the TRANSITORY side of the argument. CONGRESS did its part by kicking in $5 trillion stimulus within a year into $21 trillion economy and that was just huge (vs only $1 trillion in 2008-09). Also, the post-financial-crisis stimulus stopped only by 2013. The ECONOMICS PROFESSION has a terrible record on diversity, and it has openly mocked/attacked related initiatives within its circles/websites. That is what was pointed out by Alice WU in 2017 and SAHM in 2020. Her post on it last year started out as a private note to a student under vicious attack, and when she circulated her note among colleagues and friends, they (including YELLEN and BERNANKE) encouraged her to make it public.
Pg 30: ECONOMY. Growth is slowing/STALLING – retail sales are falling; the UM consumer sentiment fell; inventories are rising (but from a low inventories/sales ratio, so not a concern yet); backlogs are rising (due to supply chain constraints). The FED is signaling tapering (watch the news from Fed annual conference at Jackson Hole, August 26-28). The 2021/H2 projections for economic growth are now in doubt. This may cool INFLATION, as the Fed has been saying. Rising Covid-19-Delta is also a wild card. (How is moderating inflation from slowing economy good?)
Pg 31: INCOME. mREITs with attractive yields include MFA, RWT (recently acquired CoreVest). (Caution: mREITs are highly leveraged portfolios of mortgages, so they are highly rate sensitive and may perform poorly with rising rates)
(EXTRAS from online Friday that didn’t make the weekend paper version)
None