Post by Admin/YBB on Apr 16, 2022 8:30:13 GMT -6
Pg 14-15.
REVIEW. Corporate INSIDERS were on the sidelines in 2022/Q1 – both buying and selling activities were low. However, there was more buying in selected home improvement and building supply sector, and more selling in oil/gas sector. Insiders’ automatic-sell-programs/plans also have low thresholds below which the selling is not triggered.
PREVIEW. By keeping things simple, Costco/COST is even challenging Amazon/AMZN. For fwd P/E, COST 46, AMZN 43 (and that includes Amazon web AWS); for P/EBITDA, COST 22, AMZN 16. Most of COST profits are from membership fees; membership growth is healthy and that just flows into its profits. Shrinkage from theft is only 0.10-0.15% (vs 3%+ for industry).
DATA THIS WEEK. Housing market index (declining due to higher mortgage rates) on MONDAY; housing starts (the highest since 06/2006) on TUESDAY; existing home sales (the lowest since 06/2020) on WEDNESDAY; (review those 3 mixed housing data again) LEI on THURSDAY; IHS Markit manufacturing PMI and services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Twitter2 (TWTR; in a rapid fire, Elon MUSK became a passive investor, an active investor, accepted offer to join the Board, declined to join the Board, made a take-it-or-leave-it cash offer (and the SEC has yet to catch up with Musk’s very late initial filing of position); TWTR rushed to adopt a poison pill to prevent hostile takeover; stock is trading well below Musk’s offer, so the market doesn’t believe that has a chance; suggestion here is for TWTR to sell to Musk arguing that TWTR is struggling, Musk may not do much harm and a better offer may not come (notably, TWTR has rejected past approaches by CRM and DIS); pg 18);
FedEx (FDX; yield 1.5%; fwd P/E 10; buybacks 3%; Founder and CEO Fred SMITH is retiring as CEO on June 1 and COO Raj SUBRAMANIUM will take over as CEO; new emphasis will be on profitability instead of revenue and volume growth, especially for FedEx Ground; investor day in late June; pg 19);
Selected retailers (DG; TGT, JWN, LOW + M, WMT, NKE, WSM; the 1st group is stronger post-pandemic after making structural changes during the pandemic, while the 2nd group has provided positive guidance; omnichannel/hybrid-physical-online models are catching on; while the pandemic “tide” lifted most retail “boats”, the tide is receding now and not all retailers will do well; headwinds include Fed tightening, inflation, margin pressures, supply-chain disruptions (some lack products but other have bulging inventories); may not be good idea to use retail XRT; pg 20)
Small-cap healthcare provider Progyny (PGNY; fwd P/S 3.7; 2019 IPO; sells plans/coverage for fertility treatments; 4 million members and growing; many employers are adding this coverage as traditional group health plans don’t include such coverage; hurt by pandemic; pg 22).
BEARISH. Tesla (TSLA; key-man risk has grown since Elon MUSK’s interest in Twitter3/TWTR; on the news, TSLA stock fell in market value by an amount close to the cash offer for TWTR; last year, Must sold $16 billion in TSLA stock to pay taxes; if he succeeds in buying TWTR (seems unlikely now), he may have to sell $43+ billion in TSLA stock to raise money for cash offer for TWTR, or he may borrow by putting TSLA stock as collateral, or some LBO financing (but that would/should have been disclosed); concern is that with Musk’s attention is already diverted on SpaceX, and TWTR would be yet another diversion; not an outright negative blurb (nor bullish) but it warns TSLA of bumpy ride ahead; pg 18).
(Unusual to have 3 stories related to Twitter with additional mentions elsewhere)
Pg 16: FOLLOW UP. AT&T/T finally closed on its spinoff-and-merger-combo of media Warner Bros-Discovery (WBD); T holders get 0.24 shares of WBD. Now T will be a pure-play telecom with focus on wireless and fiberoptic network and will have high capex for several years.; new dividend is set at 5.7%. As for media WBD, it will have high debt (net debt/EBITDA 4.5), high risks, but cheap valuation at EV/EBITDA 7 only.
Pg 31: Antivirals (from Pfizer, etc) will be important tools for fighting Covid-19. Several Covid-19 variants have evolved and those have spread rather quickly. We started out with 2-dose vaccines, then a booster (1st) was suggested, now another booster (2nd) is suggested, and later there may be more boosters (3rd, 4th,…). But vaccinations are not suitable for continuing/maintenance treatments. That is where antivirals will come in, and one could take them as need as soon as one feels Covid-19 symptoms.
Pg 32: Secure Act, 2019 made several favorable provisions for ANNUITIES within 401k/403b such as annuities within the framework of target-date funds (TDFs) (but the commercial movement on these has been slow). There are many types of annuities: Basic and cheap immediate-income annuities, fixed-annuities, variable-annuities, deferred-income annuities (buy now for income later), QLACs (from tax-deferred accounts), annuities with inflation riders and GMWB/GLWB riders (very expensive but limited flexibility for access to principal). Mentioned are sample products from AIG, AlliancBernstein, BlackRock, Brighthouse, Fidelity, Income America (supported by a consortium), J.P Morgan, Lincoln, Nationwide, State Street, TIAA. (In general, annuities are complex insurance products and more bells and whistles one gets, more one pays. Insurance companies can sell you almost any coverage for a price.)
Pg 34: FUNDS. Brian BEITNER (firm cofounder, retiring by yearend), Haicheng LI, Jesse FLORES, Nathaniel VELARDE of international large-cap growth CCWSX (ER 1.05%; Morningstar 4* and Bronze) look for high-quality companies with competitive edges and strong balance sheets. Top 10 holdings account for 40%. The biggest country weight is Canada (16.16%); and despite concerns, it has an overweight in China (8.58%).
Pg 36, TECH TRADER. Tech-trend guru Mary MEEKER has her own firm Bond Capital, 2019- ; she was formerly with Morgan Stanley and Kleiner Perkins. The Firm makes VENTURE CAPITAL investments in IT and consumer products and services in startups and early-stage companies (“Bond” in the name is alluding to bonding rather than bond as in fixed-income). The DIGITAL world is here. It progressed over decades from mainframe computers to PCs to Internet to mobile Internet to metaverse. Pandemic accelerated digital transformations. Blockchain is a foundational technology. Recently, too much money has been chasing too many new companies (private or public) and many won’t survive. They may have good ideas/concepts, but they need to quickly establish their market presence/dominance, or they will disappear. The easy monetary policy that fueled speculation in these will be gone soon. When interest rates are higher, investors become more rational. There is also high inflation, growing deficits, a sudden war in Europe, more global instability and unrest, and some recession signals are visible. But all these issues will pass and those who are innovators, flexible, adaptable will do fine.
Pg 37: INCOME INVESTING. Current rate environment is reviewed and then recommended are I-Bonds (current rate 7.12% heading to 9.62% on May 1?) and 6-mo and 12-mo T-Bills. (You should know that things are bad in fixed-income when these are suggested as the best options)
EXTRA. High dividend ETFs include utilities XLU, energy XLE, commodities GCC, MLP MLPA, diversified SCHD, VYM, DIV (global).
Pg 38: Jason De Sena TRENNERT, Cofounder of Strategas. He uses QUANTITATIVE analysis but supplements it by talking to lots of people – bartenders, taxi drivers, hotel clerks, local businessmen as he travels extensively. INFLATION is not the only problem, it is that the FED is suddenly rushing to fight it. Is there Fed put still in place? This high inflation is not peaking yet and will likely be sticky. There is near full employment and wages are rising. Rents are rising and they follow housing prices (inflation indexes use owners’ equivalent rent). Environmental policies and ESG will lead to higher costs and prices. So, there will be people for and against ESG (he is against). Ahead of Midterm elections, people will blame the party in power for their troubles and Democrats will lose ground. Chances of RECESSION in the US in 2023 have risen to 33%. Europe may be in recession this year. CHINA is uninvestible for long-term. The VIE structure of the US-listed Chinese ADRs don’t provide ownership or protections. He LIKES energy, materials, selected financials (regionals) and industrials (aerospace, defense, infrastructure). Firm has 2 new ETFs (01/2022- ), both still tiny: SAMT that rotates among 4 themes; SAGP that exploits global policy changes.
Pg 42: ECONOMY. Don’t believe that this is PEAK INFLATION. Recent PPI (wholesale) > CPI (consumer) is bad news for company profit MARGINS and EARNINGS for Q2 and all of 2022. As the consumer CPI typically lags the producer/wholesale PPI, the CPI may not have peaked. The core CPI and PPI exclude FOOD and ENERGY where inflation is very high due to WAR and supply-chain disruptions. Many small businesses cite inflation as their biggest problem, and most are raising their average prices. The NY Fed’s measure of inflation-expectations is at a record. Then there is HOUSING that is accounted in the CPI and PPI artificially since 1980s through owners’ rent-equivalents that lag housing prices by 12-18 months. If one uses the old pre-1980s CPI with actual housing prices and also eliminates some other “improvements/ refinements”, the old CPI would be +17.2% y-o-y. The creeping effects of commodity prices and owners’ rent-equivalents will keep inflation high for quite a while. In April, there will be a change in how the CPI includes new vehicle prices and that would boost the CPI more. Atlanta Fed’s “sticky” CPI is also rising. So, just like the old “transitory inflation”, this new “peak inflation” may turn out to be a false notion.
Pg 78: OTHER VOICES. Graham ALLISON, Harvard. ECONOMIC weight leads to new powers/clouts in the global arena. In just a few decades, CHINA has progressed from a poor trading partner to a trading peer with the US, and may even overtake the US in a decade. 130 countries now trade more with China than with the US. While China is reducing its dependence on imports, many countries now depend critically on Chinese imports, and China may use EXPORT CONTROLS as tools of its foreign policy. It has already tried that in limited but successful ways against Japan, S Korea, Lithuania, etc. These actions have had deterrent effects on other countries who are now careful not to offend or upset China (and no military is needed for this although Chinese military power is also rising). The US should realize that in this race, it may not be ahead for too long. (No suggestions are offered on what, if anything, can be done about this)
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Supplement 2022 TOP 100 FINANCIAL ADVISORS has soft features on how to pick a financial advisor; advisors serving the Silicon Valley; advisors for business owners; an institutional advisor(founder father, sons, others) with 10 family members; an advisor run by 2 best friends from teenage years. Then, there are listing of Top 100 Financial Advisors, Top 100 Private Wealth Management Teams, Top 100 Institutional Consulting Teams.
REVIEW. Corporate INSIDERS were on the sidelines in 2022/Q1 – both buying and selling activities were low. However, there was more buying in selected home improvement and building supply sector, and more selling in oil/gas sector. Insiders’ automatic-sell-programs/plans also have low thresholds below which the selling is not triggered.
PREVIEW. By keeping things simple, Costco/COST is even challenging Amazon/AMZN. For fwd P/E, COST 46, AMZN 43 (and that includes Amazon web AWS); for P/EBITDA, COST 22, AMZN 16. Most of COST profits are from membership fees; membership growth is healthy and that just flows into its profits. Shrinkage from theft is only 0.10-0.15% (vs 3%+ for industry).
DATA THIS WEEK. Housing market index (declining due to higher mortgage rates) on MONDAY; housing starts (the highest since 06/2006) on TUESDAY; existing home sales (the lowest since 06/2020) on WEDNESDAY; (review those 3 mixed housing data again) LEI on THURSDAY; IHS Markit manufacturing PMI and services PMI on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Twitter2 (TWTR; in a rapid fire, Elon MUSK became a passive investor, an active investor, accepted offer to join the Board, declined to join the Board, made a take-it-or-leave-it cash offer (and the SEC has yet to catch up with Musk’s very late initial filing of position); TWTR rushed to adopt a poison pill to prevent hostile takeover; stock is trading well below Musk’s offer, so the market doesn’t believe that has a chance; suggestion here is for TWTR to sell to Musk arguing that TWTR is struggling, Musk may not do much harm and a better offer may not come (notably, TWTR has rejected past approaches by CRM and DIS); pg 18);
FedEx (FDX; yield 1.5%; fwd P/E 10; buybacks 3%; Founder and CEO Fred SMITH is retiring as CEO on June 1 and COO Raj SUBRAMANIUM will take over as CEO; new emphasis will be on profitability instead of revenue and volume growth, especially for FedEx Ground; investor day in late June; pg 19);
Selected retailers (DG; TGT, JWN, LOW + M, WMT, NKE, WSM; the 1st group is stronger post-pandemic after making structural changes during the pandemic, while the 2nd group has provided positive guidance; omnichannel/hybrid-physical-online models are catching on; while the pandemic “tide” lifted most retail “boats”, the tide is receding now and not all retailers will do well; headwinds include Fed tightening, inflation, margin pressures, supply-chain disruptions (some lack products but other have bulging inventories); may not be good idea to use retail XRT; pg 20)
Small-cap healthcare provider Progyny (PGNY; fwd P/S 3.7; 2019 IPO; sells plans/coverage for fertility treatments; 4 million members and growing; many employers are adding this coverage as traditional group health plans don’t include such coverage; hurt by pandemic; pg 22).
BEARISH. Tesla (TSLA; key-man risk has grown since Elon MUSK’s interest in Twitter3/TWTR; on the news, TSLA stock fell in market value by an amount close to the cash offer for TWTR; last year, Must sold $16 billion in TSLA stock to pay taxes; if he succeeds in buying TWTR (seems unlikely now), he may have to sell $43+ billion in TSLA stock to raise money for cash offer for TWTR, or he may borrow by putting TSLA stock as collateral, or some LBO financing (but that would/should have been disclosed); concern is that with Musk’s attention is already diverted on SpaceX, and TWTR would be yet another diversion; not an outright negative blurb (nor bullish) but it warns TSLA of bumpy ride ahead; pg 18).
(Unusual to have 3 stories related to Twitter with additional mentions elsewhere)
Pg 16: FOLLOW UP. AT&T/T finally closed on its spinoff-and-merger-combo of media Warner Bros-Discovery (WBD); T holders get 0.24 shares of WBD. Now T will be a pure-play telecom with focus on wireless and fiberoptic network and will have high capex for several years.; new dividend is set at 5.7%. As for media WBD, it will have high debt (net debt/EBITDA 4.5), high risks, but cheap valuation at EV/EBITDA 7 only.
Pg 31: Antivirals (from Pfizer, etc) will be important tools for fighting Covid-19. Several Covid-19 variants have evolved and those have spread rather quickly. We started out with 2-dose vaccines, then a booster (1st) was suggested, now another booster (2nd) is suggested, and later there may be more boosters (3rd, 4th,…). But vaccinations are not suitable for continuing/maintenance treatments. That is where antivirals will come in, and one could take them as need as soon as one feels Covid-19 symptoms.
Pg 32: Secure Act, 2019 made several favorable provisions for ANNUITIES within 401k/403b such as annuities within the framework of target-date funds (TDFs) (but the commercial movement on these has been slow). There are many types of annuities: Basic and cheap immediate-income annuities, fixed-annuities, variable-annuities, deferred-income annuities (buy now for income later), QLACs (from tax-deferred accounts), annuities with inflation riders and GMWB/GLWB riders (very expensive but limited flexibility for access to principal). Mentioned are sample products from AIG, AlliancBernstein, BlackRock, Brighthouse, Fidelity, Income America (supported by a consortium), J.P Morgan, Lincoln, Nationwide, State Street, TIAA. (In general, annuities are complex insurance products and more bells and whistles one gets, more one pays. Insurance companies can sell you almost any coverage for a price.)
Pg 34: FUNDS. Brian BEITNER (firm cofounder, retiring by yearend), Haicheng LI, Jesse FLORES, Nathaniel VELARDE of international large-cap growth CCWSX (ER 1.05%; Morningstar 4* and Bronze) look for high-quality companies with competitive edges and strong balance sheets. Top 10 holdings account for 40%. The biggest country weight is Canada (16.16%); and despite concerns, it has an overweight in China (8.58%).
Pg 36, TECH TRADER. Tech-trend guru Mary MEEKER has her own firm Bond Capital, 2019- ; she was formerly with Morgan Stanley and Kleiner Perkins. The Firm makes VENTURE CAPITAL investments in IT and consumer products and services in startups and early-stage companies (“Bond” in the name is alluding to bonding rather than bond as in fixed-income). The DIGITAL world is here. It progressed over decades from mainframe computers to PCs to Internet to mobile Internet to metaverse. Pandemic accelerated digital transformations. Blockchain is a foundational technology. Recently, too much money has been chasing too many new companies (private or public) and many won’t survive. They may have good ideas/concepts, but they need to quickly establish their market presence/dominance, or they will disappear. The easy monetary policy that fueled speculation in these will be gone soon. When interest rates are higher, investors become more rational. There is also high inflation, growing deficits, a sudden war in Europe, more global instability and unrest, and some recession signals are visible. But all these issues will pass and those who are innovators, flexible, adaptable will do fine.
Pg 37: INCOME INVESTING. Current rate environment is reviewed and then recommended are I-Bonds (current rate 7.12% heading to 9.62% on May 1?) and 6-mo and 12-mo T-Bills. (You should know that things are bad in fixed-income when these are suggested as the best options)
EXTRA. High dividend ETFs include utilities XLU, energy XLE, commodities GCC, MLP MLPA, diversified SCHD, VYM, DIV (global).
Pg 38: Jason De Sena TRENNERT, Cofounder of Strategas. He uses QUANTITATIVE analysis but supplements it by talking to lots of people – bartenders, taxi drivers, hotel clerks, local businessmen as he travels extensively. INFLATION is not the only problem, it is that the FED is suddenly rushing to fight it. Is there Fed put still in place? This high inflation is not peaking yet and will likely be sticky. There is near full employment and wages are rising. Rents are rising and they follow housing prices (inflation indexes use owners’ equivalent rent). Environmental policies and ESG will lead to higher costs and prices. So, there will be people for and against ESG (he is against). Ahead of Midterm elections, people will blame the party in power for their troubles and Democrats will lose ground. Chances of RECESSION in the US in 2023 have risen to 33%. Europe may be in recession this year. CHINA is uninvestible for long-term. The VIE structure of the US-listed Chinese ADRs don’t provide ownership or protections. He LIKES energy, materials, selected financials (regionals) and industrials (aerospace, defense, infrastructure). Firm has 2 new ETFs (01/2022- ), both still tiny: SAMT that rotates among 4 themes; SAGP that exploits global policy changes.
Pg 42: ECONOMY. Don’t believe that this is PEAK INFLATION. Recent PPI (wholesale) > CPI (consumer) is bad news for company profit MARGINS and EARNINGS for Q2 and all of 2022. As the consumer CPI typically lags the producer/wholesale PPI, the CPI may not have peaked. The core CPI and PPI exclude FOOD and ENERGY where inflation is very high due to WAR and supply-chain disruptions. Many small businesses cite inflation as their biggest problem, and most are raising their average prices. The NY Fed’s measure of inflation-expectations is at a record. Then there is HOUSING that is accounted in the CPI and PPI artificially since 1980s through owners’ rent-equivalents that lag housing prices by 12-18 months. If one uses the old pre-1980s CPI with actual housing prices and also eliminates some other “improvements/ refinements”, the old CPI would be +17.2% y-o-y. The creeping effects of commodity prices and owners’ rent-equivalents will keep inflation high for quite a while. In April, there will be a change in how the CPI includes new vehicle prices and that would boost the CPI more. Atlanta Fed’s “sticky” CPI is also rising. So, just like the old “transitory inflation”, this new “peak inflation” may turn out to be a false notion.
Pg 78: OTHER VOICES. Graham ALLISON, Harvard. ECONOMIC weight leads to new powers/clouts in the global arena. In just a few decades, CHINA has progressed from a poor trading partner to a trading peer with the US, and may even overtake the US in a decade. 130 countries now trade more with China than with the US. While China is reducing its dependence on imports, many countries now depend critically on Chinese imports, and China may use EXPORT CONTROLS as tools of its foreign policy. It has already tried that in limited but successful ways against Japan, S Korea, Lithuania, etc. These actions have had deterrent effects on other countries who are now careful not to offend or upset China (and no military is needed for this although Chinese military power is also rising). The US should realize that in this race, it may not be ahead for too long. (No suggestions are offered on what, if anything, can be done about this)
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Supplement 2022 TOP 100 FINANCIAL ADVISORS has soft features on how to pick a financial advisor; advisors serving the Silicon Valley; advisors for business owners; an institutional advisor(founder father, sons, others) with 10 family members; an advisor run by 2 best friends from teenage years. Then, there are listing of Top 100 Financial Advisors, Top 100 Private Wealth Management Teams, Top 100 Institutional Consulting Teams.