Post by Admin/YBB on Apr 23, 2022 10:04:02 GMT -6
Pg 12-13.
REVIEW. The GOP wants to further relax rules for the IPOs that were previously relaxed under the Jobs Act, 2012. Some of the benefits (more IPOs, wider participation, etc) of the previous relaxation of IPO rules were only due to the bull market and that angle was missed by several studies. So, beware of further relaxation of IPO rules that may harm the IPO investors.
PREVIEW. Delta/DAL has tested SpaxeX Starlink Internet services for in-flight wi-fi. Gogo that sells in-flight connectivity now has a market-cap of $2.5 billion only. SpaceX market-cap may eventually be $40-130 billion (Barron’s has $100 million in some places, $100 billion in other places; where have the copy editors gone?)
DATA THIS WEEK. Consumer confidence, durable goods report, new home sales on TUESDAY; wholesale inventories on WEDNESDAY; Q1 GDP growth (+1.7% annualized) on THURSDAY; ISM Chicago PMI, personal income and expenditures, UM consumer sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. J.P. Morgan Chase (JPM; yield 3%; fwd P/E 11.8; P/tBV 1.9; lower buybacks; stock is down on earnings disappointments for 2 recent quarters due to higher spending and lower capital levels to gain market share and enter new business areas (digital bank in Europe, etc); investor day in late-May; cannot repeat flowing loan-loss reserves into earnings as it did last year; Jamie DIMON, 66, will be around as CEO and/or Chairman until 70+; pg 15);
Under Armour (UAA; fwd P/E 19.6; started buybacks; sales US 60% and growing rapidly in Asia-Pacific and elsewhere; underdog in athletic-apparel/footwear restructured during the pandemic and may rally sharply; industry headwinds – inflation, Covid-19, supply-chain disruptions; pg 17).
BEARISH. Nvidia (NVDA; fwd P/E 38; makes graphics chips; post-pandemic headwinds include slowing demand for gaming chips, rising chip inventories, weaker pricing for its chips (some a reaction to its aggressive price hikes/gouging during the pandemic), slowing demand (pandemic may have just pulled some demand forward), changes in crypto mining industry that will reduce the use of graphics chips; still high valuations when growth is slowing; pg 14).
Pg 18: BIG MONEY POLL. Done by mid-April. 112 responding money managers.
US Stock Valuations: 49% for fairly valued, 39% overvalued
SP500 Target for 2022YE: 4,127-4,792 (close 4,272 Friday)
US Equity Returns over 10 Years: 6-10% by 59%
Attractive US Assets: Equity by 59%
Best Global Market for 12 Months: US by 64%
Best Sectors: Energy by 34%, tech 16%, healthcare 15%
Worst Sectors: Utilities by 22%, consumer-discretionary 17%, tech 17% (note in both)
Best Market-Cap for 12 Months: Large-cap by 47%, mid-cap 33%
Growth vs Value: Value by 73%
Oil in 1 Yr: $101.30
Gold in 1 Yr: $2,001.13
US GDP for 2022: 3% by 38%, 4% by 22%, 2% by 20%
US CPI by 2022YE (y-o-y): 6% by 37%, 5% by 31%
Fed Funds by 2022YE: 2% by 31%, 1.5% by 18%, 2.25% by 16%, 1.75% by 14%
Grade for US Monetary Policy: C by 34%, B by 31%
Grade for US Fiscal Policy: C by 28%, F by 27%, D by 25%
Pg 28: The new MULTICANCER DNA blood screening test from Grail/Illumina/ILMN will provide early screening (the test is available for $949 under a special experimental testing program from Grail; cost not covered by insurance or Medicare; Barron’s paid for reporter ALPERT’s test who has personal and family history for cancer). This test is better for detecting late-stage (52%+ rate) than early-stage (only 28% rate) cancers and the detection sensitivity varies by cancers; negative tests don’t rule out cancers; positive tests are 99.5% correct (“specificity”). The FDA approval may be 1-2 years away. Competitors have more targeted approaches to early cancer detection (Cologuard/EXAS, GH, NTRA, Freenome (backed by RHHBY) etc). Wall Street has given up on biotechs since 02/2021.
Pg 31, FUNDS. ACTIVE-SHARE has become popular since 2009 introduction by CREMERS and a colleague. But higher fees by funds using active-shares have not been justified by their risk-adjusted performance (some just took higher risks). It may work better for large-cap funds than small- or mid- cap funds. High active-share doesn’t mean better manager skills. It may be useful for avoiding closet indexers that charge high fees; focused funds also have high active-shares but have higher volatility and inconsistent performance.
Pg 32: INCOME INVESTING. Be selective with high dividend stocks: Real estate SPG, IT IBM, healthcare GILD, telecom T, VZ; bank NYCB, retail FL, money transfer WU, consumers UL.
Pg 16: Stocks with dividend and dividend-growth should keep up with inflation: AVGO, CAT, CVS, FITB, HPQ, MRK; ETFs NOBL, VIG, DGRO, DIVZ (newer & tiny, 01/2021- ).
Pg 33: ECONOMY. GOLD may not be just for gold bugs anymore. Gold should catch up with the CRB index that has more than doubled post-pandemic. Conventional wisdom that higher RATES (especially the real rates) are not good for gold may be revised too. The bond market-based INFLATION-EXPECTATIONS (nominal Treasury yield minus TIPS yields) may be flawed with the current inflation so high, and the true real rate found as nominal Treasury yield minus the CPI (or the PPI or the PCE or any inflation XYZ) remains deeply negative. High inflation may not be slowing down anytime soon (forget the peak inflation). A panicky FED may crush the economy (and crash the stock market) and may then have to reverse (this comes under Fed policy errors). Sanctions on Russia that included freezing its foreign exchange reserves will cause global CENTRAL BANKS to boost their gold reserves (held locally, not at NYC or London) and that will fuel central bank demand for gold. Gold COINS are hot and there are strong inflows into gold-bullion ETFs (GLD, IAU, SGOL, etc). There is high correlation between CRYPTOS and highflying growth stocks and eventually some crypto money may also shift to gold. Gold fundamentals are getting better, and the current supply is below the 5-year average. Keep in mind that gold will not make you rich but may keep you rich. (Barron’s has had a soft spot for gold for a long time, but its past calls were not timely. Will it be different this time?)
Pg 34: James ANDERSON, Baillie Anderson (Retiring as Partner in April), former Barron’s Roundtable Member. It has been a tough 2022/Q1 but his growth style has been great during his 39 year career and he remains optimistic on transformative technologies (e.g. data + genomics in healthcare (ILMN, RXRX, Tempus, etc), synthetic biology, electrification, etc). Trick is to find a handful of companies in the new areas as many old and new companies will be left behind. Realize that transformative technologies are deflationary or disinflationary, so with high inflation now, other influences are dominating, and he is concerned about those. But one has to respect the market – e.g. both Tesla/TSLA (he thought MUSK had his hands full with Tesla and SpaceX and he is puzzled by this Twitter/TWTR thing that he sold long ago) and Moderna/MRNA have great futures ahead but the market is treating them quite differently. He likes BEZOS’/AMZN approach of going for 10% chances of making 100x than BUFFETT’s of never losing money.
Pg 70: OTHER VOICES. Christopher SMART, Barings Investment Institute (prior NEC, NSC, Treasury, Harvard, Pioneer Investments, etc). Theory was that economic cooperation and engagement will keep all players in line and at peace. And to use sanctions (threats or actual) to keep bad players in line. That carrot-and-stick approach worked with mixed results for China, Iran, S Africa. But it failed dramatically with PUTIN’s Russia, and the sudden and surprising Russia-Ukraine war is a clear demonstration of that failure. We are watching 2 large economies being destroyed as we try to figure something out. Lessons? Economic engagement may be a necessary but not sufficient condition for world peace. We need to rethink all this and find a new course forward.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
REVIEW. The GOP wants to further relax rules for the IPOs that were previously relaxed under the Jobs Act, 2012. Some of the benefits (more IPOs, wider participation, etc) of the previous relaxation of IPO rules were only due to the bull market and that angle was missed by several studies. So, beware of further relaxation of IPO rules that may harm the IPO investors.
PREVIEW. Delta/DAL has tested SpaxeX Starlink Internet services for in-flight wi-fi. Gogo that sells in-flight connectivity now has a market-cap of $2.5 billion only. SpaceX market-cap may eventually be $40-130 billion (Barron’s has $100 million in some places, $100 billion in other places; where have the copy editors gone?)
DATA THIS WEEK. Consumer confidence, durable goods report, new home sales on TUESDAY; wholesale inventories on WEDNESDAY; Q1 GDP growth (+1.7% annualized) on THURSDAY; ISM Chicago PMI, personal income and expenditures, UM consumer sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. J.P. Morgan Chase (JPM; yield 3%; fwd P/E 11.8; P/tBV 1.9; lower buybacks; stock is down on earnings disappointments for 2 recent quarters due to higher spending and lower capital levels to gain market share and enter new business areas (digital bank in Europe, etc); investor day in late-May; cannot repeat flowing loan-loss reserves into earnings as it did last year; Jamie DIMON, 66, will be around as CEO and/or Chairman until 70+; pg 15);
Under Armour (UAA; fwd P/E 19.6; started buybacks; sales US 60% and growing rapidly in Asia-Pacific and elsewhere; underdog in athletic-apparel/footwear restructured during the pandemic and may rally sharply; industry headwinds – inflation, Covid-19, supply-chain disruptions; pg 17).
BEARISH. Nvidia (NVDA; fwd P/E 38; makes graphics chips; post-pandemic headwinds include slowing demand for gaming chips, rising chip inventories, weaker pricing for its chips (some a reaction to its aggressive price hikes/gouging during the pandemic), slowing demand (pandemic may have just pulled some demand forward), changes in crypto mining industry that will reduce the use of graphics chips; still high valuations when growth is slowing; pg 14).
Pg 18: BIG MONEY POLL. Done by mid-April. 112 responding money managers.
US Stock Valuations: 49% for fairly valued, 39% overvalued
SP500 Target for 2022YE: 4,127-4,792 (close 4,272 Friday)
US Equity Returns over 10 Years: 6-10% by 59%
Attractive US Assets: Equity by 59%
Best Global Market for 12 Months: US by 64%
Best Sectors: Energy by 34%, tech 16%, healthcare 15%
Worst Sectors: Utilities by 22%, consumer-discretionary 17%, tech 17% (note in both)
Best Market-Cap for 12 Months: Large-cap by 47%, mid-cap 33%
Growth vs Value: Value by 73%
Oil in 1 Yr: $101.30
Gold in 1 Yr: $2,001.13
US GDP for 2022: 3% by 38%, 4% by 22%, 2% by 20%
US CPI by 2022YE (y-o-y): 6% by 37%, 5% by 31%
Fed Funds by 2022YE: 2% by 31%, 1.5% by 18%, 2.25% by 16%, 1.75% by 14%
Grade for US Monetary Policy: C by 34%, B by 31%
Grade for US Fiscal Policy: C by 28%, F by 27%, D by 25%
Pg 28: The new MULTICANCER DNA blood screening test from Grail/Illumina/ILMN will provide early screening (the test is available for $949 under a special experimental testing program from Grail; cost not covered by insurance or Medicare; Barron’s paid for reporter ALPERT’s test who has personal and family history for cancer). This test is better for detecting late-stage (52%+ rate) than early-stage (only 28% rate) cancers and the detection sensitivity varies by cancers; negative tests don’t rule out cancers; positive tests are 99.5% correct (“specificity”). The FDA approval may be 1-2 years away. Competitors have more targeted approaches to early cancer detection (Cologuard/EXAS, GH, NTRA, Freenome (backed by RHHBY) etc). Wall Street has given up on biotechs since 02/2021.
Pg 31, FUNDS. ACTIVE-SHARE has become popular since 2009 introduction by CREMERS and a colleague. But higher fees by funds using active-shares have not been justified by their risk-adjusted performance (some just took higher risks). It may work better for large-cap funds than small- or mid- cap funds. High active-share doesn’t mean better manager skills. It may be useful for avoiding closet indexers that charge high fees; focused funds also have high active-shares but have higher volatility and inconsistent performance.
Pg 32: INCOME INVESTING. Be selective with high dividend stocks: Real estate SPG, IT IBM, healthcare GILD, telecom T, VZ; bank NYCB, retail FL, money transfer WU, consumers UL.
Pg 16: Stocks with dividend and dividend-growth should keep up with inflation: AVGO, CAT, CVS, FITB, HPQ, MRK; ETFs NOBL, VIG, DGRO, DIVZ (newer & tiny, 01/2021- ).
Pg 33: ECONOMY. GOLD may not be just for gold bugs anymore. Gold should catch up with the CRB index that has more than doubled post-pandemic. Conventional wisdom that higher RATES (especially the real rates) are not good for gold may be revised too. The bond market-based INFLATION-EXPECTATIONS (nominal Treasury yield minus TIPS yields) may be flawed with the current inflation so high, and the true real rate found as nominal Treasury yield minus the CPI (or the PPI or the PCE or any inflation XYZ) remains deeply negative. High inflation may not be slowing down anytime soon (forget the peak inflation). A panicky FED may crush the economy (and crash the stock market) and may then have to reverse (this comes under Fed policy errors). Sanctions on Russia that included freezing its foreign exchange reserves will cause global CENTRAL BANKS to boost their gold reserves (held locally, not at NYC or London) and that will fuel central bank demand for gold. Gold COINS are hot and there are strong inflows into gold-bullion ETFs (GLD, IAU, SGOL, etc). There is high correlation between CRYPTOS and highflying growth stocks and eventually some crypto money may also shift to gold. Gold fundamentals are getting better, and the current supply is below the 5-year average. Keep in mind that gold will not make you rich but may keep you rich. (Barron’s has had a soft spot for gold for a long time, but its past calls were not timely. Will it be different this time?)
Pg 34: James ANDERSON, Baillie Anderson (Retiring as Partner in April), former Barron’s Roundtable Member. It has been a tough 2022/Q1 but his growth style has been great during his 39 year career and he remains optimistic on transformative technologies (e.g. data + genomics in healthcare (ILMN, RXRX, Tempus, etc), synthetic biology, electrification, etc). Trick is to find a handful of companies in the new areas as many old and new companies will be left behind. Realize that transformative technologies are deflationary or disinflationary, so with high inflation now, other influences are dominating, and he is concerned about those. But one has to respect the market – e.g. both Tesla/TSLA (he thought MUSK had his hands full with Tesla and SpaceX and he is puzzled by this Twitter/TWTR thing that he sold long ago) and Moderna/MRNA have great futures ahead but the market is treating them quite differently. He likes BEZOS’/AMZN approach of going for 10% chances of making 100x than BUFFETT’s of never losing money.
Pg 70: OTHER VOICES. Christopher SMART, Barings Investment Institute (prior NEC, NSC, Treasury, Harvard, Pioneer Investments, etc). Theory was that economic cooperation and engagement will keep all players in line and at peace. And to use sanctions (threats or actual) to keep bad players in line. That carrot-and-stick approach worked with mixed results for China, Iran, S Africa. But it failed dramatically with PUTIN’s Russia, and the sudden and surprising Russia-Ukraine war is a clear demonstration of that failure. We are watching 2 large economies being destroyed as we try to figure something out. Lessons? Economic engagement may be a necessary but not sufficient condition for world peace. We need to rethink all this and find a new course forward.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None