Post by Admin/YBB on May 14, 2022 9:20:57 GMT -6
Pg 12-13.
We finally have the new full FED with COOK, JEFFERSEN, POWELL confirmed this week (BRAINARD was confirmed previously).
REVIEW. BIOTECH stocks are in a bear market (XBI -39% YTD, -61% since 02/2021). 120+ biotech have market value less than their net cash on hand. Only a handful of biotech are doing well or OK – AMGN, VRTX, IONS, ALKS, EXEL, MIRM, ALBO, VIVO, IRWD, etc.
PREVIEW. Coinbase/COIN had a poor earnings report. It also disclosed risks for client assets in case of bankruptcy – a new boilerplate disclosure now required by the SEC. (This was much ado about nothing as banks without FDIC insurance and brokerages without SIPC insurance would have similar risks. The crypto industry is evolving, and regulatory framework is still being developed.)
DATA THIS WEEK. NY Fed Empire State manufacturing survey on MONDAY; housing market index, retail sales, capacity utilization, industrial production, business inventories on TUESDAY; housing starts on WEDNESDAY; existing home sales, LEI on THURSDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Citizens Financial (CFG; fwd P/E 8.3; P/tBV 1.3; growing fast with acquisitions into a mini-JPM; competitors include FITB, HBAN, etc; history goes back to 1871 but became public again 8 years ago; pg 25).
BEARISH.
Pg 14: FOLLOW UP. Elon MUSK’s hesitancy on Twitter/TWTR may be just a negotiating ploy for a lower price (to $44 from $54.20?). The problem of fake/spam accounts or bots that he cited isn’t a new or unknown issue and should have been dealt with in his due diligence. If he just walks away, he may have huge legal liabilities beyond the $1 billion breakup fee. TWTR was trading at huge 24.5% discount from the cash deal price indicating a high deal risk. The SEC is investigating his delay in initial filing of TWTR position.
Pg 15: A BEAR MARKET PRIMER. Bear markets are normal part of market cycle. Stay calm, start shopping, stick with quality stocks (earnings, cash flows, growth; avoid cash-burning former highflyers and meme stocks; be wary of cryptos), think long-term (10-yr inflation-adjusted stock returns have been positive 89% of the time), further downside may be limited (SP500 fwd P/E has already declined from 21 to 17; 15 is the long-term average, and it can undershoot), international and EM stocks are additionally suffering from very strong dollar (20-yr high), consider trashed bonds, have suitable allocations (60-40 has been declared dead again and again; adjust it for personal needs).
Pg 18: So-called STABLECOIN was not stable at all (all private guarantees have limits). Asset-backed stablecoins include Tether/USDT, USDC (backed by Circle that is planning to public via SPAC merger), etc; algorithmic stablecoin include TerraUSD (the mechanism involved LUNA), etc. There was a CRYPTO-CRASH but the contagion has been limited to crypto universe so far. This episode may hasten crypto REGULATIONS and may accelerate the development of digital-dollar (a CBDC similar to digital-yuan, etc).
Pg 26: FUNDS. Comanagers Thomas SHRAGER and Robert WYCKOFF of international value TBGVX (ER 1.37%) don’t rely on old value metrics such as book value, but on the newer EV/EBIT (more relevant for buying whole companies), etc. The current tectonic shift to value started in 2020/Q4. Higher rates also favor value vs growth. Fund holds a mix of high-quality steady companies, cyclicals and deep-value; Europe accounts for 42%.
Pg 28, TECH TRADER. There are some good tech bargains – data storage WDC (fwd P/E 6; activist Elliot Management is involved), memory chips MU (fwd P/E 5). Both have transformed themselves in respective consolidating industries.
Pg 30: INCOME INVESTING. Apple/AAPL should increase its dividend (current 0.6%; payout ratio 16% only) instead of buybacks (3.56%). Its fwd P/E is 22.3 and it has increased quarterly dividend from 22c to 23c only.
NY Community Bancorp/NTCB has safe dividend of 7%; payout ratio is 57%. It is acquiring FBC.
The ENERGY sector dividends are going up (recent, PSX, EOG). Energy companies are using dividend increases, special dividends, variable dividends.
Pg 31, ECONOMY. The peak for aggressive FED talk may be past as investors and markets seem scared enough. The Fed-PUT may exist but at a lower trigger point and that not from stocks but the credit markets. The CCC-rated bond spreads have widened sharply to 10% and the Fed may become concerned when those exceed 15%; start of the Fed QT may accelerate that. That would be a huge reversal from the recent Fed tough talk. Reported CPI and core CPI have been high from service sector inflation (sticky), not from prices of goods due to supply-chain disruptions; the housing effect via rent-equivalents hasn’t fully kinked in yet. The PPI (wholesale) was even worse. But things weren’t as bad for PCE and core PCE, measures favored by the Fed. These may give Powell a cover to flip (again).
Pg 32: Jean HYNES, CEO (07/2021- ) of Wellington Management and Manager of VG Healthcare VGHCX (active). VGHCX has exposure in biopharma (overweight), healthcare services (overweight), medical technology (underweight as many stocks have runup). Biotech (IBB) have been hurt by speculation, IPOs, difficult clinical testing and FDA approval process, and higher interest rates; many biotech are trading below their cash levels and their further downside may be limited. Megatrends include revolution in biology (ILMN, MRNA, PFE, AZN, TMO, DHR, etc) and healthcare digitization (UNH, ANTM, etc). We may be better prepared for the next pandemic. AI will have a huge impact in future. Unfortunately, many diseases have not received much attention or investments. (Nothing about Wellington Management)
Pg 62: OTHER VOICES. Yanzhong HUANG, Council on Foreign Relations (CFR) and Seton Hall U. CHINA’s ZERO-COVID policy is now backfiring. Social-media is full of horror stories from new lockdowns (partial or full) in Shenzhen, Shanghai, Beijing, Baotou, Zhengzhou and elsewhere in China. There are mass testing and several new makeshift Covid hospitals. Frequent business DISRUPTIONS will continue long-term and will aggravate global SUPPLY-CHAIN issues. Foreign business EXODUS from China will continue.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. BoA says that allocation/balanced 60-40 portfolios are headed for their worst year ever on inflation-adjusted basis (details about its assumptions are not provided as the YTD declines are in low/mid-teens now).
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
We finally have the new full FED with COOK, JEFFERSEN, POWELL confirmed this week (BRAINARD was confirmed previously).
REVIEW. BIOTECH stocks are in a bear market (XBI -39% YTD, -61% since 02/2021). 120+ biotech have market value less than their net cash on hand. Only a handful of biotech are doing well or OK – AMGN, VRTX, IONS, ALKS, EXEL, MIRM, ALBO, VIVO, IRWD, etc.
PREVIEW. Coinbase/COIN had a poor earnings report. It also disclosed risks for client assets in case of bankruptcy – a new boilerplate disclosure now required by the SEC. (This was much ado about nothing as banks without FDIC insurance and brokerages without SIPC insurance would have similar risks. The crypto industry is evolving, and regulatory framework is still being developed.)
DATA THIS WEEK. NY Fed Empire State manufacturing survey on MONDAY; housing market index, retail sales, capacity utilization, industrial production, business inventories on TUESDAY; housing starts on WEDNESDAY; existing home sales, LEI on THURSDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Citizens Financial (CFG; fwd P/E 8.3; P/tBV 1.3; growing fast with acquisitions into a mini-JPM; competitors include FITB, HBAN, etc; history goes back to 1871 but became public again 8 years ago; pg 25).
BEARISH.
Pg 14: FOLLOW UP. Elon MUSK’s hesitancy on Twitter/TWTR may be just a negotiating ploy for a lower price (to $44 from $54.20?). The problem of fake/spam accounts or bots that he cited isn’t a new or unknown issue and should have been dealt with in his due diligence. If he just walks away, he may have huge legal liabilities beyond the $1 billion breakup fee. TWTR was trading at huge 24.5% discount from the cash deal price indicating a high deal risk. The SEC is investigating his delay in initial filing of TWTR position.
Pg 15: A BEAR MARKET PRIMER. Bear markets are normal part of market cycle. Stay calm, start shopping, stick with quality stocks (earnings, cash flows, growth; avoid cash-burning former highflyers and meme stocks; be wary of cryptos), think long-term (10-yr inflation-adjusted stock returns have been positive 89% of the time), further downside may be limited (SP500 fwd P/E has already declined from 21 to 17; 15 is the long-term average, and it can undershoot), international and EM stocks are additionally suffering from very strong dollar (20-yr high), consider trashed bonds, have suitable allocations (60-40 has been declared dead again and again; adjust it for personal needs).
Pg 18: So-called STABLECOIN was not stable at all (all private guarantees have limits). Asset-backed stablecoins include Tether/USDT, USDC (backed by Circle that is planning to public via SPAC merger), etc; algorithmic stablecoin include TerraUSD (the mechanism involved LUNA), etc. There was a CRYPTO-CRASH but the contagion has been limited to crypto universe so far. This episode may hasten crypto REGULATIONS and may accelerate the development of digital-dollar (a CBDC similar to digital-yuan, etc).
Pg 26: FUNDS. Comanagers Thomas SHRAGER and Robert WYCKOFF of international value TBGVX (ER 1.37%) don’t rely on old value metrics such as book value, but on the newer EV/EBIT (more relevant for buying whole companies), etc. The current tectonic shift to value started in 2020/Q4. Higher rates also favor value vs growth. Fund holds a mix of high-quality steady companies, cyclicals and deep-value; Europe accounts for 42%.
Pg 28, TECH TRADER. There are some good tech bargains – data storage WDC (fwd P/E 6; activist Elliot Management is involved), memory chips MU (fwd P/E 5). Both have transformed themselves in respective consolidating industries.
Pg 30: INCOME INVESTING. Apple/AAPL should increase its dividend (current 0.6%; payout ratio 16% only) instead of buybacks (3.56%). Its fwd P/E is 22.3 and it has increased quarterly dividend from 22c to 23c only.
NY Community Bancorp/NTCB has safe dividend of 7%; payout ratio is 57%. It is acquiring FBC.
The ENERGY sector dividends are going up (recent, PSX, EOG). Energy companies are using dividend increases, special dividends, variable dividends.
Pg 31, ECONOMY. The peak for aggressive FED talk may be past as investors and markets seem scared enough. The Fed-PUT may exist but at a lower trigger point and that not from stocks but the credit markets. The CCC-rated bond spreads have widened sharply to 10% and the Fed may become concerned when those exceed 15%; start of the Fed QT may accelerate that. That would be a huge reversal from the recent Fed tough talk. Reported CPI and core CPI have been high from service sector inflation (sticky), not from prices of goods due to supply-chain disruptions; the housing effect via rent-equivalents hasn’t fully kinked in yet. The PPI (wholesale) was even worse. But things weren’t as bad for PCE and core PCE, measures favored by the Fed. These may give Powell a cover to flip (again).
Pg 32: Jean HYNES, CEO (07/2021- ) of Wellington Management and Manager of VG Healthcare VGHCX (active). VGHCX has exposure in biopharma (overweight), healthcare services (overweight), medical technology (underweight as many stocks have runup). Biotech (IBB) have been hurt by speculation, IPOs, difficult clinical testing and FDA approval process, and higher interest rates; many biotech are trading below their cash levels and their further downside may be limited. Megatrends include revolution in biology (ILMN, MRNA, PFE, AZN, TMO, DHR, etc) and healthcare digitization (UNH, ANTM, etc). We may be better prepared for the next pandemic. AI will have a huge impact in future. Unfortunately, many diseases have not received much attention or investments. (Nothing about Wellington Management)
Pg 62: OTHER VOICES. Yanzhong HUANG, Council on Foreign Relations (CFR) and Seton Hall U. CHINA’s ZERO-COVID policy is now backfiring. Social-media is full of horror stories from new lockdowns (partial or full) in Shenzhen, Shanghai, Beijing, Baotou, Zhengzhou and elsewhere in China. There are mass testing and several new makeshift Covid hospitals. Frequent business DISRUPTIONS will continue long-term and will aggravate global SUPPLY-CHAIN issues. Foreign business EXODUS from China will continue.
(EXTRAS from online Friday that didn’t make the weekend paper version)
FUNDS. BoA says that allocation/balanced 60-40 portfolios are headed for their worst year ever on inflation-adjusted basis (details about its assumptions are not provided as the YTD declines are in low/mid-teens now).
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).