Post by Admin/YBB on Sept 24, 2022 10:01:07 GMT -6
Pg 10-11.
REVIEW. It is said that ACTIVE fund managers can earn their keeps in difficult markets, but that isn’t panning out. 60% of active funds underperformed in 2022 vs 53% in 2021. Problem is that outperformance is difficult for liquid large-caps but is easier for illiquid small/mid-caps; a surprise was notable active underperformance for foreign funds.
PREVIEW. Amazon/AMZN has signed a deal with startup Infinium to produce 100-150 heavy-duty trucks that run on “electrofuels” (poor terminology for special synfuels that even has a Wiki entry). Electrofuels are synthetic fuels produced by using clean energy to produce hydrogen that is combined with carbon dioxide to produce synthetic diesel, gasoline and natural gas. The IC engine modifications required may be minimal. There are no estimates for commercial production schedule or costs for these electrofuels/synfuels.
DATA THIS WEEK. Chicago national activity index on MONDAY; new home sales, durable goods report, consumer confidence, home price index on TUESDAY; personal income and spending, UM sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Alzheimer’s treatments (ESALY, BIIB beyond flopped Aduhelm, LLY, RHHBY, pg 14);
Backup power generators Generac (GNRC; fwd P/E 13; also growing clean-energy; pg 15);
Ford (F; temporary selloff on warning about truck/SUV production due to supply issues; pg 24);
Small oil/gas producer with global footprint APA (yield 3%; fwd P/E 3.3; buybacks; owns Apache; deal with LNG to export natural gas to Europe and Asia; pg 25).
BEARISH. See other stories.
Pg 12: HY/junk yields (-12.6% YTD; average yield 8.8%, almost double from 01/2022; spreads 500+ bps) are attractive but beware of their risks (higher defaults and re-fi risks in recession, etc). A sign of strength is that almost 50%+ of the HY debt now is BB and only 10% is CCC; new issues have slowed down. Mentioned are OEFs INEAX, MDFIX, VWEHX; ETFs ANGL, HYG, JNK; CEFs HYT, JQC; also, several individual issues, leveraged-loans, busted-convertibles.
Pg 26: Paul SINGER’s (78) Elliott Management (AUM $56 billion; Co-CEO Jonathan POLLOCK) may be the last big activist remaining. The hedge fund is a multi-asset/strategy fund and activism is only a small part; $5 million minimum; performance has been so-so (but not all of its actions are public); following Elliott into a stock hasn’t worked well. Fund gets board representation and pushes for restructuring; may act friendly or hostile (it has resources to fight big companies, even governments such as Argentina); sometimes it does a buyout itself or in partnership with others. Recent interests include PYPL, CTXS, PINS, CAH, WDC, SU, SWCH, T; globally CNI, SWMAY, TOSYY, WTW.
Pg 28: FUNDS. Many mutual funds/OEFs are facing heavy REDEMPTIONS/OUTFLOWS and are forced to sell, and realize gains, on their long-held positions. Their investors would be shocked to receive large CG distributions this December despite the funds showing severe losses for 2022 (it won’t matter how long the fund owner held the fund). The ETFs don’t have this problem due to their special structure (basically, they can trade in-kind with authorized participants without any tax consequences). Mentioned are SHRAX (also, manager change), BGRFX, BPTRX, FKGRX, DFUSX, FDGRX, TWCUX, JHBCX and PEOPX (SP500 index), NINDX (LC index). (It is too early for funds to post estimates for 2022, but the article makes guesses based on funds’ potential CG exposures and reported outflows)
Pg 29: INCOME. Dividend stocks for inflationary times: PM, CVX, MMC, BDX, ELV, MSFT. Ideas are from managers HUBER of PRDGX and BARCLAY of LBSAX.
Pg 30, TECH TRADER. Chicken has gone Red – well, sort of. The ad-supported streaming micro-cap CSSE (Chicken Soup for the Soul Entertainment; 2017 IPO) has bought the DVD kiosk company Redbox (36,000 kiosks). CSSE has several ad-streaming brands – Crackle, PopcornFlix, etc. The idea here is to use Redbox cashflow to grow the streaming business and also do some cross-selling.
Pg 62: OTHER VOICES. Rick LEAR, own firm. BONDS have historically acted as portfolio ballasts/stabilizers due to their low or negative correlation with stocks. But the last few years under ZIRP have been different and that was quite clear in this year’s bond rout/crash. It may be easy to say that this was due to a black swan event for bonds, but the author points to a possible misunderstanding of bond risks (volatility), especially in using standard deviations (SDs). For investment-grade bonds, the SD is about 1/5 th that for stocks and that fact is used to develop static/strategic portfolio ALLOCATIONS. The problem in 2022 was that stocks had xSD moves but bonds had ySD moves, with y >> x. (I was with the author until this point but then he lost me with his perfect 20-20 hindsight(s). An obvious issue is to get some quantitative handle on multipliers x and y in advance, i.e., say, in 12/2021.). The author goes on to say that knowing what the FED was going to do (accelerated rate hikes and QT), the static/strategic portfolios should have adjusted suitably (i.e. tactical allocations) to become stock-heavy and bond-light in late-2021 or early-2022. Moreover, after Russia-Ukraine war late in 02/2022, the energy weight for stocks should have been increased.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
REVIEW. It is said that ACTIVE fund managers can earn their keeps in difficult markets, but that isn’t panning out. 60% of active funds underperformed in 2022 vs 53% in 2021. Problem is that outperformance is difficult for liquid large-caps but is easier for illiquid small/mid-caps; a surprise was notable active underperformance for foreign funds.
PREVIEW. Amazon/AMZN has signed a deal with startup Infinium to produce 100-150 heavy-duty trucks that run on “electrofuels” (poor terminology for special synfuels that even has a Wiki entry). Electrofuels are synthetic fuels produced by using clean energy to produce hydrogen that is combined with carbon dioxide to produce synthetic diesel, gasoline and natural gas. The IC engine modifications required may be minimal. There are no estimates for commercial production schedule or costs for these electrofuels/synfuels.
DATA THIS WEEK. Chicago national activity index on MONDAY; new home sales, durable goods report, consumer confidence, home price index on TUESDAY; personal income and spending, UM sentiment on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
BULLISH. Alzheimer’s treatments (ESALY, BIIB beyond flopped Aduhelm, LLY, RHHBY, pg 14);
Backup power generators Generac (GNRC; fwd P/E 13; also growing clean-energy; pg 15);
Ford (F; temporary selloff on warning about truck/SUV production due to supply issues; pg 24);
Small oil/gas producer with global footprint APA (yield 3%; fwd P/E 3.3; buybacks; owns Apache; deal with LNG to export natural gas to Europe and Asia; pg 25).
BEARISH. See other stories.
Pg 12: HY/junk yields (-12.6% YTD; average yield 8.8%, almost double from 01/2022; spreads 500+ bps) are attractive but beware of their risks (higher defaults and re-fi risks in recession, etc). A sign of strength is that almost 50%+ of the HY debt now is BB and only 10% is CCC; new issues have slowed down. Mentioned are OEFs INEAX, MDFIX, VWEHX; ETFs ANGL, HYG, JNK; CEFs HYT, JQC; also, several individual issues, leveraged-loans, busted-convertibles.
Pg 26: Paul SINGER’s (78) Elliott Management (AUM $56 billion; Co-CEO Jonathan POLLOCK) may be the last big activist remaining. The hedge fund is a multi-asset/strategy fund and activism is only a small part; $5 million minimum; performance has been so-so (but not all of its actions are public); following Elliott into a stock hasn’t worked well. Fund gets board representation and pushes for restructuring; may act friendly or hostile (it has resources to fight big companies, even governments such as Argentina); sometimes it does a buyout itself or in partnership with others. Recent interests include PYPL, CTXS, PINS, CAH, WDC, SU, SWCH, T; globally CNI, SWMAY, TOSYY, WTW.
Pg 28: FUNDS. Many mutual funds/OEFs are facing heavy REDEMPTIONS/OUTFLOWS and are forced to sell, and realize gains, on their long-held positions. Their investors would be shocked to receive large CG distributions this December despite the funds showing severe losses for 2022 (it won’t matter how long the fund owner held the fund). The ETFs don’t have this problem due to their special structure (basically, they can trade in-kind with authorized participants without any tax consequences). Mentioned are SHRAX (also, manager change), BGRFX, BPTRX, FKGRX, DFUSX, FDGRX, TWCUX, JHBCX and PEOPX (SP500 index), NINDX (LC index). (It is too early for funds to post estimates for 2022, but the article makes guesses based on funds’ potential CG exposures and reported outflows)
Pg 29: INCOME. Dividend stocks for inflationary times: PM, CVX, MMC, BDX, ELV, MSFT. Ideas are from managers HUBER of PRDGX and BARCLAY of LBSAX.
Pg 30, TECH TRADER. Chicken has gone Red – well, sort of. The ad-supported streaming micro-cap CSSE (Chicken Soup for the Soul Entertainment; 2017 IPO) has bought the DVD kiosk company Redbox (36,000 kiosks). CSSE has several ad-streaming brands – Crackle, PopcornFlix, etc. The idea here is to use Redbox cashflow to grow the streaming business and also do some cross-selling.
Pg 62: OTHER VOICES. Rick LEAR, own firm. BONDS have historically acted as portfolio ballasts/stabilizers due to their low or negative correlation with stocks. But the last few years under ZIRP have been different and that was quite clear in this year’s bond rout/crash. It may be easy to say that this was due to a black swan event for bonds, but the author points to a possible misunderstanding of bond risks (volatility), especially in using standard deviations (SDs). For investment-grade bonds, the SD is about 1/5 th that for stocks and that fact is used to develop static/strategic portfolio ALLOCATIONS. The problem in 2022 was that stocks had xSD moves but bonds had ySD moves, with y >> x. (I was with the author until this point but then he lost me with his perfect 20-20 hindsight(s). An obvious issue is to get some quantitative handle on multipliers x and y in advance, i.e., say, in 12/2021.). The author goes on to say that knowing what the FED was going to do (accelerated rate hikes and QT), the static/strategic portfolios should have adjusted suitably (i.e. tactical allocations) to become stock-heavy and bond-light in late-2021 or early-2022. Moreover, after Russia-Ukraine war late in 02/2022, the energy weight for stocks should have been increased.
(EXTRAS from online Friday that didn’t make the weekend paper version)
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).