Post by Admin/YBB on Aug 26, 2023 7:35:22 GMT -6
Pg 8. PREVIEW & REVIEW (consolidated). Smaller M&A at modest premium are surging in the energy sector (recent PR + ESTE). Potential takeover targets include CPE, MTDR, PR, SM, VTLE.
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Home price index, consumer confidence, JOLTS report on TUESDAY; personal income and PCE on THURSDAY; construction spending, jobs report (+172,000 to +187,000), unemployment rate (3.5%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Monster Beverage (MNST; fwd P/E 33.7; PEG 1.8; high margins; lifestyle marketing; it held prices during/after the pandemic, but may raise them now; the best US stock annual return of +58% (and +31% over 25 years, also the best); its energy-drinks are popular with teens and younger crowd; introduced zero-sugar energy-drinks and also combining energy-drinks with alcohol to target women (?; Beast Unleashed); bought CANarchy Craft Brewery and Bang Energy; ad deals with sports; growing in Lat Am, Europe, Middle East, Africa; pg 9);
SharkNinja (SN; fwd P/E 11.6; July IPO was as spinoff from HK JS Global Lifestyle (still owns 57%); Shark brands include vacuum cleaners, hairdryers ($100-$300), etc; Ninja brand includes kitchen appliances (blenders, air fryers, grills), coffee makers, ice cream makers ($199), carbonated drinks makers ($179); new products are launched with speed-to-market and strong marketing campaigns on TV, social-media; risks include Asian manufacturing; pg 10).
BEARISH.
Pg 12: US reshoring will be expensive and will keep inflation higher. These include manufacturing in the US, Canada and Mexico (i.e. in and around the US). The US Government has incentives (CHIPS, IIJ, IRA Acts) via tax credits, subsidies, lower tariff in strategic industries (semis, EVs, infrastructure, manufacturing, clean energy, energy transitions, etc). Think of this government spending as insurance that would reduce big downside economic risks but at some extra costs. Supply-chain disruptions during the pandemic and worsening US-China relations are driving this US effort. The foreigners can also tap into incentives if they build local/regional facilities. The US has had programs for defense, agriculture, banks, and now for the long-neglected industrial sector. China still outspends the US by 10x-20x for “industrial policy”, so the results in the US will take some time. Many of these jobs will be high-paying jobs that won’t require 4-yr college degrees (so, the community college programs will benefit). Mentioned are ETN, SIEGY, EMR, CRH, TT, ROK, FTV; GM, F, STLA, HMC, Hyundai/HYMTF, BMWYY; TSM, SBGSY
Pg 18, Cover Story – More. Why are millions of Americans moving to RISKY AREAS? The combo of affordable prices, booming local economies, experiencing nature (beaches, coastal/lakeshore living, outdoors), low (state) taxes come with the risks of natural disasters (weather, flooding, extreme heat, wildfires, earthquakes, rising sea levels, climate changes). New people soon learn about sandbagging, boarding up windows, heatstroke, etc. Some living in harsh-Winter areas (Midwest, North, Northeast) have second homes in warmer and sunnier areas. Unfortunately, many are just rebuilding in the disaster-prone areas (but then complain about high insurance, or lack of it). For many homebuyers, these risks are secondary even if they are aware of them (many aren’t even aware). The federal and local governments have small programs to relocate people away from disaster-prone areas, but more needs to be done (including preventing people from resettling in disaster areas in the first place). Many get used to extreme heat (104+ degF) with 24/7 air conditioning, but such areas may also have water problems (AZ, TX, etc).
Pg 20, FOLLOW UP. Lowe’s (LOW; yield 1.94%; fwd P/E 16.5; buybacks) is expanding its contractors’ business where HD dominates. A repeat recommendation after 01/25/23.
Pg 21, ECONOMY. POWELL’s 15-min speech at Jackson Hole was short and vague. He said to expect more of the same. The core PCE is still far from +2% average inflation target. Housing inflation is declining. There may be 0 or 1 or 2 hikes in the future. So, there was nothing new but that was intentional.
Pg 22, FUNDS. Some funds are using AI for portfolio management – there are 11 AI-based ETFs such as DIP, QRFT, etc. But it is unlikely that AI will replace the managers of active or passive funds, and instead, may become another tool in managers’ toolbox. (By @lewisbraham at MFO)
EXTRA. FUNDS. BlackRock/BLK has supported only a few ESG proposals this year. It said that many were overreaching or redundant. In reality, FINK/BLK has gone quiet from being overly pushy on ESG. BLK was starting to get backlash in its businesses. The new trend is to follow ESG quietly.
Pg 23, INCOME. CREDIT QUALITY issues may show up first in low-rated leveraged FR/BL, then in HY (spreads now are too low), then in investment-grade, and may finally spillover into the equity market. Investors and savers are enjoying high interest RATES, but the flip side for the borrowers isn’t pretty. Many small/medium-size companies that rely on low-rates are facing high variable rates (the traditional fixed-rate bond market is out of their reach). BANKRUPTCY filings are rising, 400 YTD (!), such as Party City, Bed Bath & Beyond, Yellow. It will take just one major, well-known company bankruptcy to change the sentiment. DEFAULT rate for low-rated debt has risen to 3.8% (to 5.8% in 2024/Q1?; even that is low for recessions). But it’s early in the credit cycle and problems may surface in 2024-25. The FED may still raise rates and will keep them higher for longer. Don’t chase returns, be cautious and take some chips off the table. (There are now also investment-grade FR and top-quality Treasury FRNs).
Pg 24, TECH TRADER. Nvidia/NVDA had a blockbuster Q2 report. Its graphics-chips (GPU) and AI-chips are benefiting from the generative AI frenzy. But it is unlikely that NVDA will be doubling its revenues year after year, or that its data center revenues will be doubling quarter after quarter (it was an amazing Q2). Nvidia’s growth now is coming at the expense of other chipmakers. The upcoming Arm Holdings IPO by SoftBank/SFTBY was another significant news. Chip designer Arm may become a strong competitor for NVDA, and a successful Arm IPO will bring a flood of AI and chips IPOs. But for now, NVDA rules.
Pg 26, FUNDS. Marty FLANAGAN, Outgoing CEO, Invesco/IVZ; Trustee SMU; Chairman, Engage Capital. He is stepping down as CEO of IVZ but will continue as an Advisor until 2024. The new CEO and President is Andrew SCHLOSSBERG. During Flanagan’s tenure, IVZ grew into AUM $1.54 trillion powerhouse. He expanded hugely into ETFs (PowerShares, 2006) and Asia (a joint-venture in China). He thinks that the US and China will find some common grounds on business. The recent US investment bans in China were defined quite narrowly; the Secretaries of State BLINKEN and Treasury YELLEN have visited China – these are positive signs despite some tough talk. The fund industry trend towards lower fees has benefitted retail investors. ACTIVE ETFs are a natural development. Key for ETFs is marketing and distribution (an interesting insight into exchange traded products). Interest rates have normalized and fixed-income has become attractive in a very long time. Technological changes happen in stair-steps, and we are seeing one in AI and generative AI.
Pg 54, OTHER VOICES. Eugene STEUERLE, Urban Institute (DC think tank) and Urban-Brookings Tax Policy Center. Interest RATES are at 16-yr high, and they will affect people, businesses and the government. The impact on the government will be mixed – increases in deficits and payouts, but reduction in the value of outstanding debt. Savers will benefit from inflation and higher rates, but lenders will see lesser values for their loans; those on fixed income will also suffer. With the end of the cheap money era, hopefully, the allocation decisions will become more rational. Keep in mind the real rates (TIPS rates) vs nominal rates (T-Bills/Notes/Bonds); positive real rates, as now, are restrictive for the economy. There will also be a reckoning for the government when its debt-servicing costs will keep rising.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
DATA THIS WEEK (seriously shrunk but supplemented from the link below). Home price index, consumer confidence, JOLTS report on TUESDAY; personal income and PCE on THURSDAY; construction spending, jobs report (+172,000 to +187,000), unemployment rate (3.5%) on FRIDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Monster Beverage (MNST; fwd P/E 33.7; PEG 1.8; high margins; lifestyle marketing; it held prices during/after the pandemic, but may raise them now; the best US stock annual return of +58% (and +31% over 25 years, also the best); its energy-drinks are popular with teens and younger crowd; introduced zero-sugar energy-drinks and also combining energy-drinks with alcohol to target women (?; Beast Unleashed); bought CANarchy Craft Brewery and Bang Energy; ad deals with sports; growing in Lat Am, Europe, Middle East, Africa; pg 9);
SharkNinja (SN; fwd P/E 11.6; July IPO was as spinoff from HK JS Global Lifestyle (still owns 57%); Shark brands include vacuum cleaners, hairdryers ($100-$300), etc; Ninja brand includes kitchen appliances (blenders, air fryers, grills), coffee makers, ice cream makers ($199), carbonated drinks makers ($179); new products are launched with speed-to-market and strong marketing campaigns on TV, social-media; risks include Asian manufacturing; pg 10).
BEARISH.
Pg 12: US reshoring will be expensive and will keep inflation higher. These include manufacturing in the US, Canada and Mexico (i.e. in and around the US). The US Government has incentives (CHIPS, IIJ, IRA Acts) via tax credits, subsidies, lower tariff in strategic industries (semis, EVs, infrastructure, manufacturing, clean energy, energy transitions, etc). Think of this government spending as insurance that would reduce big downside economic risks but at some extra costs. Supply-chain disruptions during the pandemic and worsening US-China relations are driving this US effort. The foreigners can also tap into incentives if they build local/regional facilities. The US has had programs for defense, agriculture, banks, and now for the long-neglected industrial sector. China still outspends the US by 10x-20x for “industrial policy”, so the results in the US will take some time. Many of these jobs will be high-paying jobs that won’t require 4-yr college degrees (so, the community college programs will benefit). Mentioned are ETN, SIEGY, EMR, CRH, TT, ROK, FTV; GM, F, STLA, HMC, Hyundai/HYMTF, BMWYY; TSM, SBGSY
Pg 18, Cover Story – More. Why are millions of Americans moving to RISKY AREAS? The combo of affordable prices, booming local economies, experiencing nature (beaches, coastal/lakeshore living, outdoors), low (state) taxes come with the risks of natural disasters (weather, flooding, extreme heat, wildfires, earthquakes, rising sea levels, climate changes). New people soon learn about sandbagging, boarding up windows, heatstroke, etc. Some living in harsh-Winter areas (Midwest, North, Northeast) have second homes in warmer and sunnier areas. Unfortunately, many are just rebuilding in the disaster-prone areas (but then complain about high insurance, or lack of it). For many homebuyers, these risks are secondary even if they are aware of them (many aren’t even aware). The federal and local governments have small programs to relocate people away from disaster-prone areas, but more needs to be done (including preventing people from resettling in disaster areas in the first place). Many get used to extreme heat (104+ degF) with 24/7 air conditioning, but such areas may also have water problems (AZ, TX, etc).
Pg 20, FOLLOW UP. Lowe’s (LOW; yield 1.94%; fwd P/E 16.5; buybacks) is expanding its contractors’ business where HD dominates. A repeat recommendation after 01/25/23.
Pg 21, ECONOMY. POWELL’s 15-min speech at Jackson Hole was short and vague. He said to expect more of the same. The core PCE is still far from +2% average inflation target. Housing inflation is declining. There may be 0 or 1 or 2 hikes in the future. So, there was nothing new but that was intentional.
Pg 22, FUNDS. Some funds are using AI for portfolio management – there are 11 AI-based ETFs such as DIP, QRFT, etc. But it is unlikely that AI will replace the managers of active or passive funds, and instead, may become another tool in managers’ toolbox. (By @lewisbraham at MFO)
EXTRA. FUNDS. BlackRock/BLK has supported only a few ESG proposals this year. It said that many were overreaching or redundant. In reality, FINK/BLK has gone quiet from being overly pushy on ESG. BLK was starting to get backlash in its businesses. The new trend is to follow ESG quietly.
Pg 23, INCOME. CREDIT QUALITY issues may show up first in low-rated leveraged FR/BL, then in HY (spreads now are too low), then in investment-grade, and may finally spillover into the equity market. Investors and savers are enjoying high interest RATES, but the flip side for the borrowers isn’t pretty. Many small/medium-size companies that rely on low-rates are facing high variable rates (the traditional fixed-rate bond market is out of their reach). BANKRUPTCY filings are rising, 400 YTD (!), such as Party City, Bed Bath & Beyond, Yellow. It will take just one major, well-known company bankruptcy to change the sentiment. DEFAULT rate for low-rated debt has risen to 3.8% (to 5.8% in 2024/Q1?; even that is low for recessions). But it’s early in the credit cycle and problems may surface in 2024-25. The FED may still raise rates and will keep them higher for longer. Don’t chase returns, be cautious and take some chips off the table. (There are now also investment-grade FR and top-quality Treasury FRNs).
Pg 24, TECH TRADER. Nvidia/NVDA had a blockbuster Q2 report. Its graphics-chips (GPU) and AI-chips are benefiting from the generative AI frenzy. But it is unlikely that NVDA will be doubling its revenues year after year, or that its data center revenues will be doubling quarter after quarter (it was an amazing Q2). Nvidia’s growth now is coming at the expense of other chipmakers. The upcoming Arm Holdings IPO by SoftBank/SFTBY was another significant news. Chip designer Arm may become a strong competitor for NVDA, and a successful Arm IPO will bring a flood of AI and chips IPOs. But for now, NVDA rules.
Pg 26, FUNDS. Marty FLANAGAN, Outgoing CEO, Invesco/IVZ; Trustee SMU; Chairman, Engage Capital. He is stepping down as CEO of IVZ but will continue as an Advisor until 2024. The new CEO and President is Andrew SCHLOSSBERG. During Flanagan’s tenure, IVZ grew into AUM $1.54 trillion powerhouse. He expanded hugely into ETFs (PowerShares, 2006) and Asia (a joint-venture in China). He thinks that the US and China will find some common grounds on business. The recent US investment bans in China were defined quite narrowly; the Secretaries of State BLINKEN and Treasury YELLEN have visited China – these are positive signs despite some tough talk. The fund industry trend towards lower fees has benefitted retail investors. ACTIVE ETFs are a natural development. Key for ETFs is marketing and distribution (an interesting insight into exchange traded products). Interest rates have normalized and fixed-income has become attractive in a very long time. Technological changes happen in stair-steps, and we are seeing one in AI and generative AI.
Pg 54, OTHER VOICES. Eugene STEUERLE, Urban Institute (DC think tank) and Urban-Brookings Tax Policy Center. Interest RATES are at 16-yr high, and they will affect people, businesses and the government. The impact on the government will be mixed – increases in deficits and payouts, but reduction in the value of outstanding debt. Savers will benefit from inflation and higher rates, but lenders will see lesser values for their loans; those on fixed income will also suffer. With the end of the cheap money era, hopefully, the allocation decisions will become more rational. Keep in mind the real rates (TIPS rates) vs nominal rates (T-Bills/Notes/Bonds); positive real rates, as now, are restrictive for the economy. There will also be a reckoning for the government when its debt-servicing costs will keep rising.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
None
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).