Post by Admin/YBB on Nov 4, 2023 6:30:07 GMT -6
Pg 10. PREVIEW & REVIEW (consolidated). DATA CENTERS use lots of WATER and AI is making it worse. GOOGL, META, MSFT, etc have long-term programs to reduce their water use.
DATA THIS WEEK. International trade deficit, consumer credit on TUESDAY; Treasury budget, UM consumer sentiment on FRIDAY. (Seriously shrunk but supplemented from the link below).
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Chevron (CVX; yield 4.5%; fwd P/E 10; shareholder yield 10% (dividend yield + buyback yield); disappointing Q3 report; some operational issues are transient; deal to buy Hess/HES for $60 billion had mixed reception; CEO Wirth will continue beyond 65+; pg 12);
Vertex Pharma (VTRX; nonopioid pain drug VX-548 trials ongoing; side effects appear minimal – those led to failures of earlier attempts by LLY, PFE,REGN; pg 13);
#2 Uniform provider/servicer Vestis (VSTS; fwd P/E 16.4; net debt/EBITDA 3.9, high now but should go down; makes and provides cleaning and delivery services for uniforms; also aprons, towels, floormats, restroom cleaning supplies, first-aid kits; good cross-selling potential; most contracts are long-term and renewable; 10/2023 spinoff from food-services Aramark/ARMK; competition is #1 CTAS, #3 UNF; pg 22).
BEARISH.
Pg 11, TECH TRADER. AAPL Q3 report disappointed again. There was no growth while the stock is valued at fwd P/E of 27. It may be letting the AI revolution pass – AAPL says it is working on AI and will announce when something is ready. Margins remain high at 45.1%.
Pg 23: Kyla SCANLON (26), social-media blogger. She discusses how Gen Z looks at the economy, the Fed, finances, starter cars and houses, etc. Bonds at 5% look attractive and are affecting stock valuations. She graduated from Western Kentucky U, worked at Capital Group, a tech startup, and then started her social-media mini-empire “Bread”. (@kylascan at X/Twitter)
Pg 24, FUNDS. Convertible funds (also called hybrids) are attractive – CCVIX, CAGCX; CWB, ICVT, CVRT. (There are growth- and income- oriented convertibles)
Pg 24, ECONOMY. Watch JAPAN. After its bubble burst in 1990s, Japan was early with the QEs (2001) and negative rates (2016). Inflation is above +2% target. Now it has eased on yield-curve control in preparation for raising rates. When that happens, capital outflows may reverse to inflows and yen-dollar carry trade may end. That may cause the dollar to decline and the US Treasury rates to go up. It may surprise the market simply because something like this hasn’t happened for decades.
Pg 25, INCOME. Investors who went into floating-rate PRIVATE CREDIT funds should beware of risks when rates flatten or go down. They hold senior secured loans that are high in the capital structure. As private credit doesn’t trade, their values appear to be more stable (but that can change suddenly). They are sold mostly to institutional clients, but they are also growing in the retail market (via BlackRock, Fidelity, KKR, etc). Many of these funds allow for limited quarterly redemptions; and have high minimums, yields and fees. Funds may hold both private and public credits. Mentioned are Blackstone BCred (nontraded); CRDAX, KCOPX, TAKIX, RCIAX/RCIIX.
Pg 26, FUNDS. Q&A. Charles KANTOR, Long-Short NLSAX. Fund uses L-S to reduce risks. Longs are based on GARP methodology, shorts have some headwinds. Net long exposure is in the range of 30-60%, now 40-45%. He uses opportunistic trades rather than big themes. Hardly anyone could predict Russia-Ukraine war, Israel-Hamas conflict, regional banking crisis, economy (soft landing vs recession), but the market offers opportunities. Currently he likes discounters (DLTR), online dating apps (MTCH), credit agencies (EFX); shorts include consumer-staples (SJM), and misvalued companies (SOFI, RDFN).
It was hard to guess on Friday which FUND stories will make the final version. So, here are lots of EXTRAS – enjoy or skip.
EXTRA1, FUNDS. FACTOR investing has gone through a difficult stretch. Factors include style (growth, value), size (SC, MC, LC), quality, momentum, volatility, dividend (current, dividend-growth, blend), etc. Only growth and quality factors have been strong in this environment dominated by Magnificent 7. But with an uncertain economic outlook in 2024, factor investing may have a resurgence.
EXTRA2, FUNDS. For go-nowhere market, consider OPTIONS-writing ETFs – giant JEPI, CVRD, SPYI, etc. (These give up some upside for option income; downside may or may not be protected.)
EXTRA3, FUNDS. LOW-VOLATILITY ETFs may not be good while volatility is rising – USMV, SPLV, etc. (They are often locked into wrong positioning at their infrequent rebalancing)
EXTRA4, FUNDS. Several funds will make large CG distributions by the yearend. Those don’t matter for tax-deferred/free accounts, but only for taxable accounts. Large CG distributions are due to large outflows and/or portfolio manager changes. Noted are CREEX, DHSCX, IYVAX; FMXKX, KLCKX, JPDEX.
Pg 54, OTHER VOICES. Catherine KEATING, BNY Mellon. Retirement plans have shifted from defined-benefit (DB) to defined-contribution (DC) plans. The universe of stocks has shrunk from 8,000 to less than 4,000 now, but there are 16,000 private companies owned by private-equity. Bond market has grown as banks have pulled back from risky lending. Alternative investments are also growing but are less accessible. The author then concludes that individual investors should invest more like private-equity and use institutional approaches. In future, women may control $30 trillion in assets but may not be prepared or be too risk averse. The financial industry should try to fill this gap.
Pg 55, RETIREMENT. Starting RMD age has been changing frequently (70.5-72-73---75) to cause confusion. Brokerages and fund firms are uneven in tracking these changes. Penalties for avoiding RMDs have been reduced but are still substantial. Those who don’t need RMDs for expenses may use QCDs for charities – that money doesn’t flow through income and that may have some tax benefits. Note that QCDs can still start at 70.5. (This is a new feature on the shrunk Mailbag page)
(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. International trade deficit, consumer credit on TUESDAY; Treasury budget, UM consumer sentiment on FRIDAY. (Seriously shrunk but supplemented from the link below).
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Chevron (CVX; yield 4.5%; fwd P/E 10; shareholder yield 10% (dividend yield + buyback yield); disappointing Q3 report; some operational issues are transient; deal to buy Hess/HES for $60 billion had mixed reception; CEO Wirth will continue beyond 65+; pg 12);
Vertex Pharma (VTRX; nonopioid pain drug VX-548 trials ongoing; side effects appear minimal – those led to failures of earlier attempts by LLY, PFE,REGN; pg 13);
#2 Uniform provider/servicer Vestis (VSTS; fwd P/E 16.4; net debt/EBITDA 3.9, high now but should go down; makes and provides cleaning and delivery services for uniforms; also aprons, towels, floormats, restroom cleaning supplies, first-aid kits; good cross-selling potential; most contracts are long-term and renewable; 10/2023 spinoff from food-services Aramark/ARMK; competition is #1 CTAS, #3 UNF; pg 22).
BEARISH.
Pg 11, TECH TRADER. AAPL Q3 report disappointed again. There was no growth while the stock is valued at fwd P/E of 27. It may be letting the AI revolution pass – AAPL says it is working on AI and will announce when something is ready. Margins remain high at 45.1%.
Pg 23: Kyla SCANLON (26), social-media blogger. She discusses how Gen Z looks at the economy, the Fed, finances, starter cars and houses, etc. Bonds at 5% look attractive and are affecting stock valuations. She graduated from Western Kentucky U, worked at Capital Group, a tech startup, and then started her social-media mini-empire “Bread”. (@kylascan at X/Twitter)
Pg 24, FUNDS. Convertible funds (also called hybrids) are attractive – CCVIX, CAGCX; CWB, ICVT, CVRT. (There are growth- and income- oriented convertibles)
Pg 24, ECONOMY. Watch JAPAN. After its bubble burst in 1990s, Japan was early with the QEs (2001) and negative rates (2016). Inflation is above +2% target. Now it has eased on yield-curve control in preparation for raising rates. When that happens, capital outflows may reverse to inflows and yen-dollar carry trade may end. That may cause the dollar to decline and the US Treasury rates to go up. It may surprise the market simply because something like this hasn’t happened for decades.
Pg 25, INCOME. Investors who went into floating-rate PRIVATE CREDIT funds should beware of risks when rates flatten or go down. They hold senior secured loans that are high in the capital structure. As private credit doesn’t trade, their values appear to be more stable (but that can change suddenly). They are sold mostly to institutional clients, but they are also growing in the retail market (via BlackRock, Fidelity, KKR, etc). Many of these funds allow for limited quarterly redemptions; and have high minimums, yields and fees. Funds may hold both private and public credits. Mentioned are Blackstone BCred (nontraded); CRDAX, KCOPX, TAKIX, RCIAX/RCIIX.
Pg 26, FUNDS. Q&A. Charles KANTOR, Long-Short NLSAX. Fund uses L-S to reduce risks. Longs are based on GARP methodology, shorts have some headwinds. Net long exposure is in the range of 30-60%, now 40-45%. He uses opportunistic trades rather than big themes. Hardly anyone could predict Russia-Ukraine war, Israel-Hamas conflict, regional banking crisis, economy (soft landing vs recession), but the market offers opportunities. Currently he likes discounters (DLTR), online dating apps (MTCH), credit agencies (EFX); shorts include consumer-staples (SJM), and misvalued companies (SOFI, RDFN).
It was hard to guess on Friday which FUND stories will make the final version. So, here are lots of EXTRAS – enjoy or skip.
EXTRA1, FUNDS. FACTOR investing has gone through a difficult stretch. Factors include style (growth, value), size (SC, MC, LC), quality, momentum, volatility, dividend (current, dividend-growth, blend), etc. Only growth and quality factors have been strong in this environment dominated by Magnificent 7. But with an uncertain economic outlook in 2024, factor investing may have a resurgence.
EXTRA2, FUNDS. For go-nowhere market, consider OPTIONS-writing ETFs – giant JEPI, CVRD, SPYI, etc. (These give up some upside for option income; downside may or may not be protected.)
EXTRA3, FUNDS. LOW-VOLATILITY ETFs may not be good while volatility is rising – USMV, SPLV, etc. (They are often locked into wrong positioning at their infrequent rebalancing)
EXTRA4, FUNDS. Several funds will make large CG distributions by the yearend. Those don’t matter for tax-deferred/free accounts, but only for taxable accounts. Large CG distributions are due to large outflows and/or portfolio manager changes. Noted are CREEX, DHSCX, IYVAX; FMXKX, KLCKX, JPDEX.
Pg 54, OTHER VOICES. Catherine KEATING, BNY Mellon. Retirement plans have shifted from defined-benefit (DB) to defined-contribution (DC) plans. The universe of stocks has shrunk from 8,000 to less than 4,000 now, but there are 16,000 private companies owned by private-equity. Bond market has grown as banks have pulled back from risky lending. Alternative investments are also growing but are less accessible. The author then concludes that individual investors should invest more like private-equity and use institutional approaches. In future, women may control $30 trillion in assets but may not be prepared or be too risk averse. The financial industry should try to fill this gap.
Pg 55, RETIREMENT. Starting RMD age has been changing frequently (70.5-72-73---75) to cause confusion. Brokerages and fund firms are uneven in tracking these changes. Penalties for avoiding RMDs have been reduced but are still substantial. Those who don’t need RMDs for expenses may use QCDs for charities – that money doesn’t flow through income and that may have some tax benefits. Note that QCDs can still start at 70.5. (This is a new feature on the shrunk Mailbag page)
(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).