Post by Admin/YBB on Dec 9, 2023 8:14:22 GMT -6
Pg 12. FOMC Statement and Powell’s presser on WEDNESDAY.
PREVIEW & REVIEW (consolidated). “Green” DIESEL? Renewable diesel from animal fat and plants is being used for NYC garbage trucks, ambulances, etc. CA is a heavy consumer of biodiesel. With supplies rising, biodiesel stocks are down (DAR, NESTE, PBF).
DATA THIS WEEK. CPI (+3.1% yoy; core +4%), Treasury budget on TUESDAY; PPI on WEDNESDAY; retail sales, business inventories on THURSDAY; capacity utilization, industrial production 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. Hospital company HCA Healthcare (HCA; yield 1%; fwd P/E 13 only; 200 hospitals, hundreds of urgent-care clinics, surgery centers, diagnostic/imaging facilities; with 46,000+ staff now, it still faces shortages in critical areas; healthcare sector is down on unrealistic fears from the new GLP-1 agonist obesity drugs – these very expensive injectable drugs (oral versions are still under trial) won’t be the magical cure-all; pg 18);
Software developer ServiceNow (NOW; AI is transformative in his business; stock 10x in 10 years; cash flow margin plus revenue growth > 55% (Rule of 55); CEO McDermott (previously, XRX, SAP, etc); pg 29).
BEARISH.
Pg 14. BIG US BANKs are lobbying against the upcoming BASEL III Endgame requirements that are intended to make global banking uniform across the world. Banks with $100+ billion in assets will need 16% risk-adjusted equity capital (vs 12.9% for the US now); the SIFIs will have even higher requirements. Only 37 of 4,100 US banks will be under Basel III, but they cover 81% of the US deposits. Banks with more diversified operations will need more capital than those in basic banking. The new rules will be effective in 2024 but will have a 3-yr implementation period. The Federal Reserve is supporting Basel III. Nonbank financials don’t have to meet similar requirements and the fear is that they will gain more market share in regulated banking activities.
Pg 15: RANSOMWARE attacks are growing. In 2023, direct costs of ransomware attacks were about $30 billion, $4.5 million/incident, but indirect costs to businesses and affected consumers were much higher. Many cybergangs demand payments in hard-to-trace CRYPTOs; some are foreign-based and out of the reach of the US laws. This has provided a boost to crypto lending businesses – some combine those with cybersecurity services. Companies in cybersecurity (PANW, CRWD, ZS, MDB, MSFT) and cyber insurance (AIG, CB, Lloyd’s) are doing brisk business. Ironically, cybergangs like to deal/negotiate with insurance companies as they are often quick to settle and have a ready pot of money. The SEC will soon require public reporting of cyberbreaches within 4 days (with exceptions for national security) and will also require disclosures of cyber protection measures in annual reports. But there is concern that these steps will help cybergangs. The healthcare industry is a favorite target for cybergangs, but other industries and government units have also been attacked. Some cybergangs now offer protective services for subscription fees. There is also a large black market for stolen data. GenerativeAI is helping cybergangs in polishing phishing texts, but AI is also helping cybersecurity companies with automating cybersecurity. (Interesting that spellcheck doesn’t complain about most words such as cyberxxxxx)
Pg 24: With RATES higher now, retirees can benefit from fixed-income, allocation 60-40 (declared dead prematurely many times), small increases in systematic withdrawal rates (SWRs; also realize the dangers of all-stock portfolios whose SWRs ranged from 1.7-6.9% in 30-yr rolling periods since 1926).
Pg 28, RETIREMENT. TAX STRATEGIES for the yearend include deferring income to 2024; accelerating deductions; tax-loss harvesting (TLH); avoiding buying mutual funds just ahead of big yearend CG distributions; doing Roth Conversions gradually to avoid tax bracket bump; USE or lose items (charitable contributions, QCDs, annual gifts, max-ing 401k/403b/457).
Pg 30, FUNDS. David KING of moderate-allocation income CFCRX typically has 40% stocks (utilities, telecom, real estate), 40% bonds (inv-gr, HY) and 20% convertibles.
Pg 30, INCOME. PHARMA stocks with dividends include JNJ, ABBV, AZN.
Pg 31, TECH TRADER. SMALL-CAP TECH look attractive, according to Lori CALVASINA (RBC Capital Markets). Mentioned from various sources are software – CWAN, COUR, GWRE; digital ads – MGNI, DV; cybersecurity – VRNS; K-12 education – PWSC; fintech – FLYW, FOUR, LSPD; medical software – WEAV; law enforcement IT – SSTI; retail IT – PI. Then, a mea culpa for 09/2022 bullish piece on CSSE.
Pg 32, Q&A – FUNDS. Ramona PERSAUD, Fidelity Equity Division (FEQIX, FGILX, etc). She looks for great businesses with differentiated products and services. Some may be hit with short-term operational or transitional issues. She looks at P/E dispersion, P/Es below SP500 (relative value) and finds that things are a bit expensive now. She also looks at yield dispersion within R3000 and yields now are above average. Higher rates benefit value and cyclicals as there is more investor discipline. Several stock picks are discussed.
EXTRA, FUNDS. Cathie WOOD’s ETFs ARKK, ARKW, ARKF have been selling Coinbase/COIN that has done quite well despite earlier gloom and doom. Crypto bears are getting killed by this crypto rally.
Pg 34, ECONOMY. With the LABOR market strong, it’s unlikely that the FED will cut rates in 2024. Wildly optimistic fed fund traders will be disappointed. Inflation is moderating, gasoline prices are falling, HY spreads are low. There is no reason to cut rates and they will remain higher for longer.
Pg 62, OTHER VOICES. Christopher SMART, Arbroath Group (investment strategy consulting). Congress is sitting on UKRAINE AID package. The US has already spent $46.6 billion in military aid and $3.9 billion in humanitarian aid. Some are asking when will it be enough? But cutting off Ukraine aid will be a disaster for the global economy and the stock markets. Without the aid, Ukrainian economy will collapse, and Russians will walk in. The US security commitments to Europe will be doubted. Middle East may spin out of control. China may make bold moves on Taiwan. A US vacuum on the global scene will create chaos – political and economic. So, the Author says that the US is stuck funding Ukraine.
NOTE1. It’s very irritating that Barron’s has stopped mentioning TICKERS for most companies mentioned. I now have to look them up. Sometimes this takes time as there are similar names, especially for banks.
NOTE2. RETIREMENT feature(s) have moved to regular section from previously sharing the Mailbag page. This is to be watched.
(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).
PREVIEW & REVIEW (consolidated). “Green” DIESEL? Renewable diesel from animal fat and plants is being used for NYC garbage trucks, ambulances, etc. CA is a heavy consumer of biodiesel. With supplies rising, biodiesel stocks are down (DAR, NESTE, PBF).
DATA THIS WEEK. CPI (+3.1% yoy; core +4%), Treasury budget on TUESDAY; PPI on WEDNESDAY; retail sales, business inventories on THURSDAY; capacity utilization, industrial production 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. Hospital company HCA Healthcare (HCA; yield 1%; fwd P/E 13 only; 200 hospitals, hundreds of urgent-care clinics, surgery centers, diagnostic/imaging facilities; with 46,000+ staff now, it still faces shortages in critical areas; healthcare sector is down on unrealistic fears from the new GLP-1 agonist obesity drugs – these very expensive injectable drugs (oral versions are still under trial) won’t be the magical cure-all; pg 18);
Software developer ServiceNow (NOW; AI is transformative in his business; stock 10x in 10 years; cash flow margin plus revenue growth > 55% (Rule of 55); CEO McDermott (previously, XRX, SAP, etc); pg 29).
BEARISH.
Pg 14. BIG US BANKs are lobbying against the upcoming BASEL III Endgame requirements that are intended to make global banking uniform across the world. Banks with $100+ billion in assets will need 16% risk-adjusted equity capital (vs 12.9% for the US now); the SIFIs will have even higher requirements. Only 37 of 4,100 US banks will be under Basel III, but they cover 81% of the US deposits. Banks with more diversified operations will need more capital than those in basic banking. The new rules will be effective in 2024 but will have a 3-yr implementation period. The Federal Reserve is supporting Basel III. Nonbank financials don’t have to meet similar requirements and the fear is that they will gain more market share in regulated banking activities.
Pg 15: RANSOMWARE attacks are growing. In 2023, direct costs of ransomware attacks were about $30 billion, $4.5 million/incident, but indirect costs to businesses and affected consumers were much higher. Many cybergangs demand payments in hard-to-trace CRYPTOs; some are foreign-based and out of the reach of the US laws. This has provided a boost to crypto lending businesses – some combine those with cybersecurity services. Companies in cybersecurity (PANW, CRWD, ZS, MDB, MSFT) and cyber insurance (AIG, CB, Lloyd’s) are doing brisk business. Ironically, cybergangs like to deal/negotiate with insurance companies as they are often quick to settle and have a ready pot of money. The SEC will soon require public reporting of cyberbreaches within 4 days (with exceptions for national security) and will also require disclosures of cyber protection measures in annual reports. But there is concern that these steps will help cybergangs. The healthcare industry is a favorite target for cybergangs, but other industries and government units have also been attacked. Some cybergangs now offer protective services for subscription fees. There is also a large black market for stolen data. GenerativeAI is helping cybergangs in polishing phishing texts, but AI is also helping cybersecurity companies with automating cybersecurity. (Interesting that spellcheck doesn’t complain about most words such as cyberxxxxx)
Pg 24: With RATES higher now, retirees can benefit from fixed-income, allocation 60-40 (declared dead prematurely many times), small increases in systematic withdrawal rates (SWRs; also realize the dangers of all-stock portfolios whose SWRs ranged from 1.7-6.9% in 30-yr rolling periods since 1926).
Pg 28, RETIREMENT. TAX STRATEGIES for the yearend include deferring income to 2024; accelerating deductions; tax-loss harvesting (TLH); avoiding buying mutual funds just ahead of big yearend CG distributions; doing Roth Conversions gradually to avoid tax bracket bump; USE or lose items (charitable contributions, QCDs, annual gifts, max-ing 401k/403b/457).
Pg 30, FUNDS. David KING of moderate-allocation income CFCRX typically has 40% stocks (utilities, telecom, real estate), 40% bonds (inv-gr, HY) and 20% convertibles.
Pg 30, INCOME. PHARMA stocks with dividends include JNJ, ABBV, AZN.
Pg 31, TECH TRADER. SMALL-CAP TECH look attractive, according to Lori CALVASINA (RBC Capital Markets). Mentioned from various sources are software – CWAN, COUR, GWRE; digital ads – MGNI, DV; cybersecurity – VRNS; K-12 education – PWSC; fintech – FLYW, FOUR, LSPD; medical software – WEAV; law enforcement IT – SSTI; retail IT – PI. Then, a mea culpa for 09/2022 bullish piece on CSSE.
Pg 32, Q&A – FUNDS. Ramona PERSAUD, Fidelity Equity Division (FEQIX, FGILX, etc). She looks for great businesses with differentiated products and services. Some may be hit with short-term operational or transitional issues. She looks at P/E dispersion, P/Es below SP500 (relative value) and finds that things are a bit expensive now. She also looks at yield dispersion within R3000 and yields now are above average. Higher rates benefit value and cyclicals as there is more investor discipline. Several stock picks are discussed.
EXTRA, FUNDS. Cathie WOOD’s ETFs ARKK, ARKW, ARKF have been selling Coinbase/COIN that has done quite well despite earlier gloom and doom. Crypto bears are getting killed by this crypto rally.
Pg 34, ECONOMY. With the LABOR market strong, it’s unlikely that the FED will cut rates in 2024. Wildly optimistic fed fund traders will be disappointed. Inflation is moderating, gasoline prices are falling, HY spreads are low. There is no reason to cut rates and they will remain higher for longer.
Pg 62, OTHER VOICES. Christopher SMART, Arbroath Group (investment strategy consulting). Congress is sitting on UKRAINE AID package. The US has already spent $46.6 billion in military aid and $3.9 billion in humanitarian aid. Some are asking when will it be enough? But cutting off Ukraine aid will be a disaster for the global economy and the stock markets. Without the aid, Ukrainian economy will collapse, and Russians will walk in. The US security commitments to Europe will be doubted. Middle East may spin out of control. China may make bold moves on Taiwan. A US vacuum on the global scene will create chaos – political and economic. So, the Author says that the US is stuck funding Ukraine.
NOTE1. It’s very irritating that Barron’s has stopped mentioning TICKERS for most companies mentioned. I now have to look them up. Sometimes this takes time as there are similar names, especially for banks.
NOTE2. RETIREMENT feature(s) have moved to regular section from previously sharing the Mailbag page. This is to be watched.
(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).