Post by Admin/YBB on Feb 13, 2021 11:05:23 GMT -6
Pg 10-11: FOMC Minutes on Wednesday.
Playboy [PLBY; fwd EV/EBITDA 13.5] became public again via a SPAC merger. But forget about playmates, old magazine and old media, and just think about consumer products [not all on the sexy side] with the bunny-logo [$3 billion revenue in 2020 from 180 countries].
Cryptos are coming! Tesla/TSLA [CEO Musk] now owns $1.5 billion in Bitcoin and will accept them as payments for its EVs. Square/SQ has invested in Bitcoin and Twitter/TWTR is considering it [their common CEO Dorsey]. MasterCard/MA will allow businesses to accept cryptos but those will be converted to local currencies at cash registers before further processing. BNY Mellon/BK [that was founded by Alexander Hamilton] will hold and transfer cryptos for clients. GM has no plans yet unless car buyers push for payments in cryptos.
Data this week: NY Fed Empire State manufacturing survey on Tuesday; retail sales, housing market index, PPI, capacity utilization, industrial production, business inventories on Wednesday; housing starts on Thursday; manufacturing PMI, services PMI, existing home sales on Friday.
Closed: US on Monday.
www.barrons.com/magazine?mod=BOL_TOPNAV
Bullish: Medical diagnostic company Hologic [HOLX; fwd P/E 2021 only 9; buybacks; products include Covid-19 PCR tests, equipment for breast-imaging and gynecological surgeries; growing by acquisitions; low valuation due to concerns that post-pandemic, some of its businesses will slowdown; pandemic has made its diagnostic unit the biggest; once diagnostic equipment has been installed, those need continuous supplies; pg 15]; Corning [GLW; P/S 2.2; founded in 1851, but it is out of all its old businesses and is now into high-tech glass (fiberglass, display-glass, Gorilla Glass, Ceramic Sheet, curved-glass) and specialty products for auto emission control and vaccine vials; R&D is 10% of revenue, capex 12%; its factory in Wuhan had to suspend production for a while in 2020; good rebound play; pg 17].
Bearish: See other stories.
Pg 13: Biotech & pharma industry will benefit from the needs of vaccinations for Covid-19, flu, etc; booster shots; handling new virus variants. Big 4 are PFE, MRK, GSK, SNY. Upstarts include MRNA, NVAX, BNTX [partnering with PFE]. Some self-standing upstarts lack distribution channels but can for now ship huge amounts to government warehouses. But that picture may change by 2022 when commercial markets will reassert and big pharma with huge marketing and distribution channels will dominate. Vaccine business involves huge contracts and offers little/no choice for doctors or patients. Also mentioned are JNJ, AZN [partnering with Oxford U].
Pg 19: 100 Years of Barron’s notes that early EVs efforts were in 1910s by Henry Ford and Thomas Edison but those were later dropped as gasoline engine powered cars arrived. There were other attempts since 1959 but EV applications remained limited to curiosity/novelty items [utility vehicles, scooters, golf carts, etc]. Then came hybrids. Finally, Elon Musk and Tesla/TSLA came along and changed everything. Barron’s admits to its error of being skeptical of Musk, as it was of the earlier failed EV efforts; Musk also hung up on Barron’s in 2013 [stock was at split-adjusted $23 then] when he was being interviewed for Barron’s skeptical cover story on Tesla. [OK, my admission too, I didn’t like this Series so far, but I liked this week’s story.]
Pg 27: Janet Rilling of core-plus STYAX has 6 month review horizon for holdings. Fund can own up to 35% in noninvestment-grade bonds; those were 11% in 01/2020, 21% in 04/2020, 26% in 08/2020, 22% now. The HY exposure is heavy in BB-rated bonds and fallen-angles. The mix within investment-grade was also adjusted opportunistically to upgrade credit-quality.
Pg 29: This had to happen – ETFs of SPACs, “wrappers” for “blank-check/shell” companies. 250 SPACs raised $83 billion in 2020, and 2021 is already half there. Indexed ETF SPAK has 40% in pre-merger-SPACs and 60% in post-merger/IPO companies. Active ETF SPCX is 100% in pre-merger SPACs, and active SPXZ has 33% in pre-merger SPACs and 67% in post-merger/IPO companies. SPAC holders get into related IPOs at IPO prices, just like big institutions, while retail customers have to buy IPOs in the secondary market.
Pg 30: Ryan Jacob of 2000 bubble & bust fame and his Internet fund JAMFX are back after 20 year [+123% in 2020, +40% in 2021]. Fund invests only in small-cap techs. [Look at its chart since inception before jumping in]
Pg 31: Minimum wage has already jumped to $15/hr in many areas without much impact on businesses [whatever are out there]; the current effective minimum wage may be $13/hr. Raise the Minimum Wage Act, 2021 moving through Congress is just catching up. As minimum wage continues to rise, the effects will be seen by 2024. There are 2 benefits of higher minimum wage – lower employee turnover rate, and better conditions for employees with only small increases in costs of goods and services.
Pg 32: Mark Mobius [84], Mobius Capital, formerly with Franklin-Templeton. Emerging-markets [EMs] will outperform post-pandemic. They have younger population and will benefit more from global recovery. EM currencies should be stable. He is not worried about the US-China relations. US listings/delistings of Chinese companies is a minor issue once one goes beyond the rhetoric on both sides. The ESG factors reduce risks in the EMs but one should have open mind about the context and trends. Worries about inflation are misguided; historical inflation measurements based on varying baskets are meaningless. Tech is a powerful deflationary influence. So, just look at income/wages and quality of life. Dollar peaked in March 2020. Dollar is the largest currency only in the investment sense now, but euro is the largest trade currency, and yuan is coming up. Cryptos are important for those who don’t want to reveal their assets and/or transactions and want to stay out of the Western dollar-based money network. He likes selected companies in India, Brazil, China, Taiwan, South Korea.
Pg 34: Ronald Cohen, Apax Partners [UK-based private-equity firm]; Chair of Impact-Weighted Accounts Initiative [by Serafeim at Harvard]. Recent book, Impact: Reshaping Capitalism to Drive Real Change, 11/2020. Author suggests that the US should implement ESG impact disclosures by corporations. Impact accounting is an aspect of ESG that focuses on measurement and evaluation of ESG impacts [positive and negative], not just ESG related goals and spending. Recommended are GAAP-like standards for ESG. [Not mentioned are SASB that is like FASB and other international organizations doing this].
Pg 35: BoA/BAC recommends dividend-growth stocks for times when rate may rise gradually. [But much of the data provided is just for SP500]
[Extras from online Friday that didn’t make the weekend paper version]
UK-based ValuAnalysis says that classical growth vs value distinctions are meaningless. Benchmarks based on fundamental analysis are flawed. One should think of high-growth vs low-growth and things in the middle. Avoid value-traps – old companies with declining businesses but promising to grow into new businesses; reason is that free cash flow required to do that isn’t there. Evaluate companies based on free cash flow and cost of capital.
Playboy [PLBY; fwd EV/EBITDA 13.5] became public again via a SPAC merger. But forget about playmates, old magazine and old media, and just think about consumer products [not all on the sexy side] with the bunny-logo [$3 billion revenue in 2020 from 180 countries].
Cryptos are coming! Tesla/TSLA [CEO Musk] now owns $1.5 billion in Bitcoin and will accept them as payments for its EVs. Square/SQ has invested in Bitcoin and Twitter/TWTR is considering it [their common CEO Dorsey]. MasterCard/MA will allow businesses to accept cryptos but those will be converted to local currencies at cash registers before further processing. BNY Mellon/BK [that was founded by Alexander Hamilton] will hold and transfer cryptos for clients. GM has no plans yet unless car buyers push for payments in cryptos.
Data this week: NY Fed Empire State manufacturing survey on Tuesday; retail sales, housing market index, PPI, capacity utilization, industrial production, business inventories on Wednesday; housing starts on Thursday; manufacturing PMI, services PMI, existing home sales on Friday.
Closed: US on Monday.
www.barrons.com/magazine?mod=BOL_TOPNAV
Bullish: Medical diagnostic company Hologic [HOLX; fwd P/E 2021 only 9; buybacks; products include Covid-19 PCR tests, equipment for breast-imaging and gynecological surgeries; growing by acquisitions; low valuation due to concerns that post-pandemic, some of its businesses will slowdown; pandemic has made its diagnostic unit the biggest; once diagnostic equipment has been installed, those need continuous supplies; pg 15]; Corning [GLW; P/S 2.2; founded in 1851, but it is out of all its old businesses and is now into high-tech glass (fiberglass, display-glass, Gorilla Glass, Ceramic Sheet, curved-glass) and specialty products for auto emission control and vaccine vials; R&D is 10% of revenue, capex 12%; its factory in Wuhan had to suspend production for a while in 2020; good rebound play; pg 17].
Bearish: See other stories.
Pg 13: Biotech & pharma industry will benefit from the needs of vaccinations for Covid-19, flu, etc; booster shots; handling new virus variants. Big 4 are PFE, MRK, GSK, SNY. Upstarts include MRNA, NVAX, BNTX [partnering with PFE]. Some self-standing upstarts lack distribution channels but can for now ship huge amounts to government warehouses. But that picture may change by 2022 when commercial markets will reassert and big pharma with huge marketing and distribution channels will dominate. Vaccine business involves huge contracts and offers little/no choice for doctors or patients. Also mentioned are JNJ, AZN [partnering with Oxford U].
Pg 19: 100 Years of Barron’s notes that early EVs efforts were in 1910s by Henry Ford and Thomas Edison but those were later dropped as gasoline engine powered cars arrived. There were other attempts since 1959 but EV applications remained limited to curiosity/novelty items [utility vehicles, scooters, golf carts, etc]. Then came hybrids. Finally, Elon Musk and Tesla/TSLA came along and changed everything. Barron’s admits to its error of being skeptical of Musk, as it was of the earlier failed EV efforts; Musk also hung up on Barron’s in 2013 [stock was at split-adjusted $23 then] when he was being interviewed for Barron’s skeptical cover story on Tesla. [OK, my admission too, I didn’t like this Series so far, but I liked this week’s story.]
Pg 27: Janet Rilling of core-plus STYAX has 6 month review horizon for holdings. Fund can own up to 35% in noninvestment-grade bonds; those were 11% in 01/2020, 21% in 04/2020, 26% in 08/2020, 22% now. The HY exposure is heavy in BB-rated bonds and fallen-angles. The mix within investment-grade was also adjusted opportunistically to upgrade credit-quality.
Pg 29: This had to happen – ETFs of SPACs, “wrappers” for “blank-check/shell” companies. 250 SPACs raised $83 billion in 2020, and 2021 is already half there. Indexed ETF SPAK has 40% in pre-merger-SPACs and 60% in post-merger/IPO companies. Active ETF SPCX is 100% in pre-merger SPACs, and active SPXZ has 33% in pre-merger SPACs and 67% in post-merger/IPO companies. SPAC holders get into related IPOs at IPO prices, just like big institutions, while retail customers have to buy IPOs in the secondary market.
Pg 30: Ryan Jacob of 2000 bubble & bust fame and his Internet fund JAMFX are back after 20 year [+123% in 2020, +40% in 2021]. Fund invests only in small-cap techs. [Look at its chart since inception before jumping in]
Pg 31: Minimum wage has already jumped to $15/hr in many areas without much impact on businesses [whatever are out there]; the current effective minimum wage may be $13/hr. Raise the Minimum Wage Act, 2021 moving through Congress is just catching up. As minimum wage continues to rise, the effects will be seen by 2024. There are 2 benefits of higher minimum wage – lower employee turnover rate, and better conditions for employees with only small increases in costs of goods and services.
Pg 32: Mark Mobius [84], Mobius Capital, formerly with Franklin-Templeton. Emerging-markets [EMs] will outperform post-pandemic. They have younger population and will benefit more from global recovery. EM currencies should be stable. He is not worried about the US-China relations. US listings/delistings of Chinese companies is a minor issue once one goes beyond the rhetoric on both sides. The ESG factors reduce risks in the EMs but one should have open mind about the context and trends. Worries about inflation are misguided; historical inflation measurements based on varying baskets are meaningless. Tech is a powerful deflationary influence. So, just look at income/wages and quality of life. Dollar peaked in March 2020. Dollar is the largest currency only in the investment sense now, but euro is the largest trade currency, and yuan is coming up. Cryptos are important for those who don’t want to reveal their assets and/or transactions and want to stay out of the Western dollar-based money network. He likes selected companies in India, Brazil, China, Taiwan, South Korea.
Pg 34: Ronald Cohen, Apax Partners [UK-based private-equity firm]; Chair of Impact-Weighted Accounts Initiative [by Serafeim at Harvard]. Recent book, Impact: Reshaping Capitalism to Drive Real Change, 11/2020. Author suggests that the US should implement ESG impact disclosures by corporations. Impact accounting is an aspect of ESG that focuses on measurement and evaluation of ESG impacts [positive and negative], not just ESG related goals and spending. Recommended are GAAP-like standards for ESG. [Not mentioned are SASB that is like FASB and other international organizations doing this].
Pg 35: BoA/BAC recommends dividend-growth stocks for times when rate may rise gradually. [But much of the data provided is just for SP500]
[Extras from online Friday that didn’t make the weekend paper version]
UK-based ValuAnalysis says that classical growth vs value distinctions are meaningless. Benchmarks based on fundamental analysis are flawed. One should think of high-growth vs low-growth and things in the middle. Avoid value-traps – old companies with declining businesses but promising to grow into new businesses; reason is that free cash flow required to do that isn’t there. Evaluate companies based on free cash flow and cost of capital.