From Barron’s, January 22, 2024 (Part 2)
Jan 20, 2024 12:06:54 GMT
chang, rhythmmethod, and 9 more like this
Post by yogibearbull on Jan 20, 2024 12:06:54 GMT
Pg 7. PREVIEW & REVIEW (consolidated). Michael BARAK, a CA personal finance teacher and school CFO, won the 2023 Barron’s Forecasting Challenge. He will get 2-year subscription for Barron’s and a lunch at NYC with his favorite Barron’s staffer.
DATA THIS WEEK. LEI on MONDAY; durable goods orders, new home sales, Q4 GDP (+2%) on THURSDAY; existing home sales, personal income & consumption expenditures (PCE +2.6%, core PCE +3.0%) 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. UK-based oil major BP (yield 5.1%; fwd P/E 6.8 only; buybacks; investors like its flip-flop on alternatives – it has reversed its prior 2020 push into alternatives and is refocusing on its core fossil fuel operations; its US operations, heavy in fossil fuels, will by more than half of its entire operation by 2030; it won’t ignore energy transition and almost half of its capex would go for that (but it won’t prematurely ignore fossil fuel business); it has planned for $60+ crude oil; its gas station and convenience store business is strong and many offer EV charging; new CEO AUCHINCLOSS is Canadian and shareholder-friendly; it may see activists’ involvement; if pressures in the UK/Europe become too much, it may shift domicile to the US; pg 13)
7 attractive small-caps (ALLY, CNH, FLNC, KEY, RH, SEE, XPO; SP MC 600 fwd P/E 13.4 only – this index is better than R2000 that has lots of unprofitable companies; EXTRA).
BEARISH. Disney (DIS; in slump that may be beyond CEO IGER’s control; viewers are now in control, not content producers or distributors; but viewers want value and DIS is reacting poorly by cutting costs, offerings, services – Iger’s magic touch gone? NFLX is the leader and driver in streaming; pg 8).
Pg 23, FUNDS. SMID growth EAASX (ER 1.14%; AUM $12.2 billion; NTF/no-load at Fidelity & Schwab) hangs on to its winners even when they become big but would sell them if they seem overvalued. The concentrated fund with about 50 stocks has a low turnover of 14%. (By @lewisbraham at MFO)
EXTRA, FUNDS. After the run up to the approvals of 11 physical/spot-Bitcoin ETFs by the SEC, Bitcoin has dropped sharply (-16%) – although this ‘selling on the news” was expected to a smaller extent. Other cryptos also fell. The US-based crypto exchange, broker-dealer, custodian Coinbase/COIN collapsed by -34% - there is concern that despite it being custodian for several new crypto ETFs, these will hurt its retail crypto business; there is also an ongoing SEC lawsuit.
Pg 24, INCOME. Dividend investors may watch some good companies that may cut dividends (high payouts and debt/EBITDA) and buy them after the selloff: CBRL, HAS, KSS, LCII, LEG, MTN, WEN, WHR.
Pg 25, TECH TRADER. Beyond the semi chips, the Internet is getting ready for a new era of DIGITAL ADs. COOKIES are on the way to extinction – Google Chrome will drop support after 2024; AAPL already blocks 3rd party cookies. Election years are generally good for advertisers. AI-powered websites are coming. Companies in ad placement verification such as DoubleVerify/DV will benefit in this cookie-less environment. The ad businesses at GOOGL, META, TikTok are doing fine, but not so well at X/Twitter; AMZN Prime is still in a tinkering phase.
Pg 26, ECONOMY. Fed Chair POWELL will have to manage the huge gap in the expectations of the fed fund futures market vs the FOMC. No action on rates is expected at the January 31 FOMC, but guidance will be very important. The economy is growing gradually, unemployment is low, but sticky inflation remains. Financial liquidity is good despite the ongoing QT. Low-rated leveraged loans have rallied. The SP500 at new highs is at fwd P/E 22 (high). This is also an election year. While the Fed claims it isn’t affected by politics, election uncertainties will lead businesses to adjust.
Pg 54, OTHER VOICES. Jonathan SHENKMAN, ParkBridge Wealth Management. Rapid rise in college TUITIONS (+12% annually, 2010-22) is unsustainable. Many students or parents take on huge debt that seems to be easily (sometimes, irresponsibly) available from the government or private sources (some degree majors don’t have reasonable prospects for jobs). Colleges/universities say that their costs are rising too, and they are limited on how much they can tap their endowments (typically, 5%; however, some “rich” universities have excess endowments). Many parents and/or grandparents use 529s that may be utilized broadly for post-high-school education and training (certifications, etc) (Some excess 529 funds can now go into beneficiaries’ Roth IRAs). Some young people also follow the apprenticeship route into professions or trades.
Pg 55, RETIREMENT. Almost 38% of financial advisors will be retiring over the next 10 years and low replacement rates will create new issues. One reason is that advisory rules are becoming stricter, and some qualification requirements have become harder to meet. There is controversy over suitability, BI Regs and fiduciary responsibilities – ask in case an advisor wears multiple hats. Also ask about succession plans. Have specific goals for advisors.
EXTRA: RETIREMENT. Jason FICHTNER, Executive Director, Retirement Income Institute, Washington DC (a 501c6 organization). So much is written about accumulations, but not so much about DECUMULATIONS. Many cannot live on Social Security and pensions (when they even exist; most DB pensions have disappeared). Many have accumulated significant sums in DC-plans such as 401k, 403b, 457, etc, but need guidance for decumulation plans. The Author suggests having 67% of retirement needs as secure income – Social Security (delay if possible), guaranteed-income (workplace or private annuities), pensions; the remainder 33% may come from portfolios. Also recommended are improved retirement plan disclosures (with illustrations for potential income in retirement) and employer-supported financial advice.
NOTE. 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.
(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
LINK
DATA THIS WEEK. LEI on MONDAY; durable goods orders, new home sales, Q4 GDP (+2%) on THURSDAY; existing home sales, personal income & consumption expenditures (PCE +2.6%, core PCE +3.0%) 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. UK-based oil major BP (yield 5.1%; fwd P/E 6.8 only; buybacks; investors like its flip-flop on alternatives – it has reversed its prior 2020 push into alternatives and is refocusing on its core fossil fuel operations; its US operations, heavy in fossil fuels, will by more than half of its entire operation by 2030; it won’t ignore energy transition and almost half of its capex would go for that (but it won’t prematurely ignore fossil fuel business); it has planned for $60+ crude oil; its gas station and convenience store business is strong and many offer EV charging; new CEO AUCHINCLOSS is Canadian and shareholder-friendly; it may see activists’ involvement; if pressures in the UK/Europe become too much, it may shift domicile to the US; pg 13)
7 attractive small-caps (ALLY, CNH, FLNC, KEY, RH, SEE, XPO; SP MC 600 fwd P/E 13.4 only – this index is better than R2000 that has lots of unprofitable companies; EXTRA).
BEARISH. Disney (DIS; in slump that may be beyond CEO IGER’s control; viewers are now in control, not content producers or distributors; but viewers want value and DIS is reacting poorly by cutting costs, offerings, services – Iger’s magic touch gone? NFLX is the leader and driver in streaming; pg 8).
Pg 23, FUNDS. SMID growth EAASX (ER 1.14%; AUM $12.2 billion; NTF/no-load at Fidelity & Schwab) hangs on to its winners even when they become big but would sell them if they seem overvalued. The concentrated fund with about 50 stocks has a low turnover of 14%. (By @lewisbraham at MFO)
EXTRA, FUNDS. After the run up to the approvals of 11 physical/spot-Bitcoin ETFs by the SEC, Bitcoin has dropped sharply (-16%) – although this ‘selling on the news” was expected to a smaller extent. Other cryptos also fell. The US-based crypto exchange, broker-dealer, custodian Coinbase/COIN collapsed by -34% - there is concern that despite it being custodian for several new crypto ETFs, these will hurt its retail crypto business; there is also an ongoing SEC lawsuit.
Pg 24, INCOME. Dividend investors may watch some good companies that may cut dividends (high payouts and debt/EBITDA) and buy them after the selloff: CBRL, HAS, KSS, LCII, LEG, MTN, WEN, WHR.
Pg 25, TECH TRADER. Beyond the semi chips, the Internet is getting ready for a new era of DIGITAL ADs. COOKIES are on the way to extinction – Google Chrome will drop support after 2024; AAPL already blocks 3rd party cookies. Election years are generally good for advertisers. AI-powered websites are coming. Companies in ad placement verification such as DoubleVerify/DV will benefit in this cookie-less environment. The ad businesses at GOOGL, META, TikTok are doing fine, but not so well at X/Twitter; AMZN Prime is still in a tinkering phase.
Pg 26, ECONOMY. Fed Chair POWELL will have to manage the huge gap in the expectations of the fed fund futures market vs the FOMC. No action on rates is expected at the January 31 FOMC, but guidance will be very important. The economy is growing gradually, unemployment is low, but sticky inflation remains. Financial liquidity is good despite the ongoing QT. Low-rated leveraged loans have rallied. The SP500 at new highs is at fwd P/E 22 (high). This is also an election year. While the Fed claims it isn’t affected by politics, election uncertainties will lead businesses to adjust.
Pg 54, OTHER VOICES. Jonathan SHENKMAN, ParkBridge Wealth Management. Rapid rise in college TUITIONS (+12% annually, 2010-22) is unsustainable. Many students or parents take on huge debt that seems to be easily (sometimes, irresponsibly) available from the government or private sources (some degree majors don’t have reasonable prospects for jobs). Colleges/universities say that their costs are rising too, and they are limited on how much they can tap their endowments (typically, 5%; however, some “rich” universities have excess endowments). Many parents and/or grandparents use 529s that may be utilized broadly for post-high-school education and training (certifications, etc) (Some excess 529 funds can now go into beneficiaries’ Roth IRAs). Some young people also follow the apprenticeship route into professions or trades.
Pg 55, RETIREMENT. Almost 38% of financial advisors will be retiring over the next 10 years and low replacement rates will create new issues. One reason is that advisory rules are becoming stricter, and some qualification requirements have become harder to meet. There is controversy over suitability, BI Regs and fiduciary responsibilities – ask in case an advisor wears multiple hats. Also ask about succession plans. Have specific goals for advisors.
EXTRA: RETIREMENT. Jason FICHTNER, Executive Director, Retirement Income Institute, Washington DC (a 501c6 organization). So much is written about accumulations, but not so much about DECUMULATIONS. Many cannot live on Social Security and pensions (when they even exist; most DB pensions have disappeared). Many have accumulated significant sums in DC-plans such as 401k, 403b, 457, etc, but need guidance for decumulation plans. The Author suggests having 67% of retirement needs as secure income – Social Security (delay if possible), guaranteed-income (workplace or private annuities), pensions; the remainder 33% may come from portfolios. Also recommended are improved retirement plan disclosures (with illustrations for potential income in retirement) and employer-supported financial advice.
NOTE. 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.
(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
LINK
