From Barron’s, February 5, 2024 (Part 2)
Feb 3, 2024 15:44:38 GMT
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Post by yogibearbull on Feb 3, 2024 15:44:38 GMT
Pg 8. PREVIEW & REVIEW (consolidated). DRONE attacks LAST Sunday on the US base in Jordan killed 3 US servicemen and injured several. The US launched massive retaliatory strikes on dozens of targets in Syria and Iraq late-FRIDAY; these were aimed for Iran-backed militia groups. Oil prices haven’t been affected so far (but major markets were closed). The shipping costs have been elevated since late-December. But watch for disruptions in both – oil production, and oil and general shipping.
EXTRA. Barron’s Al ROOT reviewed his Tesla/TSLA Model 3 after 10,000 miles. He canceled FSD (full self-driving; it isn’t truly that) subscription after 1,000 miles – it’s great for long trips, but not worth the cost or headaches for urban driving. Adding or canceling features on Tesla is easy to do online. He was able to tap into free charging a few times – some businesses offer free EV charging so that the EV drivers can spend that hour for food, coffee, shopping inside the facility. One problem was switching between EV and ICE cars – stuff about keys, regenerative braking (it’s also available in hybrids), oil changes, etc. Overall experience – Excellent.
DATA THIS WEEK. International trade deficit , consumer credit on WEDNESDAY; wholesale inventories on THURSDAY; annual CPI revisions issued on FRIDAY (monthly CPI release is in the following week).
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Small-cap specialty food distributor Chef’s Warehouse (CHEF; fwd P/E 24.6; P/EBITDA 9; distributes to high-end restaurants – Wagyu beef, stone crabs, premium olive oils and cheeses, etc; rapid growth via M&A will slow down temporarily to improve margins and consolidation; reports 2/14/24; pg 13);
Digital wallets (Existing fintechs – PYPL (including Venmo), SQ, Zelle (sponsored by a bank consortium); new big-tech entrants – AAPL, GOOGL, AMXN, X/Twitter; banks are playing catchup or trying to block other; state-charted ILC offer a loophole to operate outside of banking regulations, but with FDIC supervision and insurance; the CFPB is also increasing oversights in this area; pg 17).
Commercial real estate (CRE) reviewed by Sonny KALSI at BGO/SLF (regional bank NYCB reignited fears of CRE crisis; Kalsi isn’t panicking, but sees opportunities instead; the office sector is the most troubled and even that will bottom at some point; surprisingly, the next trouble spot may be multifamily apartments (not malls! in fact, smaller and strip-malls are doing fine) as high rents become unsustainable (the CPI uses rent-equivalents); the best now are data-centers, industrial properties, etc; the trick is to avoid BOTH the top (overvalued) and bottom (trash) quintiles of the CREs, and the middle will be the most profitable; as banks pullback from the CREs, the private real estate has stepped in and there would be equity-like returns from private real estate credits; Asia isn’t inflicted with this work-from-home (WFH) problem; pg 18).
BEARISH. Boeing (BA; continuing headaches (2018, 2024) with 737MAX; company has design, manufacturing, quality control and leadership issues; airlines have limited choices – BA or Airbus/EADSY, China isn’t yet in the picture; investors do have choices – airlines (DAL), manufacturing (EADSY, RTX, GE), part suppliers (FTAI, TDG); pg 10).
Pg 9, TECH TRADER. BIG TECH earnings turned out to be OK. AI-related capex is rising, and so is its adoption, but the missing piece is AI profits. AI-hype is driving demand for semis and cloud resources. META started dividend at 0.5% yield. GOOGL search business may suffer from the use of AI elsewhere /everywhere. AAPL smells a bit stale.
Pg 19, FUNDS. Rather than creating new classes, several fund firms are just offering Class A shares as load-waived at 3rd party brokerages (Fidelity, Schwab, E*Trade/MS, etc). Examples include JUEAX, OLGAX, etc. If ETF cousins exist, they trade commission-free at most brokerages. (By @lewisbraham at MFO) (It seems that the pool of load-paying class A investors (suckers?) has shrunk so much that the firms don’t feel they have to protect this side of their business)
EXTRA, FUNDS. Performance lag and outflows continued for ESG funds. There were humongous outflows from ESGU in part because iShares replaced it in one of its ETF model portfolios. Some ESG funds were volatile due to their exposure to growth stocks and clean energy. Sentiment has turned against ESG, and several firms have dropped ESG from fund names.
Pg 21, INCOME. ENERGY stocks with good dividends include those with fixed dividends – XOM, CVX, VLO, CNQ, even the ETF XLE; and those with variable dividends – COP.
Pg 22, Q&A/Interview. Jonathan CURTIS, CIO Equity Group, Franklin Templeton. He likes AI, cloud computing, semis, and owns 6 of the Magnificent 7 (no META) but has reduced some of their weights. AAPL is facing issues with the US DOJ and in China. The big-tech rally may broaden.
EXTRA, CEO INTERVIEW. GE CEO CULP (2018- ) says that he looks forward because he can’t change the past. The GE spinoff will finally be complete on 04/2024 with the 3rd piece GE Power (Vernova)/GEV; GE Healthcare/GEHC was spun off in 12/2022; GE ticker will remain for GE Aerospace under Culp (Pandemic delayed this spinoff plan but didn’t derail it). All 3 GE-XXX will share the “GE” logo. The old GE Capital is long gone (sold in pieces, 2013-18; only a small GE Financial Services remains). (GE Appliances, now owned by Chinese Haier and US KKR since 2016, can also use the “GE” logo until 2056, but GE has no stake in it).
Pg 24, ECONOMY. SPAIN offers a lesson on INFLATION. Its CPI bottomed at +1.9% in 06/2023, but now it’s back up to +3.4%; the GDP growth is +2%. Geopolitical pressures on global supply-chains remain. So, the US FED may remain tight for a while even after achieving its +2% average target (there was lot of discussion at Powell’s presser on Wednesday about how “confident” the Fed was /is /will be, a new consideration beyond “data”?). The US economy is also strong.
Pg 54, OTHER VOICES. Nathan SHEETS, Citi/C. The US CONSUMER may finally be slowing spending. This consumer slowdown is also seen in Lat Am and Europe. The post-pandemic demand surge (more for services, less for goods) has passed, and central bank monetary tightening is having its delayed effects. The job market and inflation should also cool. However, the Russia-Ukraine war in its 3rd year (!) and Middle East tensions continue to disrupt shipping and keep pressure on global supply-chains. There are dozens of elections globally, including in the US, that would affect global politics and economies. This global slowdown has a silver lining – the central banks may ease monetary policy at some point in the future.
Pg 55, RETIREMENT. Another piece on the pros and cons of Medicare Advantage (MA) vs the original Medicare (Parts B & D) plus Medicare; the participant split is almost 50-50. Note that the Medigap plans are from private insurers (like the MA Plans) and their premiums rise due to inflation and age; the best and the most expensive Medigap plan is G now. Also beware of the differences between MA-HMO (less choices) vs MA-PPO (more choices), and coverage limitations for in and out of networks.
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
EXTRA. Barron’s Al ROOT reviewed his Tesla/TSLA Model 3 after 10,000 miles. He canceled FSD (full self-driving; it isn’t truly that) subscription after 1,000 miles – it’s great for long trips, but not worth the cost or headaches for urban driving. Adding or canceling features on Tesla is easy to do online. He was able to tap into free charging a few times – some businesses offer free EV charging so that the EV drivers can spend that hour for food, coffee, shopping inside the facility. One problem was switching between EV and ICE cars – stuff about keys, regenerative braking (it’s also available in hybrids), oil changes, etc. Overall experience – Excellent.
DATA THIS WEEK. International trade deficit , consumer credit on WEDNESDAY; wholesale inventories on THURSDAY; annual CPI revisions issued on FRIDAY (monthly CPI release is in the following week).
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Small-cap specialty food distributor Chef’s Warehouse (CHEF; fwd P/E 24.6; P/EBITDA 9; distributes to high-end restaurants – Wagyu beef, stone crabs, premium olive oils and cheeses, etc; rapid growth via M&A will slow down temporarily to improve margins and consolidation; reports 2/14/24; pg 13);
Digital wallets (Existing fintechs – PYPL (including Venmo), SQ, Zelle (sponsored by a bank consortium); new big-tech entrants – AAPL, GOOGL, AMXN, X/Twitter; banks are playing catchup or trying to block other; state-charted ILC offer a loophole to operate outside of banking regulations, but with FDIC supervision and insurance; the CFPB is also increasing oversights in this area; pg 17).
Commercial real estate (CRE) reviewed by Sonny KALSI at BGO/SLF (regional bank NYCB reignited fears of CRE crisis; Kalsi isn’t panicking, but sees opportunities instead; the office sector is the most troubled and even that will bottom at some point; surprisingly, the next trouble spot may be multifamily apartments (not malls! in fact, smaller and strip-malls are doing fine) as high rents become unsustainable (the CPI uses rent-equivalents); the best now are data-centers, industrial properties, etc; the trick is to avoid BOTH the top (overvalued) and bottom (trash) quintiles of the CREs, and the middle will be the most profitable; as banks pullback from the CREs, the private real estate has stepped in and there would be equity-like returns from private real estate credits; Asia isn’t inflicted with this work-from-home (WFH) problem; pg 18).
BEARISH. Boeing (BA; continuing headaches (2018, 2024) with 737MAX; company has design, manufacturing, quality control and leadership issues; airlines have limited choices – BA or Airbus/EADSY, China isn’t yet in the picture; investors do have choices – airlines (DAL), manufacturing (EADSY, RTX, GE), part suppliers (FTAI, TDG); pg 10).
Pg 9, TECH TRADER. BIG TECH earnings turned out to be OK. AI-related capex is rising, and so is its adoption, but the missing piece is AI profits. AI-hype is driving demand for semis and cloud resources. META started dividend at 0.5% yield. GOOGL search business may suffer from the use of AI elsewhere /everywhere. AAPL smells a bit stale.
Pg 19, FUNDS. Rather than creating new classes, several fund firms are just offering Class A shares as load-waived at 3rd party brokerages (Fidelity, Schwab, E*Trade/MS, etc). Examples include JUEAX, OLGAX, etc. If ETF cousins exist, they trade commission-free at most brokerages. (By @lewisbraham at MFO) (It seems that the pool of load-paying class A investors (suckers?) has shrunk so much that the firms don’t feel they have to protect this side of their business)
EXTRA, FUNDS. Performance lag and outflows continued for ESG funds. There were humongous outflows from ESGU in part because iShares replaced it in one of its ETF model portfolios. Some ESG funds were volatile due to their exposure to growth stocks and clean energy. Sentiment has turned against ESG, and several firms have dropped ESG from fund names.
Pg 21, INCOME. ENERGY stocks with good dividends include those with fixed dividends – XOM, CVX, VLO, CNQ, even the ETF XLE; and those with variable dividends – COP.
Pg 22, Q&A/Interview. Jonathan CURTIS, CIO Equity Group, Franklin Templeton. He likes AI, cloud computing, semis, and owns 6 of the Magnificent 7 (no META) but has reduced some of their weights. AAPL is facing issues with the US DOJ and in China. The big-tech rally may broaden.
EXTRA, CEO INTERVIEW. GE CEO CULP (2018- ) says that he looks forward because he can’t change the past. The GE spinoff will finally be complete on 04/2024 with the 3rd piece GE Power (Vernova)/GEV; GE Healthcare/GEHC was spun off in 12/2022; GE ticker will remain for GE Aerospace under Culp (Pandemic delayed this spinoff plan but didn’t derail it). All 3 GE-XXX will share the “GE” logo. The old GE Capital is long gone (sold in pieces, 2013-18; only a small GE Financial Services remains). (GE Appliances, now owned by Chinese Haier and US KKR since 2016, can also use the “GE” logo until 2056, but GE has no stake in it).
Pg 24, ECONOMY. SPAIN offers a lesson on INFLATION. Its CPI bottomed at +1.9% in 06/2023, but now it’s back up to +3.4%; the GDP growth is +2%. Geopolitical pressures on global supply-chains remain. So, the US FED may remain tight for a while even after achieving its +2% average target (there was lot of discussion at Powell’s presser on Wednesday about how “confident” the Fed was /is /will be, a new consideration beyond “data”?). The US economy is also strong.
Pg 54, OTHER VOICES. Nathan SHEETS, Citi/C. The US CONSUMER may finally be slowing spending. This consumer slowdown is also seen in Lat Am and Europe. The post-pandemic demand surge (more for services, less for goods) has passed, and central bank monetary tightening is having its delayed effects. The job market and inflation should also cool. However, the Russia-Ukraine war in its 3rd year (!) and Middle East tensions continue to disrupt shipping and keep pressure on global supply-chains. There are dozens of elections globally, including in the US, that would affect global politics and economies. This global slowdown has a silver lining – the central banks may ease monetary policy at some point in the future.
Pg 55, RETIREMENT. Another piece on the pros and cons of Medicare Advantage (MA) vs the original Medicare (Parts B & D) plus Medicare; the participant split is almost 50-50. Note that the Medigap plans are from private insurers (like the MA Plans) and their premiums rise due to inflation and age; the best and the most expensive Medigap plan is G now. Also beware of the differences between MA-HMO (less choices) vs MA-PPO (more choices), and coverage limitations for in and out of networks.
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
