From Barron’s, February 19, 2024 (Part 2)
Feb 17, 2024 14:06:32 GMT
chang, rhythmmethod, and 3 more like this
Post by yogibearbull on Feb 17, 2024 14:06:32 GMT
Pg 9. PREVIEW & REVIEW (consolidated). For a change, the small ENDOWMENT funds outperformed the big ones for 12-months ending on 6/30/23 (+9.8% vs +2.8% only; it takes that long for most to report the data); SP500 +19.6%. Alternatives were a huge drag for big endowment funds. Endowment withdrawals rose as colleges/universities withdrew more for financial aid (there have been public complaints about some universities just sitting on excess endowments, and questions arose about their tax-exempt status) and gifts were down.
DATA THIS WEEK. LEI on TUESDAY; FOMC Minutes on WEDNESDAY; existing home sales on THURSDAY.
CLOSED. US markets on MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Military contractor L3Harris (LHX; fwd P/E 16; systems for air, land, sea, space; the CEO under review; activist D.E Shaw has 2 board seats now; pg 11);
Alternatives manager DigitalBridge Group; DBGR; sold or spun off its cell tower, digital network and data center businesses/REITs to focus on private-equity; its competition now will be BX, TPG, etc; ignore its next report on Feb 10 and also its current financials/valuations; pg 15).
BEARISH.
Pg 12: CHINA’s go-go days are over and now it’s a value play in the Year of the Wood Dragon at fwd P/E 9 only; attractive are consumer and entertainment sectors, dividend-payors (also factoring the shareholder-yield). It may rebound from its worst slump in 40 years. Unemployment is high. Government has focused more on political stability and security, and less on economic growth. Big businesses have been rattled by government crackdowns. Covid stimulus never happened, nor post-Covid rebound. Current stimulative steps are small. One problem is already high debt. It has restricted short selling; the local governments are encouraged to buy stocks or provide loans. The property market, 20% of GDP, is in the 4th year of contraction. Many Chinese are paying mortgages on contracted homes that are yet to be built. Public confidence is low. Even many Chinese are looking to invest overseas.
Foreign fund flows have turned negative. Foreign companies are cutting outlooks for their Chinese businesses. The move away from China continues. Many foreign investors now consider China un-investable. China still has a huge economic heft and grew at +5.2% nominal in 2023, may be +4.9% in 2024. The trade surplus is high and rising, but overcapacity and overproduction in several critical areas will pose challenges, including foreign threats of tariffs or sanctions.
Pg 21, FUNDS. CORPORATE bond funds are attractive for going out a bit on duration and credit spreads. Mentioned are ISTB (ST); LQD, VCIT; FLTR (inv-gr floater); ANGL (HY), NHMAX (muni HY).
EXTRA, FUNDS. Watch AAPL, BLK, TSLA, etc during the PROXY season for issues related to AI, ESG, executive pay, board independence, etc.
EXTRA, FUNDS. Bill ACKMAN/Pershing Square Holdings (“PSH”) wants to launch a very concentrated CEF PSUS (12-24 stocks) in the US; its projected $10 billion AUM at ER of 2% will make it 2x the largest US CEF PDI (not counting the gold-CEFs PHYS) and also among the most expensive. This is a tough CEF market and there were no new CEF IPOs in 2023. Ackman’s UK-listed CEF that is available in the US OTC market as PSHZF also has $10 billion AUM and it trades at 25% discount from the NAV; it charges ER of 1.5% plus 16% of profits (this hedge-fund fee structure isn’t allowed in the US). So, why would the US investors pay full NAV for the new PSUS? In the past, Ackman tried to list PSHZF on a US exchange, even trying some SPAC route (after his previous strange SPAC idea collapsed), but there were problems.
Pg 22, INCOME. Overlooked natural-gas utilities with dividends and growth include ATO, NI, NJR, NWN, OGS, SR, SWX.
Pg 23, ECONOMY. With good economic data and a strong stock market, the FED may not even cut rates this year. That isn’t the base case for many strategists, and they expect some cuts, but not as many as the fed fund traders think (5). A rising stock market is helping many to RETIRE EARLY leading to the so-called “excess retirees”. Of course, there may be other factors. This has pros (e.g. strong job market) and cons (e.g. loss of experienced workers).
Pg 24, TECH TRADER. Barry DILLERS’ media conglomerate IAC is attractive at 20% discount from sum-of-the-parts (SOTP) valuation. It’s a combo private-equity, venture-capital, mutual fund, and a collection of media and fintech companies. It has large stakes in MGM, ANGI, Dotdash Meredith, Turo, Ask Media, etc.
Pg 26, Q&A/Interview. Daleep SINGH, White House Global Economic Strategist; formerly at PGIM, White House, NY Fed. The post-Cold War world of unipolar geopolitics in 1990s was an anomaly and we now see bi/tri-polar world. Some of the big problems today will require public-private cooperation/partnership. Inflation may be higher for longer as on/near-shoring (deglobalization), energy transition, cybersecurity, etc will be costly. Markets are too emotional on their own and need a guiding hand at times. Higher US spending needs will pose a challenge for the Treasury market. Congress has been a bottleneck for debt-ceiling, budget and fiscal issues. That leads to higher uncertainties for the US and foreign investors and higher risk premiums. Russia has weaponized oil, but it isn’t the only oil producer (#3?). Price caps on Russian oil are benefiting Europe and Asia by restraining Russian oil profits. But it’s a cat-and-mouse game in the global oil market. (Dollar-diplomacy, an issue now for many foreign countries and central banks, isn’t mentioned)
Pg 54, OTHER VOICES. Patti DOMM, financial journalist (before retirement, at CNBC/CMCSA, Reuters/TRI, etc). STOCK-PICKING has been difficult. The ranks of stock ANALYSTS have thinned. The number of US STOCKS has shrunk. INDEXING is very popular. But this means future inefficiencies as there will be fewer analysts per stock. BoA/BAC has a list of stocks with least analyst coverages – BIO, BV, CF, PHIN, PLD, etc. Ariel Investments likes small-caps for this reason also. But these illiquid stocks can be very volatile and may appear to be bottomless on bad news, so one has to know the fundamentals of these companies well.
Pg 55, RETIREMENT. EARLY RETIREMENT (voluntary or involuntary) involves complex decisions. There are issues of missed paychecks, 401k/403b (keep or rollover), health insurance (COBRA or retiree plan or Obamacare or on own), Social Security (at 62 or FRA or 70), post-retirement activities (part-time work, hobbies, travel). Some employers allow phased retirement.
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.
LINK
DATA THIS WEEK. LEI on TUESDAY; FOMC Minutes on WEDNESDAY; existing home sales on THURSDAY.
CLOSED. US markets on MONDAY.
www.barrons.com/magazine?mod=BOL_TOPNAV
Data This Week Link,
www.barrons.com/market-data/market-lab?mod=md_subnav#consensus-estimate
BULLISH. Military contractor L3Harris (LHX; fwd P/E 16; systems for air, land, sea, space; the CEO under review; activist D.E Shaw has 2 board seats now; pg 11);
Alternatives manager DigitalBridge Group; DBGR; sold or spun off its cell tower, digital network and data center businesses/REITs to focus on private-equity; its competition now will be BX, TPG, etc; ignore its next report on Feb 10 and also its current financials/valuations; pg 15).
BEARISH.
Pg 12: CHINA’s go-go days are over and now it’s a value play in the Year of the Wood Dragon at fwd P/E 9 only; attractive are consumer and entertainment sectors, dividend-payors (also factoring the shareholder-yield). It may rebound from its worst slump in 40 years. Unemployment is high. Government has focused more on political stability and security, and less on economic growth. Big businesses have been rattled by government crackdowns. Covid stimulus never happened, nor post-Covid rebound. Current stimulative steps are small. One problem is already high debt. It has restricted short selling; the local governments are encouraged to buy stocks or provide loans. The property market, 20% of GDP, is in the 4th year of contraction. Many Chinese are paying mortgages on contracted homes that are yet to be built. Public confidence is low. Even many Chinese are looking to invest overseas.
Foreign fund flows have turned negative. Foreign companies are cutting outlooks for their Chinese businesses. The move away from China continues. Many foreign investors now consider China un-investable. China still has a huge economic heft and grew at +5.2% nominal in 2023, may be +4.9% in 2024. The trade surplus is high and rising, but overcapacity and overproduction in several critical areas will pose challenges, including foreign threats of tariffs or sanctions.
Pg 21, FUNDS. CORPORATE bond funds are attractive for going out a bit on duration and credit spreads. Mentioned are ISTB (ST); LQD, VCIT; FLTR (inv-gr floater); ANGL (HY), NHMAX (muni HY).
EXTRA, FUNDS. Watch AAPL, BLK, TSLA, etc during the PROXY season for issues related to AI, ESG, executive pay, board independence, etc.
EXTRA, FUNDS. Bill ACKMAN/Pershing Square Holdings (“PSH”) wants to launch a very concentrated CEF PSUS (12-24 stocks) in the US; its projected $10 billion AUM at ER of 2% will make it 2x the largest US CEF PDI (not counting the gold-CEFs PHYS) and also among the most expensive. This is a tough CEF market and there were no new CEF IPOs in 2023. Ackman’s UK-listed CEF that is available in the US OTC market as PSHZF also has $10 billion AUM and it trades at 25% discount from the NAV; it charges ER of 1.5% plus 16% of profits (this hedge-fund fee structure isn’t allowed in the US). So, why would the US investors pay full NAV for the new PSUS? In the past, Ackman tried to list PSHZF on a US exchange, even trying some SPAC route (after his previous strange SPAC idea collapsed), but there were problems.
Pg 22, INCOME. Overlooked natural-gas utilities with dividends and growth include ATO, NI, NJR, NWN, OGS, SR, SWX.
Pg 23, ECONOMY. With good economic data and a strong stock market, the FED may not even cut rates this year. That isn’t the base case for many strategists, and they expect some cuts, but not as many as the fed fund traders think (5). A rising stock market is helping many to RETIRE EARLY leading to the so-called “excess retirees”. Of course, there may be other factors. This has pros (e.g. strong job market) and cons (e.g. loss of experienced workers).
Pg 24, TECH TRADER. Barry DILLERS’ media conglomerate IAC is attractive at 20% discount from sum-of-the-parts (SOTP) valuation. It’s a combo private-equity, venture-capital, mutual fund, and a collection of media and fintech companies. It has large stakes in MGM, ANGI, Dotdash Meredith, Turo, Ask Media, etc.
Pg 26, Q&A/Interview. Daleep SINGH, White House Global Economic Strategist; formerly at PGIM, White House, NY Fed. The post-Cold War world of unipolar geopolitics in 1990s was an anomaly and we now see bi/tri-polar world. Some of the big problems today will require public-private cooperation/partnership. Inflation may be higher for longer as on/near-shoring (deglobalization), energy transition, cybersecurity, etc will be costly. Markets are too emotional on their own and need a guiding hand at times. Higher US spending needs will pose a challenge for the Treasury market. Congress has been a bottleneck for debt-ceiling, budget and fiscal issues. That leads to higher uncertainties for the US and foreign investors and higher risk premiums. Russia has weaponized oil, but it isn’t the only oil producer (#3?). Price caps on Russian oil are benefiting Europe and Asia by restraining Russian oil profits. But it’s a cat-and-mouse game in the global oil market. (Dollar-diplomacy, an issue now for many foreign countries and central banks, isn’t mentioned)
Pg 54, OTHER VOICES. Patti DOMM, financial journalist (before retirement, at CNBC/CMCSA, Reuters/TRI, etc). STOCK-PICKING has been difficult. The ranks of stock ANALYSTS have thinned. The number of US STOCKS has shrunk. INDEXING is very popular. But this means future inefficiencies as there will be fewer analysts per stock. BoA/BAC has a list of stocks with least analyst coverages – BIO, BV, CF, PHIN, PLD, etc. Ariel Investments likes small-caps for this reason also. But these illiquid stocks can be very volatile and may appear to be bottomless on bad news, so one has to know the fundamentals of these companies well.
Pg 55, RETIREMENT. EARLY RETIREMENT (voluntary or involuntary) involves complex decisions. There are issues of missed paychecks, 401k/403b (keep or rollover), health insurance (COBRA or retiree plan or Obamacare or on own), Social Security (at 62 or FRA or 70), post-retirement activities (part-time work, hobbies, travel). Some employers allow phased retirement.
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.
LINK
