From Barron’s, February 26, 2024 (Part 2)
Feb 24, 2024 16:19:27 GMT
chang, Chahta, and 4 more like this
Post by yogibearbull on Feb 24, 2024 16:19:27 GMT
Pg 9. PREVIEW & REVIEW (consolidated). M&A and IPO markets have been in hibernation since the 2021 peak due to economic concerns and extra scrutiny by Biden Administration (WH, FTC, DOJ, etc). Hopes are that with markets rallying, this window will open wide. Recent deals include Discover/DFS & COF, Ansys/ANSS & SNPS, Vizio/VZIO & WMT, Juniper/JNPR & HPE, Albertsons/ACI & KR, US Steel/X & NPSCY, etc.
DATA THIS WEEK. New home sales on MONDAY; home price index, durable goods orders, consumer confidence on TUESDAY; wholesale inventories on WEDNESDAY; personal income and consumption expenditures (PCE index +2.4% yoy, core +2.8%) on THURSDAY; construction spending, UM sentiment 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. Bloomin’s Brands (BLMN; yield 3.7%; fwd P/E 10.7; buybacks; brands include Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, etc; boosting sales and margins via new ads/marketing, digital apps, portable credit card readers, cost cutting; activist Starboard Value owns 9.7% and has 2 board seats; pg 13).
BEARISH.
Pg 10, TECH TRADER. Nvidia/NVDA is in a different league even within the Magnificent 7. It’s the king of AI (and the universe?). Its market-cap is #3 (#1 AAPL, #2 MSFT; that’s 10.8x INTC). Its blowout report came through on all fronts. But how long can a semi hardware company (with good software side) grow revenues at +234% guided? So far, it has been a great orchestra with NVDA, its suppliers, its supply-chain partners. It’s introducing a new chip every year vs 2 years before. Astronomical growth is often associated with software companies that don’t need much capex to grow (after the initial costs), but NVDA wants to change all that.
Pg 11: Several FOREIGN companies are listed on the US exchanges or available as OTC, but some large foreign companies don’t do that and are practically out of the reach of the US investors. S Koran Samsung Electronics (yield 2%; fwd P/E 16 only; market-cap $330 billion) can be accessed via S Korean brokers only; ETF EWY has 22% but also has a lot of unrelated stuff. Chinese Kweichow Moutai (yield 2.8%; fwd P/E 23; market value $285 billion) Ashares can be accessed via Interactive Brokers/IBKR and also Shanghai-HK-Connect. Saudi Aramco (yield 5.9%; fwd P/E 17; market cap $1.973 trillion, but float is tiny 1.5%) can be accessed via Saudi brokers (but accreditation requires $500 million in assets) or ETF KSA that has 7%.
Pg 12. But there is no shortage of foreign companies listed in the US – directly (sole or dual listings), as ADRs, or on the OTC. The US markets are deep, liquid and have more “sophisticated” investors for risky/ speculative areas. Recent European companies include ARM, AS, BIRK, FLUT, etc; older companies are AZN, BP, PFE, SHEL, etc; pending may be Plus500, Pearson (already has ADR PSO), etc.
Pg 14: ESG/Sustainable companies ranked by Barron’s and Calvert in 5 categories to produce an overall score – governance/shareholders, employees, customers, community, the planet.
Top 5/100: CLX, KMB, CBRE, HAS, A
Bottom 5/100: CAT, KHC, ABM, SUM, RARE.
Pg 22, INCOME. Traditional AUTO stocks F and GM won’t be appealing even with low fwd P/Es until their regular dividends are boosted substantially. Investors don’t care much about their buyback programs. Several European automakers use variable dividends and have better valuations.
Pg 23, FUNDS. Use active funds to exploit the fire sale in HEALTHCARE stocks. MANY biotech stocks were selling below their cash on the balance sheets in 10/2023 and there has been a good rebound since with XBI +40% (still well below 2/2021 peak). Mentioned are BHCFX (37% SC/MC), JAGLX, PHSTX (value), PRHSX (all-caps with some risky bets), VGHCX (giant/biggest, so LC orientation). (By @lewisbraham at MFO)
Pg 25, ECONOMY. EVERYONE knows that BOGLE/ Vanguard started the first SP500 mutual fund. But who started the first US total market INDEX? That was Wilshire 5000 (W5000) in 1974 by Dennis TITO/ Wilshire Associates (names after a CA blvd) and now several firms/indexers offer total stock market indexes. While a catchy “5000” has always been in the name, W5000 had 7,378 stocks in 1998, and only 3,392 in 01/2024. The number of US stocks has shrunk from M&A, LBOs, bankruptcies, and the new listings haven’t been enough. W5000 has gone through several hands and prefixes – FT-, DJ-, back to None-, and now again FT- (so, FT W5000). Vanguard was probably the 1st to offer a total stock market FUND in 1992 under a license from Wilshire Associates, but Vanguard has changed the underlying index several times – to MSCI, and now CRSP. Wilshire Associates also started the mutual fund WFIVX / WINDX in 02/1999 (current AUM $253.4 million only). Dennis Tito, 84, sold Wilshire Associates in 2021 to two private-equity firms (CEO a former FTSE executive Mark MAKEPEACE) and they spun off Wilshire Indexes to a group that includes themselves, Mark Makepeace, FT, Singapore Exchange. And obviously, Wilshire indexes have gone global. (By Allan SLOAN, an award-winning independent journalist)
Pg 26, Q&A/Interview. Suni HARFORD, President of Asset Management, UBS. She thrives on business challenges and financial crises. She thinks that the US stocks below the highflying mega-caps are fine. Russia-Ukraine war has been a huge setback for Europe. Asia has been dragged down by China that can turn on a dime, but Japan has been rallying. Many countries will have elections in 2024, so that should be a support for economies. Allocation 60-40 is making sense again, but she recommends carving out 20% for alternatives – real estate, private-equity, private-credit, etc. Interest rates are normalizing and aren’t high by historical standards. Customized direct indexing for separately managed accounts (SMAs) is in favor and is a big and growing business for UBS. The ESG is less popular in the US as there is lot of anti-ESG misinformation; even Texas has 30% from renewable energy now. But ESG is growing in Europe and Asia with new twists – nature-based solutions, blended investment-finance combo projects, etc. Women have come a long way in business and finance, but more are needed. This industry offers more flexible schedules but requires hard work and has good rewards. Her husband retired 12 years ago, and her UBS stint in 2017 was to be a short post-retirement job, but she may finally leave after the Credit Suisse integration.
Pg 54, OTHER VOICES. Chris GRISANTI, MAI Capital Management. What if the US ECONOMY is getting stronger and RATE cuts don’t materialize? Jobs reports, rising wages, Economic Surprise Index, PMI, etc point to improving economy. Inflation has moderated (although higher than Fed’s +2% average target). The stock market is rallying, but it may eventually run into the Fed. Stick with quality companies; higher rates for longer will be bad for weaker companies.
Pg 55, RETIREMENT. Target-Date Funds (TDFs) were thought to be set-and-forget funds, but their short history has revealed some problems. The TDFs have adjusted by offering variations within each TDF 20XX as some wanted slightly more or less equity. So, instead of glide-path, we have glide-band. Many TDFs are passive, but several are active or with active-passive mix; some include both mutual funds and ETFs. Their bond sleeves have been stodgy, often with too much of TIPS, but some are now including HY, EMs, FR/BL, etc. (TDFs benefitted hugely from the laws that allow them to be the default options for 401k/403b/457 plan auto-signups and auto-escalations)
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. New home sales on MONDAY; home price index, durable goods orders, consumer confidence on TUESDAY; wholesale inventories on WEDNESDAY; personal income and consumption expenditures (PCE index +2.4% yoy, core +2.8%) on THURSDAY; construction spending, UM sentiment 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. Bloomin’s Brands (BLMN; yield 3.7%; fwd P/E 10.7; buybacks; brands include Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, etc; boosting sales and margins via new ads/marketing, digital apps, portable credit card readers, cost cutting; activist Starboard Value owns 9.7% and has 2 board seats; pg 13).
BEARISH.
Pg 10, TECH TRADER. Nvidia/NVDA is in a different league even within the Magnificent 7. It’s the king of AI (and the universe?). Its market-cap is #3 (#1 AAPL, #2 MSFT; that’s 10.8x INTC). Its blowout report came through on all fronts. But how long can a semi hardware company (with good software side) grow revenues at +234% guided? So far, it has been a great orchestra with NVDA, its suppliers, its supply-chain partners. It’s introducing a new chip every year vs 2 years before. Astronomical growth is often associated with software companies that don’t need much capex to grow (after the initial costs), but NVDA wants to change all that.
Pg 11: Several FOREIGN companies are listed on the US exchanges or available as OTC, but some large foreign companies don’t do that and are practically out of the reach of the US investors. S Koran Samsung Electronics (yield 2%; fwd P/E 16 only; market-cap $330 billion) can be accessed via S Korean brokers only; ETF EWY has 22% but also has a lot of unrelated stuff. Chinese Kweichow Moutai (yield 2.8%; fwd P/E 23; market value $285 billion) Ashares can be accessed via Interactive Brokers/IBKR and also Shanghai-HK-Connect. Saudi Aramco (yield 5.9%; fwd P/E 17; market cap $1.973 trillion, but float is tiny 1.5%) can be accessed via Saudi brokers (but accreditation requires $500 million in assets) or ETF KSA that has 7%.
Pg 12. But there is no shortage of foreign companies listed in the US – directly (sole or dual listings), as ADRs, or on the OTC. The US markets are deep, liquid and have more “sophisticated” investors for risky/ speculative areas. Recent European companies include ARM, AS, BIRK, FLUT, etc; older companies are AZN, BP, PFE, SHEL, etc; pending may be Plus500, Pearson (already has ADR PSO), etc.
Pg 14: ESG/Sustainable companies ranked by Barron’s and Calvert in 5 categories to produce an overall score – governance/shareholders, employees, customers, community, the planet.
Top 5/100: CLX, KMB, CBRE, HAS, A
Bottom 5/100: CAT, KHC, ABM, SUM, RARE.
Pg 22, INCOME. Traditional AUTO stocks F and GM won’t be appealing even with low fwd P/Es until their regular dividends are boosted substantially. Investors don’t care much about their buyback programs. Several European automakers use variable dividends and have better valuations.
Pg 23, FUNDS. Use active funds to exploit the fire sale in HEALTHCARE stocks. MANY biotech stocks were selling below their cash on the balance sheets in 10/2023 and there has been a good rebound since with XBI +40% (still well below 2/2021 peak). Mentioned are BHCFX (37% SC/MC), JAGLX, PHSTX (value), PRHSX (all-caps with some risky bets), VGHCX (giant/biggest, so LC orientation). (By @lewisbraham at MFO)
Pg 25, ECONOMY. EVERYONE knows that BOGLE/ Vanguard started the first SP500 mutual fund. But who started the first US total market INDEX? That was Wilshire 5000 (W5000) in 1974 by Dennis TITO/ Wilshire Associates (names after a CA blvd) and now several firms/indexers offer total stock market indexes. While a catchy “5000” has always been in the name, W5000 had 7,378 stocks in 1998, and only 3,392 in 01/2024. The number of US stocks has shrunk from M&A, LBOs, bankruptcies, and the new listings haven’t been enough. W5000 has gone through several hands and prefixes – FT-, DJ-, back to None-, and now again FT- (so, FT W5000). Vanguard was probably the 1st to offer a total stock market FUND in 1992 under a license from Wilshire Associates, but Vanguard has changed the underlying index several times – to MSCI, and now CRSP. Wilshire Associates also started the mutual fund WFIVX / WINDX in 02/1999 (current AUM $253.4 million only). Dennis Tito, 84, sold Wilshire Associates in 2021 to two private-equity firms (CEO a former FTSE executive Mark MAKEPEACE) and they spun off Wilshire Indexes to a group that includes themselves, Mark Makepeace, FT, Singapore Exchange. And obviously, Wilshire indexes have gone global. (By Allan SLOAN, an award-winning independent journalist)
Pg 26, Q&A/Interview. Suni HARFORD, President of Asset Management, UBS. She thrives on business challenges and financial crises. She thinks that the US stocks below the highflying mega-caps are fine. Russia-Ukraine war has been a huge setback for Europe. Asia has been dragged down by China that can turn on a dime, but Japan has been rallying. Many countries will have elections in 2024, so that should be a support for economies. Allocation 60-40 is making sense again, but she recommends carving out 20% for alternatives – real estate, private-equity, private-credit, etc. Interest rates are normalizing and aren’t high by historical standards. Customized direct indexing for separately managed accounts (SMAs) is in favor and is a big and growing business for UBS. The ESG is less popular in the US as there is lot of anti-ESG misinformation; even Texas has 30% from renewable energy now. But ESG is growing in Europe and Asia with new twists – nature-based solutions, blended investment-finance combo projects, etc. Women have come a long way in business and finance, but more are needed. This industry offers more flexible schedules but requires hard work and has good rewards. Her husband retired 12 years ago, and her UBS stint in 2017 was to be a short post-retirement job, but she may finally leave after the Credit Suisse integration.
Pg 54, OTHER VOICES. Chris GRISANTI, MAI Capital Management. What if the US ECONOMY is getting stronger and RATE cuts don’t materialize? Jobs reports, rising wages, Economic Surprise Index, PMI, etc point to improving economy. Inflation has moderated (although higher than Fed’s +2% average target). The stock market is rallying, but it may eventually run into the Fed. Stick with quality companies; higher rates for longer will be bad for weaker companies.
Pg 55, RETIREMENT. Target-Date Funds (TDFs) were thought to be set-and-forget funds, but their short history has revealed some problems. The TDFs have adjusted by offering variations within each TDF 20XX as some wanted slightly more or less equity. So, instead of glide-path, we have glide-band. Many TDFs are passive, but several are active or with active-passive mix; some include both mutual funds and ETFs. Their bond sleeves have been stodgy, often with too much of TIPS, but some are now including HY, EMs, FR/BL, etc. (TDFs benefitted hugely from the laws that allow them to be the default options for 401k/403b/457 plan auto-signups and auto-escalations)
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