- Cover Story: Suggests most bull markets are derailed by recessions, as opposed to valuations or political issues; Suggests while Fed policy will not lead to a bear market, if rates are hiked more or faster than expected it could weigh on markets; Allen Root, Baird senior analyst said some think the next bear market will come from some form of central bank liquidation.
- Does not expect Harvey impact will be large enough to ‘meaningfully’ change commercial and reinsurance pricing and hurt the large capital bases of P&C insurers. Suggests insurance companies could start providing preliminary loss estimates in the coming weeks. KBW analyst reiterated positive comments on Chubb (CB). Says companies includingAllstate (ALL), Berkshire Hathaway (BRK.B) andProgressive (PGR) can all comfortably absorb auto-related losses.
Nathan’s Famous (NATH) mentioned positively by Gravity Capital Management. Suggests the company may not be being properly understood given its low analyst coverage. Suggests the stock is trading below intrinsic asset value. Positive on the value of Nathan’s trademarks and royalty business. Has a failure value estimate of $80-85/share (current price: $56.95)
Barons Capital is positive on Gartner (IT), Priceline (PCLN), Verisk Analytics (VRSK), FactSet Research (FDS), Vail Resorts (MTN) and TransUnion (TRU).
- Tech Trader: Suggests in the future artificial-intelligence (AI) could be used to help in the development of products, which could benefit software-tool makers such as New Relic (NEWR) and Ansys (ANSS) and manufacturer Flex (FLEX). Says the next wave will be using smart software to test and refine products before humans are involved.
Speaking of Dividends: Kian Salehizadeh, sr analyst at Reality Shares, suggests retailers TJX (TJX) and Home Depot (HD) have the ability to sustain dividend payments amid their ratios of free cash flow to annualized dividend payments. Suggests Ross Stores (ROST), Costco (COST) and Wal-Mart (WMT) have also sustainable dividends; Salehizadeh suggests Macy’s (M) dividend carries risks. Macy’s has a dividend yield of over 6%
Finding Opportunity in High Yield Bonds: Mainstay High Yield Corporate Bond Fund is positive on Netflix (NFLX) corporate bonds, cites high market cap versus outstanding debt level and strategic value from its large global customer base. The fund did not purchase the bonds most recently issued by Tesla (TSLA) because of factors including the company’s lack of free cash flow and the lack of covenants related to the bonds. Did not purchase any of the bonds recently issued by Staples (SPLS).
- European Trader: Suggests it could be time to consider taking profits in Antofagasta (ANTO.UK) which has risen over 50% in 2017, outperforming BHP and Fresnillo, as some bears are cautious on outlook for copper prices amid some questions over whether gains in the metal have been more driven by fundamentals or speculation. Liberum believes copper prices need to rise sharply vs current levels in order to justify Antofagasta’s current price. The firm has a sell rating on the copper miner with a price target of 420p (current price is 1,058p)
- Asian Trader: Believes Japanese equities are ‘cheap’ based on forward earnings vs equites in Europe and the US. Chief strategist at Nomura believes Japanese corporate earnings may grow faster than US earnings. The strategist favors Japanese REITs, cites loose monetary policy and yield demand. He also says Japanese automakers are increasing their global market shares.
- Emerging Markets: Co-manager at Henderson Global Equity Income Fund says the dividend trend for large emerging market companies seems to be improving. Notes various EM tech companies have raised dividends including Tencent (700.HK), Samsung Electronics (005930.KR) and Taiwan Semi (2330.TW). Other companies that have either restored or increased dividends include Vale, Sberbank, Wal-Mart de Mexico and Thailand’s PTT.
Commodities: Comments on the strength in industrial metals in 2017, driven by factors including the weaker US dollar, supply cuts by miners, production reductions in China, and an overall rise in demand. S&P GSCI Industrial Metals spot index has risen 22%YTD (vs. ~19% rise in 2016). Palladium prices have risen over 40% YTD amid growth in auto production and supply deficit, says Edward Egilinsky (managing director, Direxion Investments). Prices of the metal in the future could be weighed down by move to electric cars, suggests Christopher Ecclestone (mining strategist, Hallgarten & Co). Copper has risen ~24% this year. Expects additional, although more limited, gains for certain industrial metals on concerns about tight supplies and more optimism regarding global growth. China’s proposed ban on the import of scrap metal will increase demand for copper concentrate, also prices could gradually rise as finding additional copper supplies becomes more costly, says Nico Pantelis (head of research, Secular Investor); Zinc prices on the LME recently hit close to 10-year high, as China reduced capacity and various large mines have shut down over past few years. Zinc prices longer term could have more upward than downward pressure, positive on Galway Metals (GWM.CA) and Tinka Resources (TK.CA), says Brent Cook (co-author of Exploration Insights). Iron-ore -3.2% YTD near $77.10/mt amid recent decline in steel prices, which could temporarily cap further gains, suggests prices could remain in the $70s if China’s steel production remains relatively strong.
