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Morningstar CEO Kunal Kapoor said there are “just nine stocks that would rate as five stars in our coverage universe.
The U.S. stock market is so expensive that only a handful of stocks quality as “five-star” names, according to Kunal Kapoor, the chief executive officer of Morningstar Inc., who nonetheless stressed that investors shouldn’t panic.
In a speech Wednesday at his company’s annual investment conference, Kapoor pointed to a Morningstar calculation of fair value for the U.S. market. Last year, it was at 0.86, meaning the market was 14% undervalued. “Generally speaking it was a good environment to invest in, even if it felt uncertain,” he said.
Now, the metric is at 1.04, indicating it is 4% overvalued; last week, it was 2% overvalued. “There are just nine stocks that would rate as five stars in our coverage universe,” he said.
Morningstar defines a five-star stock as one where “appreciation beyond a fair risk-adjusted return is highly likely over a multiyear time frame.”
Kapoor didn’t give specific investment strategies, except to encourage investors to not panic and maintain their long-term strategies. “A retiree can generate 29% more income from proper planning alone,” he said, pointing to how over trading can appreciably depreciate one’s return.
“There were two kinds of advisors in the bear market of [the financial crisis],” he said. “The first type broke their rules. They panicked, moved to cask, broke from their asset allocations. They didn’t do all the things we aspire to do” as financial advisors.
“The second group also had it rough. But they stuck to their guns and did the right thing. They re -balanced, moved more assets into declining parts of the market, and ended up with really good results.”
While Tax Day passed a little over a week ago, the nation is gearing up for another event that could be called by the same name. President Trump's big tax plan today is expected to reduce the corporate rate from 35% to 15%, outline a sharp cut in the top rate on "pass-through" businesses, and propose a repatriation tax on offshore earnings of 10% versus the current 35%. The proposal, however, will not likely include a "border-adjustment" tax on imports.
How will equities react? Analysts seem divided over the tax plan, with some saying stocks could be vulnerable to a selloff, while others see it as a catalyst higher, along with earnings momentum. Future values are meanwhile predicting a much flatter open today, following yesterday's strong finish for U.S. markets. It included a triple-digit gain for the Dow and a record close above 6,000 for the Nasdaq.
Speculation is building on Wall Street that - should President Trump choose to replace Fed Chair Janet Yellen when her term expires next year - a likely replacement to run the central bank would be Gary Cohn. He's director of the National Economic Council and Trump's closest economic advisor. Cohn is also a former chief operating officer of Goldman Sachs (NYSE:GS).
For the third time in two months, a federal judge has knocked down an immigration order by President Trump, which sought to withhold funding from "sanctuary cities" that don't cooperate with immigration officials. "This case is yet one more example of egregious overreach by a single, unelected district judge," read a statement from the White House.
Canadian Prime Minister Justin Trudeau told President Trump in a phone call that he "refuted the baseless allegations" that persuaded Washington to slap a 20% tariff on softwood lumber from Canada. Next move, with NAFTA talks on the horizon? "Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!" Trump wrote in a tweet.
Amid high tensions on the Peninsula, the U.S. military has started moving key parts of its controversial THAAD anti-missile defense system to a deployment site in South Korea. The move, which has angered North Korea, China and Russia, prompted protests by hundreds of local residents and was denounced by the frontrunner in South Korea's presidential election.
European earnings roundup: Credit Suisse (NYSE:CS) +3% premarket after announcing a 4B Swiss Franc capital hike and posting its best quarterly profit since starting its restructuring plan. A Brazil recovery drove up Santander's (NYSE:SAN) profits, which rose 14% in the first quarter. BHP Billiton (NYSE:BHP) slashed full year production guidance for copper and coking coal and put its U.S. shale gas assets on the block again.
Call it Twitter TV or The Twitter Network... The company, which reports Q1 results today, plans to air 24/7 live video inside its apps and desktop site, Twitter's (NYSE:TWTR) Anthony Noto told BuzzFeed News, building on the 800+ hours it aired in the first three months of 2017. The announcement follows Twitter's recent loss of a cornerstone NFL deal to Amazon (NASDAQ:AMZN).
A Thai man broadcast a video of himself hanging his baby daughter on Facebook (NASDAQ:FB) then committing suicide, with the footage available to view for 24 hours before being taken down. The latest incident increases pressure on the platform to deal with inappropriate content following a string of other horrific videos. Mark Zuckerberg said last week his company had "a lot of work" to do on the problem.
Coming - in a while - to a theater near you... Disney (NYSE:DIS) has set some much-anticipated big film release dates. Star Wars: Episode IX, the completion of a nine-film saga, will head into theaters May 24, 2019. The next Indiana Jones picture (the fifth one) will be delayed a year to July 10, 2020, and its first date will go to live-action The Lion King instead. Frozen 2 will hit theaters Nov. 27, 2019.
ESPN could start issuing pink slips at its flagship cable sports channel today, and according to several reports, the layoffs may be more numerous than expected. Some 70 employees from the ranks of anchors, reporters, analysts and online writers may lose their jobs in coming weeks, while at least a few dozen had been anticipated. The struggles have been a drag on parent Walt Disney (DIS).
The FCC will begin a comprehensive review of its media regulations, starting at its May 18 meeting, with a large focus on overhauling its much-criticized media ownership restrictions. Many of them don't match current market conditions, announced Chairman Ajit Pai. The agency is also expected to unveil a strategy today for overturning net neutrality rules, a battle that will determine the future of the internet. Related tickers: CBS, CCOI, CHTR, CMCSA, CTL, CVC, DIS, DISH, ELNK, FOX, FOXA, FTR, SNE, T, TWX, VIA, VIAB, VZ
It's still safe to wear or buy the Flex 2 fitness tracker, Fitbit (NYSE:FIT) declared, as it investigates claims of a Wisconsin woman who said the band gave her second-degree burns. "I was literally just sitting and reading when my Fitbit exploded," Dina Mitchell told ABC News. "The bracelet melted and I got pieces of plastic burned into my arm."
Marking the latest legal setback for the firm, a South Korean court has ruled that UBER illegally used private vehicles for commercial purposes in Asia's fourth largest economy. It comes after Uber announced ambitious plans to roll out a network of VTOL aircraft, which will act as flying taxis, in the Dallas-Fort Worth area and Dubai by 2020.
Air passenger arrivals in the U.S. dropped by 4.3% in first quarter of the year, according to data from ForwardKeys, while arrivals in Canada and Mexico rose 6.1%. Travelers from the Middle East and Europe were possibly deterred by uncertainty over President Trump's travel ban, the travel analysis company said, as well as a strong dollar. Related tickers: AAL, ALK, DAL, JBLU, LUV, SAVE, UAL
Toshiba wants to replace auditor PricewaterhouseCoopers to resolve an impasse over full-year earnings and remain listed. The two have been at odds since a surprise $6.3B writedown at its Westinghouse unit, but the conglomerate needs shareholder approval to sack its auditor. PwC replaced Ernst & Young in June last year following Toshiba's (OTCPK:TOSYY) $1.3B accounting scandal.
McDonald's is shelving plans to sell a stake in its Japan unit that's seen a turnaround since it went on the block more than a year ago. "We believe the market is poised to maintain its strong momentum," CFO Kevin Ozan declared. The decision won't impact McDonald's (NYSE:MCD) long-term financial targets or its goal of having 95% of restaurants franchised over the long term.
Overshadowing Chipotle's Q1 results, the company told investors it had detected "unauthorized activity" on a network that supports payment processing at its restaurants. Chipotle (NYSE:CMG) believes it has taken the proper steps to stop the activity, which occurred between March 24 and April 18. Shares pulled back from earlier gains, but still posted an almost 3% advance in after-hours trading.
A victory for the vaping industry? A bill expected this week, from Republican Rep. Duncan Hunter of California, would reverse the Obama administration's "Deeming Rule." The law deems e-cigarettes to be tobacco products and subjects them to the same strict regulations governing traditional cigarettes. Hunter's bill would also exempt vaping devices from many of those rules. Related tickers: MO, BTI, LO, PM, VPCO, RAI
Tuesday's Key Earnings
3M (NYSE:MMM) +0.5% raising outlook for 2017.
AT&T (NYSE:T) -0.3% AH as wireless equipment sales slid.
Biogen (NASDAQ:BIIB) +3.6% exceeding expectations.
Caterpillar (NYSE:CAT) +7.9% crushing estimates.
Chipotle (CMG) +2.9% AH increasing comparable sales.
Coca-Cola (NYSE:KO) -0.4% with flat organic revenues.
Corning (NYSE:GLW) +3.7% posting strong sales growth.
DuPont (NYSE:DD) +3.6% beating expectations.
Eli Lilly (NYSE:LLY) -2.7% lowering EPS guidance.
Freeport-McMoRan (NYSE:FCX) +7.1% seeing big cash flows.
Lockheed Martin (NYSE:LMT) -2.2% trimming outlook.
McDonald's (MCD) +5.6% growing comparable sales.
Realty Income (NYSE:O) +1.1% AH beating estimates.
Rite Aid (NYSE:RAD) +6.4% following an earnings beat.
U.S. Steel (NYSE:X) -17% AH after a shocking loss.
Valero (NYSE:VLO) -1.5% expecting higher biofuel costs.
Wynn Resorts (NASDAQ:WYNN) +4.1% AH getting nod for a lagoon-theme park.
In Asia, Japan +1.1%. Hong Kong +0.5%. China +0.2%. India +0.6%. In Europe, at midday, London -0.1%. Paris +0.1%. Frankfurt -0.1%. Futures at 6:20, Dow +0.2%. S&P flat. Nasdaq +0.1%. Crude -0.2% to $49.45. Gold -0.1% to $1266.20. Ten-year Treasury Yield flat at 2.32%
When it was revealed earlier this month that AOL and Yahoo! (YHOO) would soon be known as Oath, the internet was equal parts confused and angered by the announcement.
Many wondered what the meaning was behind Verizon's (VZ) corporate rebranding following its $4.48 billion acquisition of Yahoo's core digital business. Others, meanwhile, began questioning if two of the most iconic and long-lived web brands would continue to survive.
Luckily for those clinging to their cherished internet brands, AOL has confirmed that it and Yahoo will live on even after Verizon decides to #TaketheOath, presumably in the next few months. In an interview with CNBC, AOL CEO Tim Armstrong emphasized that the two brands (and their popular properties) will continue to exist on their own, but that the name Oath would be a way to house the more than 25 brands that will be combined once the deal closes.
"It actually clears the lane for us to really promote Yahoo and AOL and TechCrunch and Huffington Post and Moviefone," Armstrong explained. "Some of the reaction you see to the brand, I think, is short-term thinking."
While it seems clear the Yahoo! brand will continue to exist, the company's near-death experience was enough to conjure memories of some of the ghosts of the internet's past. Here's a collection of some of the internet's most memorable brands that are now defunct or have since been rebranded:
Netscape was the company behind the first widely-used internet browser of the nascent world wide web way back in 1994. The browser, called Netscape Navigator, was the catalyst for the browser wars that proceeded throughout the late 1990s and early 2000s between Netscape, Microsoft's (MSFT) Internet Explorer and, later, Mozilla Firefox, Apple's (AAPL) Safari and Alphabet's (GOOGL) Google Chrome. Netscape was a publicly traded stock under the ticker NSCP, until 1998, when it was purchased by AOL for $4.2 billion. The NetScape home page from the 90s, complete with descriptions of what a hyperlink is, can still be visited here, however.
2. Ask Jeeves
Ask.com, formerly known as Ask Jeeves, was launched in 1996 as a search engine that produced answers in "natural language." The search engine, which became a public company trading under the symbol ASKJ, was widely recognized for its mascot, a butler named Jeeves. But the character was eventually retired whenIAC/InterActiveCorp ( IAC) acquired Ask Jeeves for $1.85 billion in 2005. Ask Jeeves still exists, but it's primarily a question-and-answer service, having largely lost the search engine market to Google.
One of the world's first web-based email services, Hotmail was started in 1996 and acquired by Microsoft in 1997 for $400 million. After several iterations, it was rebranded as Outlook.com in 2013. But many users are still able to send and receive emails today using their @hotmail.com addresses, although they're likely to be derided for it.
Launched in 2007, Justin.tv was one of the early pioneers of live streaming, allowing everyday users to create channels where they could broadcast live content, similar to Google's YouTube. The website's popular video game streaming section, Twitch.tv, was spun off in 2011 and Justin TV was shut down in 2014 to focus on the video game content. Twitch was bought that same year by Amazon (AMZN) for $970 million.
Before Google launched its flagship social media platform, Google Plus, it had Orkut. The networking site, launched in 2004, was named after Google employee Orkut Buyukkokten and quickly became one of the most-visited websites in India and Brazil. In 2014, Google stopped allowing users to create Orkut accounts and Buyukkokten went on to create Hello, another social media network.
Created in 1994, GeoCities was a popular web hosting service that was known for its unique, albeit tacky, personalization tools. GeoCities was once the third-most visited website on the internet and traded on the Nasdaq under the ticker GCTY. It was later purchased by Yahoo for $5 billion in 1999, renamed Yahoo! GeoCities and now only operates in Japan.
CMGI became famous in the 1990s as an incubator for internet companies and one of the best-performing Internet stocks of the time. It gained popularity for web brands including the browser AltaVista, and even won the naming rights to the home stadium of the New England Patriots. However, it later became a symbol of the dot-com bubble after many of its early-stage companies flamed out and its stock lost most of its value. In 2008, the company changed its name to ModusLink Global Solutions (MLNK) and refocused its efforts on providing supply chain management services. It's still traded today, although its market cap is only about $100 million.
Excite launched in 1995 as a search engine, email client and web portal, similar to MSN. It eventually became one of the most-recognized brands on the internet due to its collection of webpages, leading the internet provider @Home to acquire it for $7.5 billion in 1999 -- one of the largest internet deals at the time. The combined company, renamed Excite@Home (then trading as ATHM), later filed for bankruptcy in 2001. Excite@Home also suedComcast ( CMCSA) in 2002 over allegations of insider dealing.
Created in 2002, Friendster was one of the first social media networks to launch on the internet, many years before the rise of popular platforms like Facebook ( FB) and MySpace. Google tried to buy the company for $30 million in 2003, but the company rebuffed their offer. Friendster eventually attempted to relaunch as a social gaming company in 2011, but has since shut down entirely.