Sunday, November 12, 2017

IPO News This Week: Another Week with 10 More Firms Seeking Entry into the Capital Markets

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There were 10 initial public offerings (IPOs) on the calendar last week and 10 firms succeeded in gaining access to the public markets although a couple of those scheduled were delayed and a couple of others stepped up. The total amount raised reached a combined $1.6 billion and the average first-day pop was around 10%, a bit below the 13% average, but none of last week's IPOs broke issue and closed lower than the offering price.
There are 10 more IPO's on the coming week's calendar and they are looking to raise a combined total of about $1.9 billion. This is the last big week for IPOs before Thanksgiving and probably the last for the year.
Here's a recap of last week's IPOs:
CBTX Inc. (CBTX) raised $62 million on the sale of 2.4 million shares at $26, the high end of the expected range. Shares popped 10% on the IPO and closed the week up 12%.
Meridian Bank (NASDAQ:MRBK) raised $40 million on the sale of 2.4 million shares at $17, the low end of the expected range. Shares popped 7% on the Friday IPO.
Sogou Inc. (SOGO) sold 45 million shares at $13, the high end of the expected range, raising $585 million. Shares popped 4% on the IPO and closed the week up 7%.
Erytech Pharmaceuticals (ERYP) raised $109 million on the sale of 4.7 million shares priced at $23.26. Shares popped 6.4% on the Friday IPO.
Bandwidth Inc. (BAND) ) raised $80 million on the sale of 4 million shares at $20 a share, the low end of the range. Shares popped 6% on the Friday IPO.
Metropolitan Bank Holding (MCB) raised $109 million on the sale of 3.1 million shares at $ 35, above the expected range. Shares added 6% on the Friday IPO.
PPDAI Group Inc. (PPDF) raised $221 million on an offering of 17 million shares at $13, below the expected range. Shares added 1% on the IPO on the Friday IPO.
Image result for Apellis Pharmaceuticals Inc.
Apellis Pharmaceuticals Inc. (APLS) raised $150 million on the sale of 10.7 million shares at $14, the mid-point of the expected range. Shares closed flat on the Thursday IPO and flat for the week.
Four Seasons Education (Cayman) Inc. (FEDU) raised $101 million on its offering of 10.1 million shares prices at $10, the mid-point of the expected range. Shares dropped 5% on the IPO and closed the week flat.
InflaRX (IFRX) raised $100 million on the sale of 6.7 million shares at $15, the mid-point of the expected range. Shares closed the week unchanged.
Through the week ending November 10, IPO ETF manager Renaissance Capital reported that 141 IPOs have priced in the U.S. so far this year, up nearly 47% year over year. Total proceeds raised through last week equaled $33.2 billion, up nearly 98% year over year.
For 2016, Renaissance Capital reported a total of 105 IPOs, down 38% year over year from 170 in 2015. Total 2016 proceeds amounted to $18.8 billion compared with a 2015 total of $30 billion. Renaissance Capital does not include “best efforts” or blank-check companies in its totals, nor does it include IPOs that raise less than $10 million.
Here are the 10 companies seeking a place in the public markets next week.
SendGrid Inc. is a cloud-based digital communications platform for businesses. The company plans to offer 7.7 million shares in an expected price range of $13.50 to $14.50 to raise $112 million at a market cap of $584 million. Underwriters are Morgan Stanley, J.P. Morgan, William Blair, KeyBanc Capital Markets, Piper Jaffray, and Stifel. Shares are set to price Tuesday and begin trading Wednesday on the New York Stock Exchange under the ticker symbol SEND.
Arsanis Inc. is a clinical-stage biopharmaceutical company developing monoclonal antibody immunotherapies for serious infectious diseases. The company plans to offer 3.1 million shares in an expected price range of $15 to $17 to raise $15 million. Underwriters are Citi, Cowen & Co., and Piper Jaffray. Shares are expected to price Wednesday and begin trading Thursday on the Nasdaq under the ticker symbol ASNS.
Jianpu Technology Inc. is an online consumer loan and credit platform based in Beijing. The company plans to offer 22.5 million shares in an expected price range of $8.50 to $10.50 to raise $214 million at a market cap of $1.6 billion. Underwriters are Goldman Sachs (Asia), Morgan Stanley, J.P. Morgan, and China Renaissance. Shares are expected to price Wednesday and begin trading Thursday on the New York Stock Exchange under the ticker symbol JT.
MPM Holdings Inc. is a producer of specialty silicones and other chemical additives. The company plans to sell 14.6 million shares in an expected price range of $23 to $25 to raise $350 million at a market cap of $1.4 billion. Shares already trade on the OTCQX market place under the ticker symbol MPMQ. Underwriters include J.P. Morgan, Goldman Sachs, Credit Suisse, Deutsche Bank, UBS Investment Bank, Wells Fargo Securities, and BMO Capital Markets. Shares are expected to price Wednesday and begin trading Thursday on the New York Stock Exchange under the ticker symbol MPMH.
Bluegreen Vacations Corp. sells timeshares and manages resorts in the United States. The company plans to offer 6.5 million shares in an expected price range of $16 to $18 to raise $111 million at a market cap of $1.3 billion. Underwriters are Stifel, Credit Suisse, BofA/Merrill Lynch, and SunTrust Robinson Humphrey. Shares are set to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol BXG.
Legacy Acquisition Corp. is a blank-check company seeking to make its first acquisition. The company plans to offer 30 million units at $10 per unit to raise $300 million at a market cap of $375 million. Each unit consists of one share of common stock and one warrant to purchase one-half of one share exercisable at $11.50. Underwriters are Wells Fargo Securities, Cantor Fitzgerald, Stifel, and Loop Capital Markets. Units are set to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol LGCU.
Molino Cañuelas SACIFIA is a leading Argentina-based food producer. The company plans to offer 19.5 million shares in an expected range of $14 to $16 to raise $293 million at a market cap of $940 million. Underwriters are J.P. Morgan, UBS Investment Bank, HSBC Corp., and ITAU BBA. Shares are expected to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol MOLC.
Sailpoint Technologies Holdings Inc. is a provider of identity governance software for enterprise clients. The company plans to offer 20 million shares in an expected price range of $9 to $11 to raise $200 at a market cap of $896 million. Underwriters are Morgan Stanley, Citi, Jefferies, RBC Capital Markets, KeyBanc Capital Markets, Canaccord Genuity, and Oppenheimer & Co. Shares are set to price Thursday and begin trading Friday on the New York Stock Exchange under the ticker symbol SAIL.
scPharmaceuticals Inc. is developing and commercializing an injectable version of an intravenous drug for heart failure. The company plans to offer 6.4 million shares in an expected price range of $14 to $16 to raise $96 million at a market cap of $264 million. Underwriters are Jefferies, Leerink Partners, and BMO Capital Markets. Shares are set to price Thursday and begin trading Friday on the Nasdaq under the ticker symbol SCPH.
Stitch Fix Inc. is an online personal style and clothing retailer. The company plans to offer 10 million shares in an expected price range of $18 to $20 to raise $190 million at a market cap of $1.8 billion. Underwriters are Goldman Sachs, J.P. Morgan, Barclays, RBC Capital Markets, Piper Jaffray, Stifel, and William Blair. Shares are set to price Thursday and begin trading Friday on the Nasdaq under the ticker symbol SFIX.
Source: https://goo.gl/g59Ley

How Artificial Intelligence Will Boost These 8 Stocks

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A dozen or so companies are well-positioned to reap big profits from the burgeoning market for artificial intelligence (AI)Barron's reports. Among these companies are: semiconductor manufacturers Micron Technology Inc. (MU
MU
Micron Technology Inc
44.78
+2.94%
 
 and Nvidia Corp. (NVDA)
NVDA
NVIDIA Corp
216.14
+5.27%
 
 Google parent Alphabet Inc. (GOOGL);
GOOGL
Alphabet Inc
1,044.15
-0.34%
 
 database management software developer Oracle Corp. (ORCL);
ORCL
Oracle Corp
49.32
+0.16%
 
 online merchant and cloud-computing leader Amazon.com Inc. (AMZN);
AMZN
Amazon.com Inc
1,125.35
-0.34%
 
 computer hardware manufacturer and business solutions provider International Business Machines Corp. (IBM);
IBM
International Business Machines Corp
149.16
-0.76%
 
 video streaming service Netflix Inc. (NFLX);
NFLX
Netflix Inc
192.02
-0.97%
 
 and U.K.-based business process automation software developer Blue Prism Group PLC); (PRISM.UK).

Deep Blue to DeepMind

In 1997, IBM scored a major milestone in AI history when its Deep Blue program beat reigning world chess champion Gary Kasparov, still considered by many experts to be the best player of all time. IBM's Watson question answering system passed a high-profile test in 2011, beating two top former champs on Jeopardy!, the long-running quiz show on TV. Since then, Watson has been rolled out for general commercial use, most notably to aid doctors in making diagnoses.
Alphabet's DeepMind division has taken on the challenge of developing a program to play the ancient Chinese board game called Go, which is considered to be even more complex than chess. In 2016, the DeepMind program beat a human international champ. Last month, a refined version of this program defeated the 2016 release in each of 100 games, Barron's reports. Alphabet already is adapting the machine learning technology demonstrated by their Go-playing program to other tasks, such as the development of drugs, Barron's notes.

The Innards of AI

AI applications require advanced hardware that facilitates speedy processing. Chips from Nvidia already are the preferred choice for running machine learning software, while Micron manufactures fast memory chips that are well-suited to these applications, Barron's indicates. Meanwhile, since many AI applications are likely to be run over the internet, cloud-computing providers such as IBM and Amazon are likely beneficiaries, Barron's adds. (For more, see also: Microsoft Cloud Sales Show It's Catching Up With Amazon.)

Exploiting AI Internally

Several of the aforementioned companies are using AI to enhance their own core businesses. Improving the quality of search results, including customizing them to match the perceived needs and preferences of the individual user, are applications of AI used by Google, Amazon and Netflix alike. In the cases of Amazon and Netflix, these companies use past buying and browsing behavior to anticipate what the customer may want next, and to customize suggestions accordingly. Amazon's chatbox Alexa is a particularly notable application of AI, according to Ken Sena, a Wells Fargo & Co. (WFC
) analyst who focuses on AI, per Barron's.


Robotic Process Automation

One application of AI is to let computers apply well-defined rules to predictable inputs, as Barron's describes robotic process automation. IBM and Blue Prism already are big players in the automation of routine white collar functions. Oracle is both making a push into cloud services and developing "the world's first fully autonomous database cloud service," replacing human database administrators with an AI-driven program. Outsourcing companies located in low-cost countries are most at risk from such developments, Barron's indicates, especially in areas such as IT support and transaction processing. (For more, see also: Oracle's Cloud Strategy to Beat Amazon, Microsoft.)

Big Impact

Ken Sena expects total AI revenue over the next decade roughly to equal the current size of U.S. GDP. Other analysts are projecting that world GDP will increase by a similar amount by the year 2030, as the result of advances in AI. (For more, see also: How Google, Facebook, Amazon Will Ride The AI Wave.)

By Mark Kolakowski

Source: 
https://goo.gl/bGqX4V

Bitcoin vs. Bitcoin Cash: What's the Difference?


Image result for Bitcoin CashSince its inception, there have been questions surrounding Bitcoin’s ability to scale effectively. Bitcoin is a cryptocurrency that exists within network of computers, within the blockchain. This is revolutionary ledger-recording technology. It makes ledgers far more difficult to manipulate for a couple reasons: The reality of what has transpired is verified by majority rule, not by an individual actor. And this network is decentralized; it exists on computers all over the world.
The problem with this technology is that it’s slow. Like, really slow, especially in comparison to banks that deal with credit card transactions. Visa processes 150 million transactions per day, averaging out to roughly 1,700 transactions per second. And their capability far surpasses that, at 24,000 transactions per second.
How many transactions can the Bitcoin network process per second? Seven. Transactions take about 10 minutes to process. And as the network of Bitcoin users grows, waiting times will get longer, because there are more transactions to process without a change in the underlying technology that processes them.
The latest debates around Bitcoin’s technology have been concerned with this central problem of scaling and increasing the speed of the transaction verification process. There are two major solutions to this problem, either to make the amount of data that need to be verified in each block smaller, making transactions faster and cheaper or to make the blocks of data bigger, so that more information can be processed at one time.

The Difference Between Bitcoin and Bitcoin Cash

In mid July 2017, mining pools and companies representing roughly 80-90% of Bitcoin computing power voted to incorporate a technology known as a segregated witness, called SegWit2x. SegWit2x makes the amount of data that needs to be verified in each block smaller, by removing signature data from the block of data that needs to be processed in each transaction, and having it attached in an extended block. Signature data has been estimated to account for up to 65% of data processed in each block, so this is not an insignificant technological shift. Talk of doubling the size of blocks from 1mb to 2mb in November has ramped up, and is expected.fThis would also go some ways in improving Bitcoin’s scalability. In mid-October, Bitcoin scientists from Bitcoin Unlimited revealed they had mined the world's first 1GB block, 1,000 times bigger than the normal size.

Related image

Bitcoin Cash is a different story. Bitcoin Cash was started by Bitcoin miners and developers equally concerned with the future of the cryptocurrency, and its ability to scale effectively. These individuals had their reservations about the adoption of a segregated witness technology, though. They felt as though SegWit2x did not address the fundamental problem of scalability in a meaningful way, nor did it follow the roadmap initially outlined by Satoshi Nakamoto, the anonymous party that first proposed the blockchain technology behind cryptocurrency. Furthermore, the process of introducing SegWit2x as the road forward was anything but transparent, and there were concerns that its introduction undermined the decentralization and democratization of the currency.
On August 1st, some miners and developers initiated what is known as a hard fork, effectively creating a new currency: Bitcoin Cash. Bitcoin Cash has implemented an increased block size of 8mb, to accelerate the verification process, with an adjustable level of difficulty to ensure the chain’s survival and transaction verification speed, regardless of the number of miners supporting it. This has raised concerns about the security of Bitcoin Cash.
(For more on cryptocurrency, read: Does Crypto Have Intrinsic Value? It Depends)


The Future of Cryptocurrency

This development could mean any number of things for the future of cryptocurrency. The situation is very fluid, and market valuations are both constantly calibrating and volatile. It’s going to be difficult to get a clear picture until Bitcoin Cash has been running for a little while (or fails), and until Bitcoin implements its segregated witness technology later this month, and then doubles the size of its blocks three months later.
In a blog post earlier this week titled “The Crypto Currency Debate: Future of Money or Speculative Hype?”, “dean of valuation” and NYU Stern Professor Aswath Damordan said that the future of cryptocurrency as a currency, as opposed to a speculative asset as it is so often treated, depends on cryptocurrency developers thinking of their technology as a “transaction medium and acting accordingly”. Both of these moves seem to be aimed at improving cryptocurrency technology as a medium of exchange.
Improving cryptocurrency as a transaction medium will depend on maintaining the high level of security that Bitcoin has always ensured, while also improving transaction speeds. Bitcoin will continue to be highly secure, but how much its transaction speeds will improve is unclear. Bitcoin Cash, once its difficulty has adjusted, could have transactions processing in two minutes and 30 seconds. The security of the Bitcoin Cash blockchain, though, is unclear.
It will also depend on miners’ and users’ vision for the currency. If Bitcoin really does undermine the decentralized nature of the network, and the democratic possibilities of the blockchain technology, people may look elsewhere for a cryptocurrency with more exciting potential. (For more insights on how the market has changed since the fork, read: What's Bitcoin Cash and Where the Heck Did it Come From?)


Source: 
https://goo.gl/SCNvuZ

Weighing The Week Ahead: Millennials And The Housing Rebound

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 Includes: DDMDIADOGDXDEEHEPSEQLFEXFWDDHUSVIVVIWL

Summary

Economic news remains solid with little recession risk.
Everything you should know about the JOLTS report.
This week features reports about the housing market.
The emerging Millennial market supports housing demand.
Updated worries, non-worries, and stock ideas.
The economic calendar includes many reports, but few of the most important. I expect the housing market to attract attention. There are several relevant releases on tap, and the sector is especially important. Some will take up a special slant, asking:
Will Millennial buyers extend the housing market rebound?

Last Week Recap

In the last edition of WTWA I mused on the confluence of records in the data and in stock market indexes. I suggested that some of the punditry would start worrying that things were “as good as it gets.” This was a topic for some, including David Templeton, who responded with a qualified “no,” but suggested the need to look beyond the mega cap stocks. Check out his reasoning and persuasive charts.

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. She notes the loss of 0.21% on the week. Once again, it was a week of very low volatility; the intra-week range was only a touch more than 1%. Historically 1% moves are commonplace --- each day!
Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read the entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!
The economic news has been mostly positive, as summarized by New Deal Democrat’s helpful compilation of long, short, and coincident indicators. His conclusion is neutral on the long term and positive in shorter time frames.
The Good
  • Leading index for commercial real estate improves. Calculated Risknotes that the Dodge Momentum Index rose 13.2% in October versus September. According to Dodge, this indicator leads non-residential construction spending by one year.
  • Household stock ownership is at the lowest level in almost twenty years. Chris Ciovacco uses Gallup data to refute the notion of a current, euphoric bubble.
  • Job openings increased….and other good news from the JOLTS report. No one does a good job of analyzing this report. Many try to interpret it as a sign of employment growth, a purpose for which it was not designed. With fewer indicators to summarize this week, let me suggest the key things we should watch for.
    • Ratio of unemployed to job openings.
    • Beveridge curve – indicator of labor market structure.
    • Reason for job separations ---layoffs or voluntary. Layoffs get a lot of news. A high quit rate shows confidence on the part of employees.
The Bad
  • Jobless claims were 239K, 10K higher than last week, and worse than expectations.
  • Response to earnings was weak. Bespoke reports that despite solid earnings, there is a divergence between the overall S&P and the average member stock.
  • Michigan sentiment dipped to 97.8 from last month’s 100.7 and expectations of 101.
  • Rail traffic weaker via Steven Hansen of GEI. He looks beyond the headline data to elements he has identified as more predictive. While still better than a year ago, the improvement is decelerating.
  • Hotel occupancy rate declined 0.9% last week. The rate remains ahead of the record-setting pace of 2015. (Calculated Risk)
The Ugly
Each week seems to bring another case of outlandish violence. While there are some common themes among the perpetrators, there is no consensus about solutions – or even whether to act. Opinions about the best policy reaction seem to depend more upon beliefs rather than facts. That is always a tough situation for public policy proposals.
Millennial Notes
My research always leads me to a few items that are interesting, but not necessarily relevant to the week ahead. One such item was a list of terms and expressions that Millennials would use, but older people would not. I had the inspiration to write a paragraph or two using these terms, in the Blazing Saddles tradition. Mentioning this to Mrs. OldProf, she informed me that this was one of my dumber ideas. She was right, of course. A quick look at another source showed that many terms from the first source are now (already?) retired.
Millennials are far more likely to prefer bitcoin to stocks or bonds.
And this is despite their low ownership; only 4% have ever owned bitcoin.
The Week Ahead
We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.
The Calendar
We have a normal calendar. The inflation data is edging up to a level where it will attract more interest. Retail sales is always an important report, as is industrial production.
That said, I see the Friday reports on housing as the most significant news. Building permits are an important leading indicator. That data series and new housing starts are volatile series. That makes them a challenge to interpret, but no less important.
Briefing.com has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.
Next Week’s Theme
The calendar is a busy one, but not one to suggest important surprises. If inflation picks up, that will attract more analysis of the business cycle and the Fed. With several housing reports on tap, that may well be the focus of attention. So far, the recovery has been led by consumer spending, with little help from business investment or housing. If the rebound is to continue, more sources of growth are needed. The answer may come from the changing U.S. demographics, leading people to ask:
Can Millennials provide the push for an extended housing rally?
Here are some perspectives, in my customary bearish to bullish range.
  • Get ready to revisit the housing bubble! (The IMF – a partial warning; Jesse Colombo, who sees many, many bubbles; and 58% of homeownersthemselves)
  • Housing growth is stalled by several headwinds
    • High prices (contra-Calculated Risk)
    • Rising mortgage rates
    • More rigor in loan requirements
    • Lack of supply (Zillow)
    • Down payments a challenge for new buyers
    • Tax proposal killing the mortgage interest deduction (By the Numbers)
  • The numbers do not lie
    • Now the largest group of home-buyers (Washington Federal)
    • Factors sparking the decision to buy a home (few readers will guess the most frequent – answer at the end of today’s post)
As usual, I’ll have more in the Final Thought, where I always emphasize my own conclusions.
Quant Corner
We follow some regular featured sources and the best other quant news from the week.
Risk Analysis
I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update.
The Indicator Snapshot
The Featured Sources:
Bob Dieli: Business cycle analysis via the “C Score.
RecessionAlert: Strong quantitative indicators for both economic and market analysis.
Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.
Georg Vrba: Business cycle indicator and market timing tools.
Doug Short: Regular updating of an array of indicators. Great charts and analysis.
Guest Source:
The BLS. Most observers engage in plenty of discussion about the initial release of employment data. Why? It is an important topic, so people grab on anything, ignoring the problems in short-term measurement. Each quarter the BLS releases a new installment of the Business Dynamics series. Because this uses state employment data, reviewed and aggregated for this purpose, it is much more accurate than the monthly estimates. In fact, it makes sense to review the various estimates using this result as the “right answer.”
For Q1 2017 the net increase in private jobs was 654K. The sum of the initial monthly reports on employment Friday was 553K. The actual difference would have been a major source of debate if known at the time.
Also worth noting is the massive change – much more important than the net result. 7.3 million jobs were created. And of course, 6.7 million were lost. Opening establishments accounted for 1.3 million new jobs, something that the birth/death adjustment truthers should study.
It also demonstrates that many more people are touched by unemployment than the official rate indicates. No wonder economic perceptions are often worse than the data seem to show.
Insight for Traders
We have not quit our discussion of trading ideas. The weekly Stock Exchange column is bigger and better than ever. We combine links to trading articles, topical themes, and ideas from our trading models. This week’s post continues our discussion of the strength of combining different trading approaches – a blended approach. To illustrate, we provided some historical data on the trading models. And of course, there are updated ratings lists for Felix and Oscar, this week featuring small caps. Blue Harbinger has taken the lead role on this post, using information from me and from the models. He is doing a great job.
Insight for Investors
Investors should have a long-term horizon. They can often exploit trading volatility!
Best of the Week
If I had to pick a single most important source for investors to read this week it would be Brett Steenbarger’s analysis of Frustration, part of his trading psychology series. While I most frequently cite Dr. Brett when we specifically deal with a trading theme, there is often an overlap with investor decision making. This is such a case. Investors with a sound overall approach can become frustrated at a stretch of losses or concern about reaching their goals.
…frustration is a great example of the principle that strengths, taken to an extreme, can become vulnerabilities. When we are achievement oriented and demanding of ourselves, having something get in our way breeds a natural frustration. That frustration, in turn, triggers a fight/flight state and suddenly we are no longer nicely grounded in our brain's prefrontal cortex. Instead, we activate motor areas to cope with the situation and act in ways that we would never entertain if we were calm and focused at the start of the trading day.
This often describes the behavior of individual investors, especially those who constantly chase what worked last month or last year. Polling from Pew Research shows that many share this sentiment.
[Investors feeling frustration might find helpful my paper on Investor Pitfalls. If your frustration relates to missing the rally and/or being behind on your retirement program, I have another piece on how to edge your way back into the market. Both are available for free from main at newarc dot com].
Scott Grannis shows how the perceived problems have actually provided fuel for the stock rally.
Stock Ideas
“Doghouse stocks?” Ray Merola is reviewing some recent occupants. In this post he is analyzing Celgene (CELG). He takes note of the high risk in trials and the disappointing sales of a key product. He concludes that the market has over-reacted. This is a data-driven analysis worth reading.
Starbucks or Facebook? Peter F. Way’s unique approach to risk/reward suggests Facebook. Check it out.
Brian Gilmartin shows what’s hot and what’s not in corporate earnings trends. Energy rolling, and financials depressed. Which is the opportunity?
Homebuilders “hammered” by the tax plan?
Interested in Speculation?
Brad Thomas looks at Puerto Rican debt via DDR Corp. (DDR)
Or Contrarian Choices?
Here are the six most shorted Nasdaq stocks.
Personal Finance
Seeking Alpha Senior Editor Gil Weinreich has an interesting topic every day. While his series’ theme emphasizes financial advisors, the topics are usually of more general interest. His own commentary adds insight and ties together key current articles. It is a valuable daily read. My favorite this week discusses the possible value of an annuity in your retirement plan. He cites an article by Dick Cotton, showing how the annuity can provide a foundation for other, more aggressive investments.
This is a great example of Gil’s series expanding horizons for many advisors.
Alan Steel (HNW Magazine) shares his customary wisdom with a discussion of current exaggerated pessimism, something that many seem to ignore. Here is his analysis:
Some folks are calling it a secular bull that is both old and decrepit, and busily sunning itself through its golden years from the light of a few big stocks as it has done since about March 2009.
Others consider the market crashes within that eight year (PLUS) period, like the 21.6% S&P 500 drop from May to October 2011, and the recession-level peak-to-trough numbers in the US, Japan, China, and emerging markets (amongst others) from mid-2015 to early 2016 (details here), put the age of this bull at somewhere around 4.5 years, or perhaps just a year and a half.
Then there are the gloomier folks who, despite the long-term upward trend, positive corporate earnings, basement level inflation, low unemployment, respectable jobs growth, and historically low interest rates, habitually pick at the scabs of negative investor sentiment and draw dotted lines between now and the ghosts of recessions past.
These apostles of Joe Granville have helped position that latter category as the people’s choice.
As such, independent investor sentiment levels about the stock market are about as euphoric right now as a stomach ulcer.
He goes on to cite the Gallup data I noted above, before concluding:
For me, I think the majority of investors are doing what they always do – waiting around for some kind of wonderfully perfect moment that will finally have built up enough financially fibrous scar tissue to replace the skin torn away by events like 2008/09, 2000/02, and even (for the oldies) way back to 1987 and its less memorable ilk.
Unfortunately, market nirvana is almost always either a day away or the day we missed.
So, when it comes to investing, perfect is always the enemy of good.
Abnormal Returns is always interesting, but the Wednesday edition is especially geared to individual investors. My favorite this week takes up specific steps that investors might follow to “improve our behavior.” These are great ideas, but my sense is the choice of “hire a coach” might be the only real winner for most people.
Watch out for….
Consumer staples stocks. Barron’s notes that the sector might not be as safe as most think. (I agree). The full article provides a complete analysis, but here is a helpful summary.
Image result for walmart
Tupperware (TUP). Simply Safe Dividends looks at the sustainability of the dividend.
Stocks attracting the rare Wall Street “sell” rating.
Final Thoughts
Taking advantage of demographic trends is an important way to improve your investment results. The growing economic significance of Gen Y is obvious. The change in the housing market is an important example.
Housing àEconomic Growth à Stronger Stocks
Strength in housing ripples through many other parts of the economy, including materials, employment, construction, and transportation. (Ritholtz). I have recommended home building stocks many times over the last year, and it has worked out well.
The “bubble” skeptics seem to reason that if sales or prices reach a former peak, that should be a warning. This simplistic approach would never recognize an overall positive trend in anything!
Here is a look at the 2018 Housing forecasts (Calculated Risk).
What worries me…
  • The debt limit is now on our radar. It is time to see some progress on this issue.
  • Trade issues. While there were no accidents on the Asian trip, there are also no indications of policy progress. The I wish the President had more willingness to use expert advice. The advantage of free trade is probably the most widely shared conclusion of economic experts.
…and what doesn’t
  • Stalled tax reform. The current plans are very unlikely to get enough votes within the Republican party alone. Taking more time and gaining some bipartisan support will not happen until next year, but the result will be stronger.
  • The economy. Our indicators show little risk and there is plenty of upside.
Surprising answer to a key reason for Millennial home buying: Dogs.
Disclosure: I am/we are long CELG.
By Jeff Miller