June 2022 – Coulter Capital Management

5 Best Stocks According to Citadel Billionaire Ken Griffin

by Senior Analyst June 28, 2022

Advanced Micro Devices, Inc. (NASDAQ:AMD)

Citadel Investment Group’s Stake Value: $254.91 million Percentage Of Citadel Investment Group’s 13F Portfolio: 0.05% Number of Hedge Fund Holders: 83

Advanced Micro Devices, Inc. (NASDAQ:AMD) starts off our list of billionaire Ken Griffin’s favorite tech stocks. The California-based firm provides graphic cards, microprocessors, and motherboard chipsets that are used in PCs, smartphones, workstations, and data center servers around the world.

Ken Griffin’s stake in Advanced Micro Devices, Inc. (NASDAQ:AMD) during the first quarter consisted of 2.33 million shares valued at $254.9 million, representing 0.05% of his total portfolio. This was a 3% reduction over the previous quarter. In total, 83 hedge funds were long on the company shares at the close of the first quarter, up from 69 hedge funds a quarter ago. Fisher Asset Management increased his position in Advanced Micro Devices, Inc. (NASDAQ:AMD) by 23% in the first quarter, becoming its biggest shareholder with a $2.66 billion stake.

On June 22, Morgan Stanley analyst Joseph Moore resumed coverage of Advanced Micro Devices, Inc. (NASDAQ:AMD) with an ‘Overweight’ rating and a $103 price target. He sees the firm as well-positioned to post share gains over the next two years, and notes that it will continue to increase its share in the cloud services market as supply constraints ease.

In the first quarter, Advanced Micro Devices, Inc. (NASDAQ:AMD) posted earnings per share of $1.13, surpassing Street estimates by $0.20. Revenue of $5.89 billion was also above estimates by $358.26 million.

Investment firm Carillon Tower Advisers talked about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2021 investor letter. Here’s what the fund said:

“Advanced Micro Devices (AMD) supplies semiconductor chips for central processing units (CPUs) and graphic processing units (GPUs). The firm has been gaining share against its primary competitor in the datacenter server CPU space, as this rival has been unable to match the design and manufacturing capabilities of AMD and its partners. Investors are also looking forward to the closing of the previously announced merger with a semiconductor manufacturer that is another one of the portfolio’s holdings. The merger will increase AMD’s capabilities in the Field Programmable Gate Array (FPGA) chip space, and the combined company should possess the potential to win additional market share in the datacenter chip market.”
Broadcom Inc. (NASDAQ:AVGO)
Citadel Investment Group’s Stake Value: $301.52 million Percentage Of Citadel Investment Group’s 13F Portfolio: 0.06% Number of Hedge Fund Holders: 71
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor manufacturer based in California, which operates through its segments: Semiconductor Solutions and Infrastructure Software. Ken Griffin increased his stake in the firm by 213% in the first quarter, standing at roughly 479,000 shares worth $301.5 million. In comparison, the billionaire owned 153,000 shares of Broadcom Inc. (NASDAQ:AVGO) a quarter ago.
On May 27, Mizuho analyst Vijay Rakesh reiterated a ‘Buy’ rating on Broadcom Inc. (NASDAQ:AVGO) shares and raised the price target to $725 from $700. He holds that the company’s planned acquisition of VMware (NYSE:VMW), a US-based cloud computing company, potentially unlocks 45% upside. Financial Times recently reported that the deal is set to undergo a lengthy antitrust investigation in the EU over concerns it could possibly harm competition across the global tech industry.
Investors were seen piling into Broadcom Inc. (NASDAQ:AVGO). At the end of the first quarter, 71 hedge funds owned positions in the firm, as compared to 62 hedge funds a quarter earlier. Its largest Q1 shareholder was Fisher Asset Management with a position worth nearly $895 million.
Broadcom Inc. (NASDAQ:AVGO) announced its Q1 earnings on May 26, and disclosed earnings per share of $9.07, beating estimates by $0.35. Quarterly revenue was recorded at $8.1 billion, exceeding market forecasts by $194.74 million and representing a 22.6% jump from the year-ago quarter.
Uber Technologies, Inc. (NYSE:UBER)
Citadel Investment Group’s Stake Value: $338.03 million Percentage Of Citadel Investment Group’s 13F Portfolio: 0.06% Number of Hedge Fund Holders: 144
Uber Technologies, Inc. (NYSE:UBER) is up next on the list of top tech stocks to buy according to Ken Griffin. The billionaire owned 9.47 million shares of the firm at the end of the first quarter, priced at around $338 million. This was a decrease of 37% over the previous quarter, where he owned roughly 14.91 million shares of Uber Technologies, Inc. (NYSE:UBER).
The popular ride-hailing firm has seen diminishing investor confidence as of late. At the close of Q1 2022, 144 hedge funds owned positions in Uber Technologies, Inc. (NYSE:UBER), as compared to 153 hedge funds a quarter earlier.
On June 9, Goldman Sachs analyst Eric Sheridan reduced the firm’s price target on Uber Technologies, Inc. (NYSE:UBER) to $45 from $55, and maintained a ‘Buy’ rating on the shares. The analyst has updated his model to reflect a greater probability of a weaker macro environment, and is taking a more conservative view on the ride-sharing and food delivery sectors. Uber Technologies, Inc. (NYSE:UBER) recently announced that its popular ride-sharing feature called UberPool would be relaunching under the name UberX Share. This service was cancelled amid the Covid pandemic, and will now be available in a number of major US cities.
ClearBridge Investments, an investment management firm, mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q3 2021 investor letter. Here’s what it said:
“We have also been looking for multiyear secular trends outside of the IT and Internet sectors to help us maintain a portfolio that can perform well in markets with varied sector or factor leadership. In particular, electrification of the global economy and the transition to electric vehicles (EVs) are areas where we continue to add exposure. We are investing in the brains behind EVs through NXP in the control center and Aptiv for safety features. Global rideshare leader Uber Technologies, Inc. (NYSE:UBER) will also be a key player in the transition from internal combustion engines to EVs.”

Visa Inc. (NYSE:V)

Citadel Investment Group’s Stake Value: $348.52 million Percentage Of Citadel Investment Group’s 13F Portfolio: 0.07% Number of Hedge Fund Holders: 159

Visa Inc. (NYSE:V) is a digital payments company headquartered in California. Ken Griffin owned 1.57 million shares of the company at the end of March, worth $348.5 million. This was an increase in stake of 4% over the previous quarter, and amounted to a 0.07% slice of his overall portfolio.

Baird analyst David Koning on June 22 named Visa Inc. (NYSE:V) as his “bullish Fresh Pick”, and kept an ‘Outperform’ rating on the shares with a $290 price target. He noted that the firm would likely remain quite resilient in a recession-scenario given growing purchase volume. Koning is bullish on Visa stock as cross-border transactions and inflation provide ongoing growth drivers.

Investors were seen buying Visa Inc. (NYSE:V) stock. At the end of March, 159 hedge funds were long on the company shares, as compared to 142 hedge funds a quarter earlier. The combined value of Q1 hedge fund holdings stood at more than $28 billion. The largest shareholder of Visa Inc. (NYSE:V) during the first quarter was TCI Fund Management with a $4.41 billion stake.

In the first quarter of 2022, Visa Inc. (NYSE:V) reported earnings per share of $1.79, exceeding estimates by $0.14. $7.19 billion in revenue for the quarter registered year-on-year growth of 25.5% and also beat market forecasts by $365.4 million.

Here is what Polen Capital, an investment firm, had to say about Visa Inc. (NYSE:V) in its Q1 2022 investor letter:

“We added to both Visa and Mastercard during the final quarters of 2021, based on the belief that both businesses were trading at attractive prices and poised to deliver, double-digit returns over the next three to five years. Cross-border transactions–a highly profitable business segment for both companies–represent roughly 10% of Visa and Mastercard’s volumes and 25% of their gross revenues, so lockdowns have severely impacted this segment due to stifled travel. While it was impossible to know when people would begin traveling again, we accepted this reality with the belief that travel would eventually return. Both companies have commented that as soon as a country or geography reopens, cross-border volumes reignite, amplifying each business’s growth and profitability. We think these near- term headwinds have created an attractive long-term investment opportunity.”
Tesla, Inc. (NASDAQ:TSLA)
Citadel Investment Group’s Stake Value: $370.64 million Percentage Of Citadel Investment Group’s 13F Portfolio: 0.07% Number of Hedge Fund Holders: 80
Tesla, Inc. (NASDAQ:TSLA) is an EV manufacturer based in the United States. The company stock represented 0.07% of Ken Griffin’s Q1 portfolio, with roughly 344,000 shares valued at $370.6 million. This showed an increase of 20% over the previous quarter where Griffin owned 289,000 Tesla shares.
On June 24, Credit Suisse analyst Dan Levy maintained an ‘Outperform’ rating on Tesla, Inc. (NASDAQ:TSLA) shares and lowered the price target to $1,000 from $1,125. Despite forecasting lower than expected Q2 deliveries, the analyst retains a bullish outlook on Tesla and sees its long-term fundamentals remaining intact. He also notes that widening supply chain issues could extend Tesla’s lead over other firms in the EV space.
Out of all the hedge funds tracked by Insider Monkey, 80 reported ownership of stakes in Tesla, Inc. (NASDAQ:TSLA) at the close of the first quarter with a combined value of $11.28 billion. This is down from 91 hedge funds a quarter ago. Its largest Q1 shareholder was Cathie Wood’s ARK Investment Management, a long-time investor, with a $1.71 billion stake.
Grantham Mayo Van Otterloo & Co. LLC, an investment management firm, mentioned Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter. Here’s what the fund said:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla (NASDAQ:TSLA). At its Battery Day last year, Tesla projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”

Insider Report

Wall Street layoffs ahead as two-year hiring boom turns to bust; fixed income stays strong

by Senior Analyst June 28, 2022

Traders to the rescue?

The saving grace on Wall Street this year has been a pickup in some areas of fixed-income trading. Greater volatility in interest rates around the world, surging commodity prices and inflation at multi-decade highs has created opportunities. JPMorgan’s Pinto said he expected second-quarter markets revenue to increase 15% to 20% from a year earlier.

That too may eventually be under pressure, however. Banks will need to carefully manage the amount of capital allocated to trading businesses, thanks to the impact of higher interest rates on their bond holdings and ever-stricter international regulations.

For employees who have been resisting return-to-office mandates, the time has come to head back, according to McCormack.

“Banks have been very clear about trying to get people back to work,” he said. “If you aren’t stellar and you are continuing to work from home, you are definitely most at risk.”

Less than six months ago, Wall Street bankers were reaping the rewards from a historic boom in mergers and IPOs.

Now, thanks to a confluence of factors that have cast a pall over markets and caused most deal categories to plunge this year, broad-based job cuts loom for the first time since 2019, according to industry sources.

The turnaround illustrates the feast-or-famine nature of Wall Street advisory work. Firms were caught understaffed when central banks unleashed trillions of dollars in support for markets at the start of the Covid-19 pandemic. The ensuing surge in capital markets activity such as public listings led to a bull market for Wall Street talent, from 22-year-old college graduates to richly compensated rainmakers.

For the first time in years, bank employees seemed to gain the upper hand. They pushed back against return-to-office mandates. They received record bonuses, multiple rounds of raises, protected time away from work and even Peloton bicycles.

But that’s over, according to those who place bankers and traders at Wall Street firms.

“I can’t see a situation where banks don’t do RIFs in the second half of the year,” David McCormack, head of recruitment firm DMC Partners, said in a phone interview. The word “RIF” is industry jargon meaning a “reduction in force,” or layoffs.

‘Very challenging’

The industry is limping into the traditionally slower summer months, squeezed by steep declines in financial assets, uncertainty caused by the Ukraine war and central banks’ moves to combat inflation.

IPO volumes have dropped a staggering 91% in the U.S. from a year earlier, according to Dealogic data. Companies are unwilling or unable to issue stock or bonds, leading to steep declines in equity and debt capital markets revenues, especially in high yield, where volumes have fallen 75%. They’re also less likely to make acquisitions, leading to a 30% drop in deals volume so far this year.

Wall Street’s top executives have acknowledged the slowdown.

Last month, JPMorgan Chase President Daniel Pinto said bankers face a “very, very challenging environment” and that their fees were headed for a 45% second-quarter decline. His boss, CEO Jamie Dimon, warned investors this month that an economic “hurricane” was on its way, saying that the bank was bracing itself for volatile markets.

“There’s no question that we’re seeing a tougher capital markets environment,” Goldman Sachs President John Waldron told analysts at a conference this month.

The industry has a long track record of hiring aggressively in boom times, only to have to turn to layoffs when deals taper off. The volatility in results is one reason investors assign a lower valuation to investment banks than say, wealth management firms. In the decade after the 2008 financial crisis, Wall Street firms contended with the industry’s declining revenue pools by implementing annual layoffs that targeted those perceived to be the weakest performers.

‘Fully staffed’

Banks paused layoffs during the pandemic bull market as they struggled to fill seats amid a hiring push. But that means they are now “fully staffed, perhaps over-staffed for the environment,” according to another recruiter, who declined to be named.

The numbers bear that out. For example, JPMorgan added a net 8,000 positions at its corporate and investment bank from the start of 2020 to this year’s first quarter. The biggest Wall Street firm by revenue now has 68,292 employees, 13% more than when the pandemic began.

Headcount jumped even more at Goldman in the past two years: by 17%, to 45,100 workers. Employee levels at Morgan Stanley jumped 26%, to 76,541 people, although that includes the impact of two large acquisitions.

The math is simple: Investment banking revenue may be falling back to roughly pre-pandemic levels, as some executives expect. But all the major firms have added more than 10% in headcount since 2020, resulting in a bloated expense base.

“When banks have a revenue problem, they’re left with one way to respond,” said McCormack. “That’s by ripping out costs.”

The recruiter said he expects investment banks will trim 5% to 8% of workers as soon as July, after second-quarter results are released. Analysts will likely pressure bank management to respond to the changing environment, he said.

Sources close to JPMorgan, Goldman and Morgan Stanley said they believed that the firms have no immediate plans for broad layoffs in their Wall Street operations, but may revisit staffing and expense levels later this year, which is a typical management exercise.

Banks are still selectively hiring for in-demand roles, but they are also increasingly allowing positions to go unfilled if workers leave, according to one of the people.

“Business has dropped off,” another person said. “I wouldn’t be surprised if there was some type of headcount reduction exercise in the October-November time frame.”

Insider Report

Investors too embrace banks in year’s second half

by Senior Analyst June 27, 2022

Disclosure: RBC Capital Markets has received compensation for investment and non-investment banking services from Bank of America in the past 12 months. It has also managed or co-managed a public offering of securities for Bank of America.

Investors who are “apathetic” or negative toward banks will change their stance in the year’s second half, according to RBC Capital Markets’ top banking analyst.

Gerard Cassidy predicts bullishness will make a comeback due to strong revenue growth and optimism surrounding credit.

“You can really see people coming back to [bank] the stocks. They’re under-owned,” the firm’s head of U.S. bank equity strategy on CNBC’s “Fast Money” on Thursday. “At these valuation levels, there’s limited downside from here. But I think as people realize the banks are just not going to have the credit issues that they had in ’08-’09, that’s going to be the real rallying point for owning these names.”

Cassidy, one of Institutional Investor’s top-rated analysts, delivered his latest forecast after the Federal Reserve revealed the results of its most recent stress tests. The results determined all 34 banks have enough capital to cover a sharp downturn.

“The results came in quite nicely,” he said. “One of the major risks that we hear from investors today is that they’re worried about credit losses going higher.”

Financials have been under pressure. With just a week left in the first half, the S&P 500 banking sector is off 17%. Cassidy suggests the group is being unjustly penalized for recession jitters.

“What this [stress] test shows us, that unlike in ’08 and ’09, when 18 out of the 20 largest banks cut or eliminated their dividends, that’s not going to happen this time,” said Cassidy. “These banks are well-capitalized. The dividends are going to be safe through the downturn.”

‘Amazing numbers’

Cassidy speculates rising interest rates will set the stage for “amazing numbers” starting in the third quarter. He highlights Bank of America as a major beneficiary.

“We’re forecasting Bank of America could have 15% to 20% revenue growth this year in net interest income because of the rise in rates,” said Cassidy, who has a buy rating on the stock.

He expects struggling banks including Deutsche Bank and Credit Suisse to deliver better earnings results this year, too. Even in case of a financial shock, Cassidy believes they should be able to withstand it and come out with healthy capital.

“The real risk is outside the banking system,” Cassidy said “Once people realize credit is not that bad and the revenue growth is real strong, that changes the sentiment hopefully in the latter part of the second half of this year.”

S&P financials rallied 5% last week.

Insider Report

Canadian Dividend Aristocrats to Buy Now

by Senior Analyst June 24, 2022

Why Gator Capital Management Became Optimistic in Royal Bank of Canada

Gator Capital Management, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 10.64% was recorded by the fund for the Q1 of 2021, outperforming the S&P 500 Total Return Index that delivered a 6.18% return, but below the S&P 1500 Financials Index that had a 16.32% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Gator Capital Management, in its Q1 2021 investor letter, mentioned Royal Bank of Canada (NYSE: RY), and shared their insights on the company. Royal Bank of Canada is a Toronto, Canada-based financial services company that currently has a $139.6 billion market capitalization. Since the beginning of the year, CS delivered a 20.51% return, extending its 12-month gains to 61.24%. As of May 06, 2021, the stock closed at $98.32 per share.

Here is what Gator Capital Management has to say about Royal Bank of Canada in its Q1 2021 investor letter:

“We own a position in Royal Bank of Canada (“RBC”) and are completing our due diligence on several other Canadian banks. Royal Bank is the #1 bank in Canada. It has a business mix similar to JP Morgan Chase (“JPM”) with strong retail and corporate banking businesses. It also has a significant investment banking and asset management business. From here, we believe Canadian bank stocks will generate attractive returns for shareholders in the medium and long term.

Here is more detail on our investment thesis for Royal Bank of Canada:

1. Bank with consistently high returns – RBC consistently posts Return on Tangible Common Equity (“ROTCE”) in the low 20%. In contrast, JPM has reported ROTCE between 12% and 19% over the last six years. We think this reflects the higher margins of the Canadian banking system.

2. Leading bank in Canada – RBC is the leading bank in Canada. It has the highest returns, the highest market share, and the highest valuation of the five major Canadian banks. We believe other stock market investors will favor RBC when Canadian banks regain favor.

3. Low relative valuation to US Banks – Canadian banks have had premium valuations compared to US banks for a few decades due to their higher and more consistent returns. Over the last 10 years, this valuation premium has almost disappeared. The chart below shows the price-to-tangible book ratio (“P/TB”) of RBC compared to JPM’s. As you can see, in 2011 RBC traded at 3x P/TB while JPM traded at 1x. Now, both banks trade at 2.5x P/TB.

4. Strong growth at City National – RBC’s US Subsidiary, City National Bank, is growing very quickly. RBC purchased City National in 2015. City National was an LA-based bank focused on high-net-worth customers. At the time of the purchase, City National had already expanded and gained traction in San Francisco and New York. Now, City National has branches in Washington, DC, Atlanta, Miami, Dallas, Minneapolis, San Diego, and Las Vegas. City National has a banking strategy similar to that of First Republic and is growing at a comparable rate. We would note that First Republic trades at 26x 2021 estimated earnings.

5. Solid management team – Chief Executive Officer, Dave McKay, has led the bank for the last seven years. He has been at RBC for his entire career and has run several of the business units as he climbed the corporate ladder. Rod Bolger has been Chief Financial Officer for almost five years and has worked at RBC for 10 years. Prior to joining RBC, Bolger worked at Bank of America and Citigroup. We think both men are good bankers and good stewards of shareholder capital.

6. Consistent capital management – RBC has had a consistent policy of reinvesting for organic growth, paying a dividend, and using excess capital to repurchase shares. None of the five major Canadian banks have cut their dividend payouts since World War II. At 3.7%, RBC’s dividend yield is higher than any major US bank.

7. Potential for a stronger Canadian dollar – The Canadian dollar loosely tracks the price of oil. It seems when crude oil is below $60 per barrel, the Canadian dollar trades at 70 cents compared to the US Dollar. When crude oil approaches $100 per barrel, the Canadian dollar trades closer to parity with the US dollar. We do not have a strong view on crude oil prices. Still, we would note that we seem headed toward a strong economic recovery from the pandemic, and crude oil prices generally reflect the level of economic activity.

For the last eight years, we have seen investors shorting Canadian banks due to the housing markets in Toronto and Vancouver. We believe this short thesis is stale and hasn’t come to fruition. We believe different dynamics drive the Canadian housing market than the US housing market in 2008. We do not see the banks engaging in risky lending practices. The substantial problem in the US market in 2008 was due to risky loans with low or no documentation and loans to subprime borrowers. We don’t see evidence of either of these practices in Canada. We admit that the residential property markets in Toronto and Vancouver appear very expensive, but we believe the pricing reflects the strong demand for housing in global cities with land-constrained markets. We think both Toronto and Vancouver will benefit from immigration policies in the US making it difficult for high-quality immigrants to enter. We compare Toronto and Vancouver to New York and San Francisco and see similar pricing. We would point out that both New York and San Francisco fared relatively well during the 2008 US housing crash. Also, we do not see concerning house pricing trends in the rest of Canada.

We do believe there are real risks in the RBC story:

1. Energy Exposure – The Canadian economy is more natural resource dependent than the US economy. Oil and gas production accounts for a significant proportion of the economy. This presents two risks to RBC: 1) direct credit risk to energy companies, and 2) Canadian dollar risk due to the Canadian dollar’s high correlation to the price of oil. As the world moves away from fossil fuels, Canada’s economy will have to transition as well. In the short-term, this is less of a concern due to the economic strength supporting the price of oil.

2. M&A – We would prefer RBC to not make a large acquisition in the US, but we are realistic that they may. We would say their M&A track record is mixed. First, their roll-up of US retail stockbrokers in the 1990s has worked very well. Also, their 2015 acquisition of City National Bank has performed well. However, during the 2000s, RBC bought Centura Bank in North Carolina, Eagle Bancshares in Georgia, and Alabama National BanCorporation. RBC was not able to improve the returns of those three US bank acquisitions and sold the operation to PNC in 2012. RBC lost at least $1 billion over 11 years from these acquisitions. We’re hopeful that RBC’s management team has learned its lesson and won’t try to acquire another generic US bank. We would rather they continue to organically grow the old City National franchise, which focuses on high-net-worth customers in major US cities.

3. Vaccine distribution in Canada – A short-term risk is that vaccine distribution in Canada is going more slowly than in the US. So, the Canadian economy might recover more slowly than the US economy. We believe this risk is small because we think stock market investors will look through this issue. However, we are concerned about further lock-downs in Canada, like the recent second shut-down in Ontario.

Given the large rally in US bank stocks, we are moving out of some US banks and into Canadian banks. We have long admired the banking oligopoly in Canada, but we had stayed away due to the hefty premium that the Canadian banks had over the US banks. That premium is largely gone now. We think the Canadian banks will regain their premium valuation over the US banks. We see parallels between buying the Canadian banks now and our call to buy “Growth banks” like SIVB and WAL in 2019. Growth banks had lost their premium valuation because they were asset-sensitive. They have since regained their premium valuation. We think the same thing will happen for the Canadian banks.”

Our calculations show that Royal Bank of Canada (NYSE: RY) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Royal Bank of Canada was in 18 hedge fund portfolios, compared to 16 funds in the third quarter. RY delivered an 18.50% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your account by investing in the top hedge fund stocks instead of S&P 500 ETFs.

The Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best innovative stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences.

Insider Report

9 Biggest premarket movers: CarMax, FedEx, Seagen etc…

by Senior Analyst June 24, 2022

CarMax (KMX) – The automobile retailer beat estimates by 7 cents with quarterly earnings of $1.56 per share, and revenue that also beat analyst forecasts amid what the company called a “challenging” used vehicle market. CarMax added 1.1% in the premarket.

FedEx (FDX) – FedEx rallied 3.4% in premarket trading after reporting its quarterly adjusted earnings of $6.87 per share beat estimates by 1 cent. Shipment volumes declined but were offset by increased shipping rates and fuel surcharges. FedEx also issued upbeat guidance for fiscal 2023.

Seagen (SGEN) – Seagen shares jumped 3.5% in premarket action after the Wall Street Journal reported that Merck (MRK) is pushing ahead with a potential deal to acquire the biotech company. The stock had jumped last week after the paper’s initial report that Merck was in talks with Seagen about a possible transaction.

Zendesk (ZEN) – Zendesk soared 56.5% in the premarket on reports that the software company is close to a buyout deal with a group of private equity firms. The Wall Street Journal reported that Hellman & Friedman and Permira are among those involved. The potential buyout comes after Zendesk announced last week that it had ended efforts to sell itself.

Microsoft (MSFT) – Microsoft gained 1.2% in the premarket after Citi named it a “top pick,” pointing to its attractive valuation and the company’s ability to sustain growth.

Bausch Health (BHC) – Bausch Health announced that Chairman Joseph Papa has stepped down from the board and it was not due to any dispute or disagreement with the health care products maker. Investor John Paulson will become chairman. Bausch Health jumped 3.6% in premarket trading.

BlackBerry (BB) – BlackBerry reported an adjusted quarterly loss of 5 cents per share, matching analyst forecasts, while the software company’s revenue beat estimates. BlackBerry’s results were helped by growth in cybersecurity and auto products. Its stock rose 1% in the premarket.

LendingTree (TREE) – LendingTree slumped 7.9% in premarket trading after the online lender cut its current quarter guidance. LendingTree pointed to recession fears, higher interest rates and inflationary factors for the revision.

Wolfspeed (WOLF) – The semiconductor developer was upgraded to “buy” from “neutral” at Goldman Sachs, which said the stock’s risk-reward profile is now much more attractive given a recent pullback and that a significant upward earnings inflection is ahead. Wolfspeed rallied 4.1% in premarket trading.

Insider Report

Fed chair Jerome Powell admits recession a ‘possibility’ after rate hikes

by Senior Analyst June 22, 2022

The US economy remains strong but a series of aggressive rate hikes meant to cool soaring inflation could eventually trigger a recession, Federal Reserve Chair Jerome Powell cautioned Wednesday.

Powell, whose testimony before senators was closely watched by investors and analysts, also said the world’s largest economy faces an “uncertain” global environment and could see further inflation “surprises.”

The Fed chair again stressed that the US central bank understands the hardship caused by rising prices and is committed to bringing down inflation, which has reached a 40-year high.

Last week, the Fed announced the sharpest interest rate increase in nearly 30 years and promised more action to combat the price surge, with gas and food costs skyrocketing and millions of Americans struggling to make ends meet.

But when peppered with questions about the prospect of a recession, Powell admitted it could not be ruled out.

“It’s not our intended outcome at all, but it’s certainly a possibility,” he told the Senate Banking Committee.

“And frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want, which is two percent inflation and still a strong labor market.”

In his opening remarks, Powell insisted the US economy “is very strong and well positioned to handle tighter monetary policy.”

“Inflation has obviously surprised to the upside over the past year, and further surprises could be in store,” the Fed chief said in his semi-annual appearance before Congress.

Policymakers “will need to be nimble” given that the economy “often evolves in unexpected ways,” he said.

The Fed is facing intense criticism that it was too slow to react to the changing economy, which benefited from a flood of federal government stimulus.

Last week’s super-sized 0.75-percentage-point increase in the benchmark lending rate was the third since March, taking the policy rate up a total of 1.5 points. Powell at the time said more such increases were likely in July.

“I think it’s going to be very challenging. We’ve never said it was going to be easy or straightforward,” Powell said when asked about efforts to stave off recession.

– ‘Essential’ to curb inflation –

In addition to easing the financial strain on less-wealthy American families, the Fed chief said tamping down inflation was “essential… if we are to have a sustained period of strong labor market conditions that benefit all.”

The US economy recovered quickly from the Covid-19 pandemic, helped by robust consumer spending, and has continued to create jobs at a strong pace, averaging 408,000 in the past three months.

Unemployment is near a 50-year low.

But the buoyant demand for homes, cars and other goods clashed with transportation and supply chain snarls in parts of the world where Covid-19 has remained a challenge.

That fueled inflation, which got dramatically worse after Russia invaded Ukraine in late February and Western nations imposed stiff sanctions on Moscow, sending food and fuel prices up at a blistering rate.

Powell said the fallout from the conflict “is creating additional upward pressure on inflation.”

In addition, “Covid-19-related lockdowns in China are likely to exacerbate ongoing supply chain disruptions.”

But he noted that the issue is not unique to the United States.

“Over the past year, inflation also increased rapidly in many foreign economies,” he said.

In fact, many major central banks have joined the Fed in beginning to tighten monetary policy — with the notable exception of the Bank of Japan.

Powell pointed to signs that rising rates are having an impact, as business investment slows and “activity in the housing sector looks to be softening, in part reflecting higher mortgage rates.”

Average home loan rates jumped to 5.23 percent in May for a 30-year, fixed-rate mortgage, from 4.98 percent in April, according to Freddie Mac, while the median price for homes topped $400,000 for the first time.

“The tightening in financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better balance with supply,” Powell said.

Insider Report

The S&P 500 just confirmed a Bear market; What investors should know

by Senior Analyst June 14, 2022

The bear is back.

The S&P 500 on Monday confirmed what many investors have been saying for months: The large-cap benchmark is in the grips of a bear market.

Stocks suffered sharp losses Monday after major benchmarks saw their worst week since January. Much of the weakness was attributed to the Friday reading of the May consumer-price index, which surged to 8.6% year-over-year — a 40-year high. Investors fear the Federal Reserve will have to raise rates even more aggressively than already expected, risking recession in their effort to tame inflation.

The S&P 500 SPX, -3.88% fell 151.23 points, or 3.9%, to end at 3,749.63, down 21.8% from its Jan. 3 record close and surpassing the 20% pullback threshold traditionally used to define a bear market.

Need to Know: The S&P 500 is clinging to a key support level after Friday’s meltdown, here’s what happens if that fails

The S&P 500 briefly traded below the bear-market threshold in May, but didn’t close below it. Stocks subsequently bounced, but the rebound has since given way as recession fears have increased.

The Dow Jones Industrial Average DJIA, -2.79% finished with a loss of 876.05 points, or 2.8%, to finish at 30,516.74, after dropping more than 1,000 points at its session low. A close below 29,439.72 would put the blue-chip gauge into a bear market. The tech-heavy Nasdaq Composite COMP, -4.68%, which slumped into a bear market earlier this year, dropped 4.7% on Monday, leaving it nearly 33% below its Nov. 19, 2021, record close.

To be sure, many investors and analysts see a 20% pullback as an overly formal if not outdated metric, arguing that stocks have long been behaving in bearlike fashion.

Note that the S&P 500’s finish on Monday means the start of the bear market is backdated the Jan. 3 peak. A bear market is declared over once the S&P 500 has risen 20% from a low.

How have stocks behaved once a bear market has been confirmed? History shows that usually more pain was in store.

There have been 17 bear — or near-bear— markets since World War II, said Ryan Detrick, chief market strategist for LPL Financial, in a May note. Generally speaking, the S&P 500 has fallen further once a bear market begins. And, he said, bear markets have, on average, lasted about a year, producing an average peak-to-trough decline of just shy of 30%. (see table below).

Beyond the averages, there’s a lot of variability in the length and depth of past bear markets. The steepest fall, a peak-to-trough decline of nearly 57%, occurred in the 17 months that marked the 17-month bear market that accompanied the 2007-2009 financial crisis. The longest was a 48.2% drop that ran for nearly 21 months in 1973-74. The shortest was the nearly 34% drop that took place over just 23 trading sessions as the onset of the COVID-19 pandemic sparked a global rout that bottomed out on March 23, 2020, and marked the start of the current bull market.

JP Morgan, Goldman economists now expect Fed to raise rates by 75 basis points on Wednesday

Economists at JP Morgan and Goldman Sachs said in client notes Monday that they now expect the Federal Reserve to raise its policy rate by 75 basis points on Wednesday.

JP Morgan JPM, -2.98% economist Michael Feroli pointed to the “startling rise in longer-term inflation expectations” in a Friday consumer sentiment report and a Wall Street Journal article on Monday suggesting that Fed officials wouldn’t be “constrained by their previous guidance” of a 50-basis-point increase as reasons for his revised forecast.

Of the WSJ article, Feroli also said “one might wonder whether the true surprise would actually be hiking 100bp, something we think is a non-trivial risk,” in a Monday client note.

A 100-basis-point hike would increase the fed-funds rate by 1% from its current 0.75% to 1% target range.

“Our best guess,” Goldman GS, -1.29% economists wrote, is “the article is a hint from the Fed leadership that a 75bp rate hike is coming at the June FOMC meeting on Wednesday,” in a Monday client note.

Market participants largely had been expecting a 50-basis-point hike by the Fed this week. Since Friday’s inflation reading, however, stocks have tumbled, landing the S&P 500 index SPX, -3.88% in a bear market on Monday.

Read: The S&P 500 just confirmed a bear market: What investors need to know

Turmoil also took the 10-year Treasury TMUBMUSD10Y, 3.327% up to 3.371% on Monday, its highest since April 2011, according to Dow Jones Market Data. Bond prices and yields move in opposite directions.

“The Fed has to rein in demand by reducing excess liquidity,” said Robert Pavlik, senior portfolio manager at Dakota Wealth Management, by phone. While he noted the central bank can’t control supply imbalances, it can control demand by raising rates, which makes it more expensive for households to spend on credit.

“That’s where my argument for a 1% rate hike this week comes in,” Pavlik said. “Just rip the Band-Aid off and do it.”

Krishna Guha, a strategist at Evercore ISI, said the WSJ report “de facto tees up a 75 [basis point hike] this week,” but also that it isn’t “what we think is optimal policy,” nor “good for markets.”

JP Morgan’s Feroli now sees the terminal fed-funds rate in a range of 3.25% to 3.50% by early next year, whereas Goldman economists expect to see that range by the end of December.

Barclays economists on Friday were quicker to call for a 75-basis-point rate hike, saying that an aggressive move in June would provide the Fed its “biggest bang for its buck.”

Insider Report

Bloomberg Terminal increases coverage by adding 40 Cryptocurrencies

by Senior Analyst June 11, 2022

This is the largest expansion of its crypto data since Bloomberg Terminal began tracking BTC in 2013.
Co-Founder of the Three Arrows Capital crypto investment fund Su Zhu seems pleased with the new additions to the terminal. He commented in a tweet stating that it is “Also cool that they link to the white papers.”
Bloomberg Terminal is considered a seminal tool for professional and institutional investors as it offers analysis, insights on compliance and risk, and allows users to make trades.
Bloomberg says it vets assets on the terminal through a data-driven approach and “ensures that approach evolves along with the crypto markets.”
Bloomberg Terminal users can access the intraday pricing for all crypto it tracks by visiting and clicking “CRYP.”
The announcement from Bloomberg stated, “Bloomberg takes a data-driven approach to selecting the cryptocurrency data to include on the Bloomberg Terminal and ensures that approach evolves along with the crypto markets. Bloomberg has developed a rigorous vetting model, available to view on the Bloomberg Terminal, that takes into account our institutional client base.”

The addition of so many more crypto assets to Bloomberg Terminal indicates greater maturity in the crypto markets. Institutions are taking a much closer look at their opportunities within the space to both develop platforms and turn a profit.

Financial and technical information platform, Bloomberg, has vastly expanded its coverage of the cryptocurrency markets following a decision to include data on the top 50 crypto assets to the Bloomberg Terminal.

Product manager for cryptocurrencies at Bloomberg, Alex Wenham, explained that as “the global institutional investor community’s interest in digital assets continues to grow, they will need a way to seamlessly incorporate digital assets into their workflows.”

Before now, Bloomberg already had 10 cryptocurrencies in its terminal since 2018, including BTC, ETH, and XRP. The expansion adds an additional 40 coins to the mix such as SOL, allowing financial professionals and institutions access real-time financial market data and to place trades.

Insider Report

Ally Financial (NYSE: ALLY) Continues Outpacing Stock Market Gains in Fintech sector

by Senior Analyst June 11, 2022

Ally Financial (ALLY) closed the most recent trading day at $43.16, moving +1.96% from the previous trading session. This change outpaced the S&P 500’s 1.84% gain on the day. Elsewhere, the Dow gained 1.33%, while the tech-heavy Nasdaq added 0.67%.

Heading into today, shares of the auto finance company and bank had lost 2.89% over the past month, lagging the Finance sector’s gain of 0.54% and the S&P 500’s loss of 0.5% in that time.

Ally Financial will be looking to display strength as it nears its next earnings release. On that day, Ally Financial is projected to report earnings of $1.95 per share, which would represent a year-over-year decline of 16.31%. Meanwhile, our latest consensus estimate is calling for revenue of $2.22 billion, up 6.27% from the prior-year quarter.

For the full year, Consensus Estimates are projecting earnings of $7.71 per share and revenue of $8.9 billion, which would represent changes of -10.45% and +8.41%, respectively, from the prior year.

Investors might also notice recent changes to analyst estimates for Ally Financial. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company’s business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves.

Investors should also note Ally Financial’s current valuation metrics, including its Forward P/E ratio of 5.49. Its industry sports an average Forward P/E of 6.39, so we one might conclude that Ally Financial is trading at a discount comparatively.

It is also worth noting that ALLY currently has a PEG ratio of 0.17. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. The Financial – Consumer Loans industry currently had an average PEG ratio of 0.36 as of yesterday’s close

ALLY

-7.19%.

Insider Report

Target’s Oversupply Problem Should Scare All Retailers

by Senior Analyst June 8, 2022

Target Corp is expected to shed by August the excess inventory that is hurting its profitability and be poised to show strong profits during the key back-to-school and holiday sales seasons, analysts said on Tuesday.

The retailer said it will work quickly to cull its unsold stock, which analysts believe is largely discretionary items like TVs and appliances that consumers have avoided as inflation spiked in recent months.

“Target is doing the right thing in acting aggressively to clear out excess inventory by taking the margin hit now. This will allow them to be better positioned ahead of the two most important retail selling seasons, back-to-school and holiday,” said Ken Perkins, founder of research firm Retail Metrics.

“This should be a short-term problem.”

The company on Tuesday cut its second-quarter operating profit margin forecast by more than half, to 2% from 5.3%, but expects to hit 6% in the second half of the year.

The inventory surge, up 43% in dollar value year over year at the end of the first quarter, hurt profitability.

But Target CEO Brian Cornell said the retailer was working to shed surplus stock by the end of the second quarter on July 31 and will cancel some orders, leading to “additional costs in the second quarter.”

Archives June 2022

Advanced Micro Devices, Inc. (NASDAQ:AMD)

Broadcom Inc. (NASDAQ:AVGO)

Uber Technologies, Inc. (NYSE:UBER)

Visa Inc. (NYSE:V)

Tesla, Inc. (NASDAQ:TSLA)

Traders to the rescue?

‘Very challenging’

‘Fully staffed’

‘Amazing numbers’

JP Morgan, Goldman economists now expect Fed to raise rates by 75 basis points on Wednesday