The breadth and intensity of this coronavirus-fueled stock market selloff has some strategists scratching their heads. Thomas Lee, founder of Fundstrat Global Advisors, has some ideas why the market is acting oddly.
Stocks have crashed due to the coronavirus outbreak. Is it time to go all into stocks now at cheaper prices?
Investing lore has it that bond investors are the “smart money” since they know their way around financial statements. Vaselkik, 62, has been in the business for nearly 35 years (31 at T. Rowe Price).
DEEP DIVE In any market environment, there are exceptions to the trend. But there aren’t many this time. Since the S&P 500 (SPX) hit its last closing record on Feb. 19, the index has skidded 12% — and only seven of the component stocks haven’t declined through the close on Feb.
A new note from Morgan Stanley shows three possible scenarios for the economy. We are currently headed for the second scenario.
Yesterday, all my troubles seemed so far away, as Paul McCartney famously wrote. The technology-led Nasdaq Composite slumped 10.54%; it is now 12.73% under its recent high. The losses relate to the impact, or fear effects, of the spreading coronavirus.
The Dow Jones Industrial Average suffered one of its biggest weekly losses in decades. Coronavirus fear threatens to hit U.S. stocks into bear-market land.
My fiancée is 30, also has no debt and has a family trust worth $100,000 that’s also invested. Add to that your hope of saving 20% a year of both your and your fiancée’s salaries, as well as half the bonus, and you’re likely to be far ahead of your contemporaries in terms of retirement savings — assuming, among many other things, that you invest the money well. On paper — and if all goes according to plan — you guys likely can retire before 60 and remain in New York City, financial planners tell MarketWatch.
While the economy is booming, there are some warnings signs starting to flash. Hedge fund manager Ken Griffin – who started trading at age 19, and now at 51 has amassed a fortune worth $15 billion – spoke about some of the near- and long-term risks in a recent interview.Griffin sees inflation as a danger in the longer term, mostly because the financial experts lack tools to determine when inflationary trends are starting. Griffin recounts how his firm’s best analysts were caught flat-footed in 2018 when the Fed started raising rates. Regarding the lack of accurate predictive foresight, Griffin says, “If there were inflation, the markets are utterly and completely unprepared for that.”But inflation, being invisible for now, is a long-term worry. Griffin sees the coronavirus outbreak has a larger threat, at least for the present. Griffin notes that a number of major companies – Apple is a particularly good example – have already announced lower Q4 and Q1 earnings, disrupted supply chains, and even store closings in response to the viral epidemic as it expands out of China. Griffin describes the epidemic as “probably the most concrete short-run risk we see in the financial markets globally.”The coronavirus is even impacting diplomacy. Griffin points out that specific terms of the US-China Phase 1 trade agreement have not yet begun implementation. The agreement puts an obligation on China to increase imports of US products on the order of $200 billion for the next two years – but that is on hold with large parts of China paralyzed by quarantines and global trade and travel patterns facing growing disruption.So, it may be interesting to see which stocks Griffin is willing to buy, given his view of the risks ahead. A look at the most recent 13F filing by Citadel, his hedge fund, reveals three new positions that TipRanks’ Stock Screener reveals as “strong buys.” Let's take a closer look.NexTier Oilfield Solutions (NEX)The first of Griffin’s new positions, we’ll look at is NexTier, a player in the oil field support services sector. Companies like NexTier don’t actually drill for oil, but they provide the support that the exploration and drilling operators need get the oil out of the ground. Without this support – the rig services, well completion, pumps and piping for fracking operations, and fluid management and disposal – the great oil fracking boom that has helped to power the US economy over the past 15 years could not have occurred.NEX is a new ticker in the market, formed during the third quarter last year when Keane Group and C&J Energy Services merged. The name change to NexTier reflects that the transaction was a merger of equals. NEX inherited the performance legacy of Keane, and the combined company reported Q3 earnings and revenues above the forecasts. It was the second quarter in a row that the company beat expectations. Looking ahead, the company will be reporting Q4 results on March 10, and is guiding for a net loss of 2 cents per share. The company is also guiding revenue in the $640 to $660 million range, slightly higher than previous guidance.So, we have a well-positioned services company in the oil industry – and Griffin’s fund bought up 6.169 million shares. That purchase represents a new stake for Citadel, and it’s worth over $30 million dollars at today’s prices.Conventional wisdom says the move is worth it. Sean Meakim, reviewing the stock for JPMorgan, is even more bullish. He writes, “We view NexTier as a leader in the industry in terms of driving technology improvements, and think it can continue to make strides in 2020to offset the macro headwinds. We model NEX delivering FCF of ~$50mm in 4Q19, sufficient to provide fuel for the company’s $100mm capital distribution plan…”Meakim puts a $9 price target on NEX shares, suggesting room for an impressive 84% upside potential. (To watch Meakim’s track record, click here)Overall, NexTier has a Strong Buy rating from the analyst consensus, based on 4 Buys and 1 Hold. The average price target of $7.90 implies an upside of 74% for the coming year. (See NexTier stock analysis at TipRanks)Aon Plc. (AON)Next on our list of new Citadel positions is Aon, a $50 billion player in the professional services and risk management industry. Aon is known as a major insurance broker, and works with large-scale clients to negotiate and place insurance policies, advise on health and other benefits, organize retirement compensation schemes, and even outsource human resources.Aon’s revenues and stock performance have been on an upward trajectory over the past year. In Q4 2019, the company reported $2.89 billion in total revenue, in line with the forecast and the year-ago number by 4%. EPS, at $2.53, was 1.6% higher than expected and most impressive 74% above the Q4 2018 figure.Share gains have been impressive, too. AON is up over 30% in the past 12 months. Complementing the share gains, AON also offers a modest dividend. At 0.79%, the yield is nothing to write home about, the share price is high enough that the annualized payment is $1.76 per share. It’s small addition for investors to count among the gains.Griffin clearly is impressed by the prospective gains here. His fund snapped up over 350,000 shares of Aon, which are now worth $77.9 million.Covering AON for Wells Fargo, analyst Elyse Greenspan writes, “We think AON is positioned to outperform as a stand-alone company or if they acquire WLTW. We believe a stand-alone AON is positioned to see industry-leading organic revenue growth and has several tailwinds to its FCF in 2020. If there is a deal, it would likely be because AON believes they can pull a healthy level of expenses out of WLTW without significant revenue disynergies. Recall AON and WLTW entered into deal negotiations last year that were called off in March 2019 and the one-year stand still on discussions ends on 3/6/20. Further, AON’s CEO has been an expense master during his tenure at AON and has been able to consistently pull expenses out of the company."Greenspan's $265 price target suggests an upside potential for AON of 20%. More importantly, she upgraded her stance on the stock, shifting from Neutral to Buy. (To watch Greenspan’s track record, click here)Aon’s Strong Buy consensus rating is supported by 5 analyst reviews, including 4 Buys and just 1 Hold. The stock is selling for $237.25, and the average price target of $237.25 indicates room for a modest 7% upside. (See Aon stock analysis at TipRanks)Digital Realty Trust (DLR)The final stock on our list is a Real Estate Investment Trust (REIT), specializing in data center and other tech-related properties. DLR owns properties around the world, in 15 countries, and boasts over 210 operating data centers. Like all REITs, Digital is required by US tax law to pay back the bulk of its profits to investors.Those profits can be substantial, as the company brings in over $3 billion annually on the top line. Earnings were robust in Q4 2019, at $1.62 per share. Estimated EPS for Q1 2020, to be reported in April, is $1.59.With robust earnings, DLR has no problem maintaining its dividend payments. Most REITs pay out strong dividends, as it is an easy way to remain in compliance with tax code regulations on profit sharing. DLR offers a 3.3% dividend yield, paid out quarterly at $1.08 per share. The payout ratio, which compares the quarterly dividend payment to the quarterly earnings, is 66.7%, indicating that the company can easily sustain the dividend given current income levels. DLR has raised its payment in each of the last three years.Strong earnings, a reliable dividend, and a pattern of long-term gains (this stock is up 34% over the last three years) are exactly the features that will attract attention from a hedge fund. So, it should be no surprise that Griffin’s fund picked up over 249,000 shares of DLR in Q4. Like the other stocks in this article, this is a new position for Griffin. At current prices, the fund’s stake in Digital Realty is worth $35.6 million.Weighing in on the stock for SunTrust Robinson, 5-star analyst Greg Miller is upbeat, saying, "We believe investors will continue to respond favorably to the execution of the business model. Sequentially higher 4Q signed leasing is not typical, underscoring DLR’s momentum… we believe the stock will continue to move higher."Miller’s Buy rating is supported by his $152 price target, which suggests room for 16% upside growth to the stock. (To watch Miller’s track record, click here)Wall Street’s analysts have given DLR 6 Buys and 2 Holds recently, making the consensus view a Strong Buy. The average price target is $137, which implies a small premium of 5% from the current share price of $130.38. (See Digital Realty stock analysis at TipRanks)
The recent plunge in stocks is making many everyday investors question how they should handle their retirement savings during such a swoon.
An electric vehicle manufacturer is eying locations for its first manufacturing site in the U.S. and is considering putting the facility in Texas. After whittling down possible locations, ElectraMeccanica Vehicles Corp. (Nasdaq: SOLO), which is based in Vancouver, Canada, announced it's looking to put a 200-employee manufacturing facility in one of seven states: Arizona, Colorado, Florida, North Carolina, South Carolina, Tennessee or Texas.
(Bloomberg) -- Wearing a black suit and harness, Richard Branson once leaped from the roof of a Las Vegas casino to launch one of his ventures.His fortune headed in the same direction this week.The value of the British billionaire’s stake in Virgin Galactic Holdings Inc. has fallen about $1.1 billion since the company reported widening losses in the fourth quarter from a year earlier. The firm’s shares tumbled 24% to close at $21.97 in New York and have plunged 35% since Tuesday.The Las Cruces, New Mexico-based firm is planning to resume ticket sales for future space flights to show Wall Street that affluent customers are willing to pay for such adventures.Space tourism is one of the latest bets from Branson, a serial creator of companies including everything from record labels to fizzy drinks to bridal gowns. The Virgin brand he founded as a mail-order retailer in 1970 is now linked to more than 60 businesses, including British bank Virgin Money UK Plc and airline Virgin Atlantic. This month, Virgin launched an adults-only cruise ship line that aims to attract younger passengers.Branson, 69, isn’t the only billionaire betting on space. Elon Musk and Jeff Bezos both have ventures in the area, but Virgin Galactic was the first to become a public company following a merger with U.S. investment firm Social Capital Hedosophia four months ago.The company has since become a highly speculative stock, more than doubling this year before Tuesday’s after-market results as hedge funds and other investors predict it will establish a new space-tourism industry.Chief Executive Officer George Whitesides has said the company will begin customer flights this year, with Branson expected to be among those on the maiden voyage.Branson owns about half of the business, which still makes up the bulk of his $6.8 billion fortune even with Wednesday’s stock slump, according to the Bloomberg Billionaires Index.(Updates with closing share price in third paragraph.)\--With assistance from Justin Bachman.To contact the reporter on this story: Ben Stupples in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Pierre Paulden at email@example.com, Steven CrabillFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
All the Democratic candidates say wealthy taxpayers and businesses should pay more — but that’s where the agreements end.
(Bloomberg Opinion) -- It’s said that the most expensive words on Wall Street are “this time is different.” But this might be one of the few times where the phrase applies.Most of the rapid selloffs in equities in the post-financial crisis era were stemmed by forceful central bank statements, such as when then European Central Bank President Mario Draghi said in 2012 that he would do “whatever it takes” to save the euro during the height of the region’s debt crisis. Or, when current Federal Reserve Chair Jerome Powell made his “dovish pivot” in early January 2019 by saying the central bank would be “patient and flexible” when it came to considering future interest-rate increases.But what makes the current plunge different is that it’s being driven by an event — the threat that the coronavirus will become worldwide pandemic — that is out of the control of monetary policy makers and Wall Street. So, there is unlikely to be some “magic” headline that scrolls across the computer screens of investors and traders that says it is over. Maybe the news of a novel vaccine or effective treatment would do the trick, but medical experts generally say none is on the immediate horizon.In order to compensate, markets must discount all current and future bad news. So, the market has to price in more infections, more border closures, wider travel restrictions, more and larger quarantines, and the potential for a widespread outbreak in the U.S. that leads to mass cancellations of gatherings and closures of school and work sites. The market also has to discount longer-term effects from de-globalization, lingering supply chain disruptions, an uneasy public that loses faith in government and other official institutions, as well as a return of the virus this fall.The way to tell whether the discounting has been fully reached is when the market stops reacting negatively to every bad headline, which has yet to happen. But once it happens, the market can truly bottom and begin to recover when some of the expected negative events fail to materialize, even though it may rally in the face of other “bad” news it already discounted.What is preventing this from happening? Two things. The first is a disbelief or lack of urgency about the scope of the coronavirus problem. This lack of panic takes many forms, with the most common being the refrain that this is “just the flu.” Seasoned market watchers should be reminded of similar dismissals in late 2007 that “subprime is only 2% of mortgage market.” One exception is the Chinese government, which did not shut down its economy and quarantine hundreds of millions of people because they are needlessly panicking. Those actions signal a seriousness that the rest of the world should not dismiss.The second is the Federal Reserve. The foundation of the post-crisis period has been that accommodative monetary policy rides to the rescue of every market decline. So, a parallel discussion that is going on is whether the Fed will cut interest rates at its next monetary policy meeting that ends on March 18. Data compiled by Bloomberg show the probability of a reduction in the Fed’s target rate at that meeting is slightly better than even money.In other words, hope is at a fever pitch that easier monetary policy can help stabilize markets. But, again, the coronavirus is not a problem that easy money, either via lower rates or additional asset purchases, can fix. Such actions will, at best, only temporarily support markets, but they won’t prevent them from reaching a true bottom.To contact the author of this story: Jim Bianco at firstname.lastname@example.orgTo contact the editor responsible for this story: Robert Burgess at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Jim Bianco is the President and founder of Bianco Research, a provider of data-driven insights into the global economy and financial markets. He may have a stake in the areas he writes about.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Harley-Davidson CEO Matthew Levatich is leaving the struggling motorcycle maker. The Milwaukee company announced Friday that Levatich will leave his post and seat on Harley's board of directors. Board member Jochen Zeitz will become acting president and CEO while a board search committee is formed and Harley hires an outside search firm to fill the job.
Plenty of economists say the U.S. economy was doing just fine before the outbreak, and many of them still see a limited impact on the U.S. If the Fed cuts rates, the market may get some unexpected juice for a quick recovery.
The coronavirus outbreak has been taking up its fair share of headline space, and rightly so. The virus first appeared in Wuhan, China, but large-scale outbreaks are now appearing in South Korea, Iran and Italy. While healthcare companies are working around the clock to develop a vaccine, the reality for now is harsh: a rapidly spreading virus is causing major disruptions to international travel and trade. China’s economy has already taken a serious hit, and even Apple has announced that its Q1 2020 results will suffer badly from the economic impact of the coronavirus. As a result, the S&P 500 is down 12% from its February 19 peak.Investors don’t want much, really: just a guaranteed return on a stock that pays back a steady income stream, even when markets tumble. It’s not too much to ask for. It can be hard to find, however. Strong returns – based on gains in share price – typically don’t go hand-in-hand with a steady income stream – based on dividends. The two forms of investment returns are based on different marketing and business strategies by the companies involved.A careful look into the TipRanks database, however, can bring up intriguing choices for income-minded investors to study. The Stock Screener tool has filters to sort more than 6,200 stocks, making it a breeze to find the right one for your investment profile. Setting the filters to scan for tickers with over 5% dividend yields and “Strong Buy” consensus ratings, the search is narrowed to 41 companies. Here are three with a clear path forward and proven returns. Let's take a closer look.Philip Morris International (PM)Sin stocks are a classic choice for dividend hunters. Most of us can agree that cigarettes and alcohol are just plain bad for you, and that they are addictive, but those very attributes help guarantee a high sales floor. Philip Morris has been riding that wave for decades.There has been some interesting news about PM in recent months. In 2H19, the company entered into talks with Altria, its former parent, regarding a ‘merger of equals’ deal. Those talks were called off in September, much to investors’ pleasure. The companies will, instead, pursue a joint venture in iQOS, a heated smokeless tobacco product, in the US market. PM has already put some $6 billion dollars into iQOS, while Altria’s tobacco alternatives – in vaping – are facing serious regulatory and public relations challenges.That being said, investors did get some good news after the company reported a Q4 earnings beat earlier this month. EPS beat the estimate by 1 cent, coming in at $1.22, and the $7.71 billion in revenue edged out the forecast by half a percent.Investors will be pleased with PM’s dividend, too. The payment, $1.17 quarterly, annualizes to $4.68 and gives a yield of 5.51%. The company has a 12-year history of reliably maintaining the payment, and has raised it three times in the past three years. The yield compares favorably to the average among S&P listed companies, which is only 2%.Piper Sandler analyst Michael Lavery reviewed this stock last week, and wrote, “We remain bullish on PM's strong underlying core earnings growth and incremental iQOS earnings to be attractive, and it is our top pick in the space... We believe its 2020 guidance is appropriately conservative, though we believe it can exceed its minimum expectations. Buybacks may also be in play for 2021.”Lavery maintained his $114 price target, implying room for a strong 32% upside potential, and reiterated his Buy rating. (To watch Lavery’s track record, click here)Philip Morris’ Strong Buy consensus rating is based on 4 Buys against a single Hold, all set in recent weeks. The stock is selling for $83.07, and the $101.20 average price target suggests it has room to grow another 22%. (See Philip Morris price targets and analyst ratings on TipRanks)Moelis & Company (MC)The next stock on today’s list, Moelis, is an investment banking company. The firm is an independent operator, offering advisory services to corporations, financial sponsors, and governments. Advisory services include recapitalizations and restructurings as well as mergers and acquisitions.The financial industry’s services are always in demand, a fact which has supported this stock over the years, and shows in the quarterly reports. Even though Q4 revenues were down 6% year-over-year, at $223.5 million, and EPS slipped 51% year-over-year to 38 cents, both figures were well above Wall Street’s forecasts. It was the fifth quarter in a row that beat the forecasts.A company that consistently beats earnings forecasts will surely attract attention – but so will a company that keeps up its dividend. MC announced a $1.26 per share payment this month, to be paid at the end of March. This is a jump from the usual quarterly divided of 51 cents – but it is consistent with company practice for February dividends. The annualized regular payment, at $2.04 per share, gives a yield of 5.96%, or nearly triple the S&P average.Ken Worthington, reviewing MC for J.P. Morgan, likes what he sees. He writes, “Moelis continues to see a rather favorable macro environment lining up for a robust client activity outlook going forward, pointing especially to the private sector, where Moelis sees its strong relationship with sponsors paving the way for more sponsor-related deals.”Worthington gives the stock a Buy rating and increased the price target from $44 to $49, implying robust upside potential of nearly 50%. (To watch Worthington’s track record, click here)Also bullish is Jeff Harte from Piper Sandler. Harte was impressed by the company’s earnings, especially that EPS beat the forecasts. In line with this development, Harte says, “We are increasing our 2020 EPS estimates from $2.98 to $3.00 and initiating a 2021 EPS estimate of $3.14.”Harte puts a Buy rating on this stock along with a price target of $44. His target indicates a 33% potential upside to the shares. (To watch Harte’s track record, click here)Overall, Moelis has a unanimous Strong Buy consensus rating, based on 4 recent Buy-side reviews. The average price target is $41.25, suggesting an upside potential of 17%. (See Moelis stock analysis on TipRanks)Two Harbors Investment (TWO)Last on our list today is a Real Estate Investment Trust (REIT), another classic dividend choice. And no wonder why – required by tax code to return most of their profits to investors and shareholders, these companies have some of the highest dividend yields among publicly traded stocks.TWO is no exception. This company, which owns both real properties and mortgage-backed securities, with a focus on residential properties, pays out 40 cents per share quarterly, or $1.60 annualized. This equates to a dividend yield of 10.86%, more than 5 times the average – and more than 6 times the yield of Treasury bonds.The company did have a disappointing Q4, though. TWO reported EPS of just 25 cents, 11 cents below estimates, and shares slipped after the news. Revenues, however, beat the forecast handily by $8.7 million, coming in at $71.2 million.Writing on the stock after the earnings report, JMP Securities analyst Trevor Cranston said, “We currently expect the $0.40 dividend to be sustained for the foreseeable future, as management indicated that it views the underlying return profile of the portfolio as continuing to support that figure. This dividend level provides a yield of 10.86% on the current share price.”Cranston’s optimism on the dividend prompted his Buy rating on the stock. He gives TWO shares a $15.50 price target, suggesting room for 10% upside potential. The real attraction for investors here is the powerful dividend return. (To watch Cranston’s track record, click here)All in all, with 5 Buy ratings and only 1 Hold, Two Harbors gets a Strong Buy rating from the analyst consensus view. Shares are priced at $14.13 and the upside potential stands at 9%, based on an average price target of $15.45. (See Two Harbors stock analysis on TipRanks)
Shares of iBio Inc. soared another 174% Friday, bringing their weekly gain to 689%, on hopes for the company's partnership with Beijing CC-Pharming Ltd. on a plant-based vaccine to treat the coronavirus. The news was first announced in early February with the company aiming to use its FastPharming facility, which was set up to create rapid delivery of medical countermeasures to treat a pandemic. The partnership aims to leverage CC-Pharming's work on Middle East Respiratory Syndrome, or MERS, another coronavirus, and iBio's manufacturing processes in plant-based expression systems. On Friday, iBio filed a shelf registration to issue up to $100 million in securities. iBio shares have gained 767% in the year to date, while the S&P 500 has gained 11%.
One consequence of this week’s market rout driven by the coronavirus outbreak is higher dividend-stock yields across the board.
The oil selloff gained steam, with West Texas Intermediate crude futures plunging more than 6% before recovering slightly. China appears to be taking advantage.
Cisco reported a slowdown in its latest quarterly report, and predicted more to come in the current period.
Goldman Sachs and Citigroup strategists think investors should not be buying the pullback in stocks right now. Goldman says corporate earnings growth will be nonexistent this year thanks to the coronavirus epidemic.
Top news and what to watch in the markets on Friday, February 28, 2020.