"We need you to start dumping your milk," said his contact from Dairy Farmers of America (DFA), the largest U.S. dairy cooperative. Despite strong demand for basic foods like dairy products amid the coronavirus pandemic, the milk supply chain has seen a host of disruptions that are preventing dairy farmers from getting their products to market. Mass closures of restaurants and schools have forced a sudden shift from those wholesale food-service markets to retail grocery stores, creating logistical and packaging nightmares for plants processing milk, butter and cheese.
The coronavirus pandemic isn't done yet, bringing pressure to the stock market, pros say.
In a notable reversal, Warren Buffett's Berkshire Hathaway has reduced its Delta Air Lines and Southwest Airlines stakes amid the coronavirus pandemic. Airline stocks sold off late Friday.
President Trump slammed 3M for sending face masks abroad during the Covid-19 crisis and invoked the Defense Production Act, requiring the company to prioritize government orders. That’s just the beginning of the story.
(Bloomberg) -- The market for mortgage-backed securities was in free fall, with fear running rampant and banks seizing collateral.So Tom Barrack, the chairman of real estate investment trust Colony Capital Inc., published an 1,800-word plea for the Federal Reserve to buy bonds backed by homes, cars and other assets and for banks to halt margin calls.That was last Saturday. In the week since, three top investors in the sector have engaged restructuring advisers, two others sold $7 billion of debt at a discount and publicly traded mortgage REITs in the U.S. lost more than $12 billion of market value, bringing total declines this year to at least $50 billion.The carnage shows no signs of abating. Prominent asset managers including Blackstone Group Inc., TPG and Apollo Global Management Inc. have been sucked into the vortex wrought by the coronavirus pandemic, with their associated mortgage REITs losing more than two-thirds of their value on average so far in 2020.The pandemic has crippled commerce across the U.S., putting almost 10 million people out of work in a matter of weeks and sparking fears that huge numbers of businesses and individuals will fail to make rent and mortgage payments. As a result, investors are fleeing from residential and commercial debt that isn’t backstopped by the federal government.Read more: Nobody knows what will happen when the rent comes due on April 1“Nobody wants to buy those securities when the underlying contracts are not performing,” especially when it remains unclear how long the disruption will last, Barrack wrote in his post on Medium.Nobody, that is, except perhaps Starwood Capital Group’s Barry Sternlicht, JPMorgan Chase & Co. and others looking for deals as billions of dollars of debt hit the block.Sternlicht, who manages $60 billion, said in a letter to shareholders last week that his firm is looking to “take advantage of market dislocations” even as shares of his publicly traded REIT have tumbled 61% this year through Thursday.TCW, an asset manager overseeing about $217 billion, is buying selectively. So are family offices, according to people familiar with the transactions. And JPMorgan, the biggest U.S. bank, said Monday it was raising as much as $10 billion to invest in dislocated markets, including credit and real estate.“For buyers in this market, it’s about willingness and ability right now,” said Mark Fontanilla, who owns a market strategy consulting firm that specializes in structured finance. “Things are so uncertain, you need to have deployable, stable capital to be able to hold positions, especially less liquid ones, through the uncertainty.”Why the Mortgage Market Needs Its Fixes Fixed: QuickTakeIn some cases, asset managers’ private funds are bidding on assets being unloaded by their own publicly traded REITs. New Residential Investment Corp., managed by Fortress Investment Group, sold bonds with a face value of $6.1 billion. One of the buyers was an entity also affiliated with Fortress, the company disclosed in a filing Thursday.REITs with too much leverage and not enough liquidity have been the most prolific sellers. Leverage, used to increase returns when times are good, are now amplifying losses. This is typically done through so-called repurchase agreements, or repos, through which borrowers post securities as collateral. When the value of those assets drop, they must post more collateral or cash. When they can’t meet margin calls, banks may liquidate the assets, driving down prices even further.“I don’t think that the leverage amount that people have been using is inappropriate,” said Eric Reilly, a partner in Mayer Brown’s banking and finance group. “In order to get the returns that investors are looking for, whether you are a public REIT or a fund, it’s difficult to invest in high quality assets and meet your return.”In the past month, five mortgage REITs have notified investors that they’ve been unable to meet margin calls and started discussing forbearance agreements with their lenders. Other REITs have canceled, delayed or modified dividends, or liquidated riskier parts of their portfolios. While private funds also use leverage, they often have access to liquidity through capital calls, giving them more flexibility than their publicly traded peers. But they aren’t necessarily immune. Their problems may just be less apparent because of more relaxed disclosure requirements.“There are a lot more mortgage funds and real estate funds than mortgage REITs,” Reilly said. “There’s probably a couple of funds out there in some form of distress for every mortgage REIT you see.”Meanwhile, the market is waiting to see if the Fed sides with Barrack by including non-agency mortgage backed securities in its intervention efforts.For any relief program to work, all parties need to be part of the rescue program, including non-bank lenders, Reilly said.“This is nobody’s fault,” he said. “It came out of the blue, from across the world, and basically punched people in the mouth.”For 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.
Investment bank Goldman Sachs has been analyzing the market performance, and has a mixed outlook for the year – not necessarily bad news for the long term, but an acknowledgement that we’re not completely certain what the economic cycle has in store. David Kostin, Goldman Sachs' chief U.S. equity strategist, predicts that the market has not found its true bottom yet, and has to meet three conditions before it can. Kostin notes that the current peak-to-trough time, of just 23 trading days, is an order of magnitude faster than the median – which stands at 17 months. But there is hope on the horizon: Kostin also believes that the S&P can finish out the year at 3,000.The three conditions Kostin sees as essential to a true market bottom are: A slow in the viral spread in the US, allowing investors to understand the actual economic impact; evidence that policy actions by the Federal Reserve and Congress are showing success in limiting the damage; and a bottoming out in both investor sentiment and positioning.Once the bottom is reached, Kostin sees a quick rebound in the offing. With that in mind, Goldman's stock analysts remind investors that compelling opportunities can still be found. Using TipRanks database, we were able to pinpoint 3 stocks that are Buy-rated and backed by the analysts from Goldman Sachs as well as the rest of the Street. To top it all off, each stands to see over 35% gains in the next year. Columbia Property Trust (CXP)We’ll start in commercial real estate, with an REIT focused on urban office properties. Columbia Property Trust holds some 6.8 million square feet of office space in New York, San Francisco, and Washington DC, with smaller investments in Los Angeles and Boston. Three of these cities – NY, LA, and San Fran – are hard-hit by coronavirus or the lockdown policies implemented to halt its spread. That should hurt a commercial landlord, but Columbia also has over 6 years remaining on its average lease, and those long remaining terms, along with a high occupancy rate of 97%, help to insulate the company from immediate difficulties.A solid end to 2019 also put Columbia in a fair position to meet the current downturn. The company met the earnings forecast, showing 34 cents per share, while the $68.73 million revenues beat the estimates by 3.1%. The earnings were more than enough to keep up the 21-cent quarterly dividend. The payout ratio, at 61%, is low for the sector – but also shows that the company can easily afford its dividend. At 7.6%, the yield is excellent, far ahead of both the average yield on the S&P 500 and the yield on Treasury notes.5-star analyst Richard Skidmore, covering CXP for Goldman Sachs, sees the stock with a clear near-term path to weather the current storm. Skidmore writes, “CXP has approximately 2% of its portfolio expiring in 2020, so we see limited downside risk resulting from the current environment. We expect growth to accelerate in 2021/2022 driven by expiration renewals… From a liquidity perspective, CXP has $314mn available under its revolving credit facility, so we believe CXP has adequate liquidity to fund its operations…”Skidmore backs his Buy rating on the stock with a $16 price target, indicative of a 44% upside potential. (To watch Skidmore’s track record, click here)Overall, CXP shares have a Strong Buy from the analyst consensus, based on 3 Buy ratings and 1 Hold. The stock is selling for a low $11.10, and the $21.25 average price target suggest room for 91% upside growth in the coming 12 months. (See Columbia stock analysis on TipRanks)Celanese Corporation (CE)Next up, we’ll switch to the chemical industry, where Texas-based Celanese holds a global niche. The company produces acetyl products, a vital molecular compound with applications in a wide range of industries. Celanese is also the largest producer of vinyl acetate monomer, a vital component of industrial polymers and adhesives.The coronavirus pandemic, by forcing workplace closures to halt the viral spread, has halted operations and put serious pressure on the company. This comes on the heels of a disappointing fourth quarter, in which demand fell and earnings and revenues both missed the estimates. EPS, at $1.99 cents, was down 16% year-over-year, and revenues declined 15% over the same period.On a positive note, Celanese boasted $179 million in free cash flow for the quarter, well ahead of the $144 million in capital expenditure. The company was easily able to maintain its 62-cent quarterly dividend, with a moderate payout ratio of 31%. At $2.48, the annualized payment gives a yield of 3.6%.Goldman Sachs 5-star analyst Robert Koort has been covering CE shares, and sees them in an advantageous position right now – enough that he upgraded his stance on the stock from Neutral to Buy. His $95 price target implies an upside potential of 38%. (To watch Koort’s track record, click here)Defending his position on CE, Koort writes, “…the company has shown an ability to maintain meaningful free cash generation during previous economic downturns. Additionally, a signiﬁcantly improved and less capital intensive business mix, and strategic acquisitions have driven structurally higher cash generation capabilities through the cycle, as evidenced by steep increases and relative stability in FCF generation over the last 7 years.”It appears consensus sentiment matches well with Koort's bullish stance, with TipRanks analytics showing CE as a Buy. Based on 17 analysts tracked in the last 3 months, 10 rate the stock a "buy," while 7 suggest "hold." The 12-month average price target stands at $104.36, marking a 52% upside from where the stock is currently trading. (See Celanese stock analysis on TipRanks.)Univar Solutions (UNVR)Last on our list is another player in the chemical industry. Univar is an ingredients distributor, providing an enormous range of chemicals, solvents, and additives needed by industrial chemical manufacturers in completing their formulations. The company bills itself as the one-stop-shop in supplying the major chemical manufacturers, and its $9.3 billion in 2019 revenue, up 8% year-over-year, underlines the importance of that niche.Q4 revenues were in-line with the 2019 total. At $2.2 billion, the quarterly total showed 9% year-over-year growth. EPS, however, was down; the 29 cents reported fell 4 cents from the year-ago number. Like Celanese above, however, Univar finished 2019 with plenty of cash on hand. The company reported some $330.3 million available, a 172% increase.This is another stock reviewed by GS’s Robert Koort. Like CE above, Koort gives UNVR an upgrade, raising his outlook to a Buy. Koort gives the stock a $15 price target, showing confidence in a 51% upside for the coming year. (To watch Koort’s track record, click here)Commenting on Univar, Koort wrote, “When looking at prior periods of economic weakness, distributors have broadly proven to perform relatively in-line with the market… we believe the stock has underperformed driven by several factors. First, during the last quarterly earnings call UNVR provided disappointing FCF guidance… We see this dynamic improving as the FCF guidance for 2020 assumed a back-end loaded improvement in sales. Should the macro environment falter… this could result in improving FCF...”UNVR shares are heavily discounted after the market’s recent slide, selling for just $9.89 now. The average price target is $24.88, and implies a powerful growth potential: 152% for the coming year. The stock gets a Moderate Buy rating from the analyst consensus, based on a 3 to 2 split of Buys versus Holds. (See Univar’s stock analysis at TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Rates have dropped this week and are giving homeowners new opportunities to save.
Many Americans will get government checks to help them weather money challenges from the coronavirus outbreak. Here’s what you need to know.
MoffettNathanson analyst Craig Moffett ran through several recession scenarios, looking at how they would affect AT&T’s business and ability to maintain the payout.
At times like this it must be a relief to have some of your retirement portfolio managed by Warren Buffett. Granted, Buffett and Berkshire Hathaway Vice Chairman Charlie Munger aren’t the spring chickens they were during the dot-com crash or the global financial crisis, when they were spry youngsters in their 70s and early 80s. The company press office says Buffett is not planning to speak in public before May.
There is plenty of optimism in oil markets this week as rumors of a global production cut send prices higher, but next week’s OPEC meeting may send prices crashing
(Bloomberg) -- The fallout from Luckin Coffee Inc.’s accounting scandal is spreading far beyond the high-flying Starbucks challenger, with renewed concerns about Chinese corporate governance dragging down stocks across industries and threatening to bring a halt to the country’s overseas initial public offerings.The Xiamen-based coffee chain said on Thursday that its chief operating officer and some underlings may have fabricated billions of yuan in sales, upending what was supposed to be one of China’s best growth stories. Luckin Coffee shares plunged as much as 81% in U.S. trading and CAR Inc., a rental company founded by Luckin Coffee’s chairman, sank 54% in Hong Kong. Popular short-selling targets including Anta Sports Products Ltd. also slumped.Lone Pine Capital, one of Luckin Coffee’s top holders, no longer reports a stake in the company, according to a filing. It held a 10.7% stake as of Jan. 9, according to data compiled by Bloomberg.The revelations revived doubts about financial reporting that have for years dogged Chinese stocks listed in the U.S. and Hong Kong, two exchanges frequently picked by company founders to raise new funds. While China recently changed regulations to punish instances of financial fraud onshore, the penalties remain negligible. Just last year, one of China’s largest listed drug makers said it overstated cash holdings by more than $4.3 billion.“After the Luckin incident, investors will be more careful when investing in Chinese companies that have a short founding history and rely on huge leverage to expand,” said Jackson Wong, Hong Kong-based asset management director for Amber Hill Capital Ltd.The news is likely to put at least a temporary freeze on new U.S. listings by Chinese companies, according to four investment bankers who asked not to be identified because they aren’t authorized to speak to media. One of the bankers said U.S. investor appetite for Chinese shares already had waned amid a string of disappointing deals and heightened geopolitical tensions between Washington and Beijing.Those concerns come on top of a general flight from risk because of the coronavirus pandemic, which has caused IPO volumes globally to plunge in recent weeks.“It will inevitably affect the investors’ confidence and market momentum on other U.S.-listed China stocks,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong. “It may even affect the Chinese companies’ U.S. IPO pipeline because investors would start to question their accountability.”Read more: Global Banks, Wary of Some China U.S. IPOs, Walk Away From DealsLouis Tse, Hong Kong-based managing director at VC Asset Management Ltd., disagreed, saying all IPOs have to follow the same procedures and meet the same regulatory requirements.“I don’t think this will tarnish the names of incoming companies in Nasdaq,” he said. “Psychologically it would have an impact, but it’s not necessarily on a Chinese company.”Outside the Luckin Coffee corporate family, the sell-off on Friday hit companies previously called out by speculators for their financial reporting -- including Anta Sports Products Ltd., Xtep International Holdings Ltd. and 361 Degrees International Ltd. China International Capital Corp., one of the lead managers of Luckin Coffee’s IPO last year, slid as much as 5.4% in Hong Kong.Luckin Coffee suspended Chief Operating Officer Jian Liu and others while its board investigates, and it said investors shouldn’t rely on previous financial statements for the nine months ended Sept. 30. The transactions in question occurred last year and totaled about 2.2 billion yuan ($310 million), according to its filing.If true, the fabricated sales figure could represent a significant portion of the company’s total revenue. Luckin, which has only reported financial data for the second and third quarter of last year after its May public offering, was seen reporting 5.15 billion yuan of revenue for the full year, according to the average of estimates compiled by Bloomberg.“Certain costs and expenses were also substantially inflated by fabricated transactions during this period,” Luckin said, adding that the board hasn’t verified the fabricated sales figures.Thursday’s share decline erased what had been a 54% gain since the company went public last year.The coffee chain, founded in 2017, operated about 4,500 stores by the end of 2019 in China. Chairman Lu Zhengyao and Chief Executive Officer Qian Zhiya employed a strategy they used with CAR Inc. more than a decade ago: burning money from investors to quickly grab market share from rivals. That strategy has been successful in winning over investors.Luckin Coffee planned to reach 10,000 locations by the end of next year in a market valued at $5.8 billion. Coffee consumption is only in its initial stages in China, and Luckin Coffee was trying to overtake Starbucks by opening more stores in two years than the industry giant has in two decades. Luckin pulled in Chinese consumers by offering generous discounts.Trouble emerged earlier this year, however. The stock plunged after Muddy Waters Capital tweeted Jan. 31 that it had a short position after receiving what it called a “credible,” unattributed 89-page report that alleged accounting issues with the chain and a broken business model. Luckin Coffee denied the allegations.The company raised $865 million from a share sale and a convertible bond offering in January, according to people with knowledge of the matter. It also raised $645 million in its U.S. IPO.“Luckin denied short sellers’ reports earlier, and then it admitted wrongdoing,” said Kenny Wen, a Hong Kong-based wealth management strategist at Everbright Sun Hung Kai Co. “Lots of lawsuits will emerge.”(Updates with holding data in third paragraph.)For 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.
Raytheon Technologies debuted on the Dow Jones Industrial Average Friday after the closing of its massive merger.
I’m not so much a bear as a realist and not buying into the notion that this is a temporary dip followed by a huge rebound. Voluminous job losses and bankruptcies could lead to permanent wealth deviation.
A small bank in West Virginia has become the first institution to fail during the coronavirus crisis, the Federal Deposit Insurance Corp. announced Friday. The First State Bank of Barboursville with $152 million in total assets was closed Friday by the West Virginia Division of Financial Institutions. The bank's $139.5 million in deposits will be acquired by MVB Bank Inc. of Fairmont, W.Va. The four branches of The First State Bank will reopen as branches of MVB Bank on Saturday, the FDIC said.
(Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. unloaded shares this week in Delta Air Lines Inc. and Southwest Airlines Co. as U.S. carriers braced for an unprecedented collapse in travel demand because of the coronavirus pandemic.Berkshire cut its Southwest holding by 4% and its Delta stake by 18%, according to regulatory filings Friday. That reduced the exposure of Buffett’s company to an industry in freefall, with Delta predicting a 90% drop in second-quarter sales and competitors making similarly dire forecasts.U.S. airlines, which enticed Berkshire three years ago despite Buffett’s longtime skepticism of the industry, are now turning to the government for financial aid as passengers stay home amid the viral outbreak. Drastic cuts to flight schedules reflect the virtual disappearance of U.S. airline traffic, with barely more than 150,000 passengers flying nationwide on any given weekday compared with normal loads of more than 2.2 million.“I wish I could predict this would end soon, but the reality is we simply don’t know how long it will take before the virus is contained and customers are ready to fly again,” Delta Chief Executive Officer Ed Bastian told employees. “Unfortunately, even as Delta is burning more than $60 million in cash every day, we know we still haven’t seen the bottom.”Delta fell 10% to $20.15 after the close of regular trading in New York, with Southwest and other airlines down as well. A Standard & Poor’s index of major U.S. carriers has tumbled 60% this year, paced by the 74% drop of United Airlines Holdings Inc.Federal AidAirlines are applying for federal aid as the government steps in with cash assistance for passenger carriers of $25 billion to help make payroll, plus another $25 billion in loans.United and American Airlines Group Inc. -- in which Berkshire also owns stakes -- are seeking help, as are Delta, Southwest, JetBlue Airways Corp. and Alaska Air Group Inc. The carriers submitted proposals for payroll assistance Friday. Several said they would negotiate terms in the coming days with the U.S. Treasury, which declined to comment.But as their customers stop flying, the companies said they would be forced to do more to reduce costs and seek additional capital because the government aid won’t be enough.About 30,000 of Delta’s workers have applied for unpaid, voluntary leaves and “we continue to need more volunteers,” Bastian said.Parked JetsJetBlue is parking more than 100 planes out of its fleet of 259 and cut its April flying schedule by 70%.“We’ve shared with you in the past weeks the unprecedented decline in demand for travel, and the situation continues to deteriorate,” JetBlue CEO Robin Hayes said in a message to employees.United is chopping about 80% of its capacity this month to curb costs, with even larger cuts planned in May. The weakness is likely to linger, with United planning for sales “at least 30%” lower in the fourth quarter than in the same period last year, according to a regulatory filing.The airline said it will “proactively evaluate and cancel flights on a rolling 90-day basis until it sees signs of a recovery in demand.”Berkshire has seen enough to pare its holdings. Buffett’s company still has a $1.32 billion stake in Delta and a $1.57 billion investment in Southwest. Berkshire has to report mid-quarter changes because its holdings in those airlines are above a 10% threshold.Berkshire InvestmentsBuffett’s company also has previously reported investments in American and United, but doesn’t have to disclose changes to those stakes as frequently since he’s below a 10% ownership level. Buffett’s assistant didn’t immediately respond to a message seeking comment.The billionaire was a longtime critic of the airline industry after making a bet on US Airways that he called a “mistake.” He even once joked that capitalists should have shot down the Wright brothers’ plane and saved money for investors.In late 2016, however, Berkshire revealed major investments in the big U.S. airlines. Buffett has said that some of the issues in the industry had stabilized as competition dwindled.Berkshire’s large stakes have stoked speculation that it could buy one of the airlines given that Buffett’s company had nearly $128 billion in cash at the end of the year. But the investor said in February that that would be “very unlikely” since such a deal would be complicated in the highly regulated industry.Since then, the airlines have plunged into the worst crisis in their history.“If anyone tells you that they’ve seen anything like this before,” said JetBlue’s Hayes, “don’t believe them.”For 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.
Stock markets fell 4.4% yesterday, marking the third session in a row of losses. The declines haven’t erased the gains from last week’s bullish trading, but they put a damper on investors’ enthusiasm. There’s a feeling of gloom; President Trump has said that the country and economy are in for a hard two weeks in the first half of April as the coronavirus epidemic peaks in the States, and he walked back his previously stated hope to see the country ‘get back to work’ by mid-month. No one is certain what the near-term holds, except that times are hard.It’s in times like these that investors, when they buy, start looking that much harder at dividend stocks. With share prices dropping, and interest rates cut to near zero, stock dividends are the surest form of asset returns available today – and those low share prices have brought down the initial cost of entry.Investment bank Wells Fargo has been following the markets, and the bank’s stock analysts are coming to the plain conclusion: get into dividends now. In a series of reports released in February and March, the firm's stock researchers outline some low-cost, high-return dividend stocks that investors need to consider – and also one that may be too risky to try. We’ve pulled the details from the TipRanks database, so let’s find out what makes these stock moves so compelling.Oaktree Specialty Lending (OCSL)We’ll start in the financial sector, appropriate when the financial world seems to be crumbling around us. But there is hope. Oaktree focuses on specialty finance, offering customized credit and loan solutions for companies that lack access to more traditional capital markets. The company generates its income through fees and interest on its loan products, which include first and second liens, unsecured loans, and preferred equity. With traditional markets staggering under the weight of the lockdowns and quarantines, Oaktree may find a wider field of action later this year.Earlier this year, just before the coronavirus outbreak hit the US, Oaktree announced a capital drive of its own, raising $300 million in 3.5% notes, which will come due in 2025. The notes were used to reduce outstanding debt while lowering the rates, and providentially gave Oaktree a sound footing just as the market disruptions hit. Shortly afterward, OCSL reported Q1 fiscal 2020 earnings, showing $14.1 million in net income, or 10 cents per share. This was down from Q4, and missed the EPS forecast by 17%.Income was enough to maintain the dividend, however, at 10 cents per quarter. The annual payment, 40 cents, gives the stock a yield of 11.8%, far higher than the 2% average dividend yield found on the broader markets. OCLS has a reliable dividend history, and adjusts the payment when needed to ensure that the company can afford the dividend.Wells Fargo analyst Finian O’Shea wrote on the stock shortly before the earnings report, saying, “OCSL continues to exit legacy positions at par or greater, which likely improves its fundamentals every quarter that passes. While we still see the case for a discount because it chooses to under-earn, we are very positive on the stock at these levels.”O’Shea stands by this opinion, giving the stock a Buy rating with a $6 price target indicating an upside potential of 86%. (To watch O’Shea’s track record, click here)OCSL’s Moderate Buy analyst consensus rating is based on 2 recent reviews, both of which agree that the stock is a buy-side proposition. Shares are priced at a heavy discount, $3.10, and the $5.80 average price target suggests an 81% upside potential for the coming 12 months. (See Oaktree stock analysis on TipRanks)TPG Specialty Lending (TSLX)Next up is another specialty finance company, TPG. TPG’s customer base is middle market companies, and like Oaktree above, its corporate customers have limited access to the capital markets. TGP offers credit, financing, and funding solutions for complex business models. Underlining the importance of the niche, TSLX rose 27% in calendar year 2019.The company had a good financial quarter to finish 2019, too. EPS beat expectations by 8.5%, coming in at 51 cents and at the top line, revenues were 3.6% over expectations, at $66.5 million. On a sour note, both numbers were down year-over-year. Despite that yoy drop, TSLX kept up its dividend – the company pays out 6 dividends annually, and has a history of adjusting those payments to ensure reliability. The current payment, due this month, is 25 cents per quarter.Annualized, TSLX’s dividend comes out to $1.64, giving a yield of 12.4%. This is more than 6x higher than the average stock dividend. And it simply blows away Treasury bonds, which have dipped below 1% as the Fed has cut rates to the bone in an effort to ameliorate the financial damage of the current economic shutdowns.Finian O’Shea, quoted above, reviewed this stock as well, and rated it as a clear Buying proposition. He put a $23.50 price target on the shares, implying an upside of nearly 80%. (To watch O’Shea’s track record, click here)In his comments, O’Shea sees this stock as a conservative, defensive play. He wrote, “We’ll reiterate the view that the value-add provided though highly structured and idiosyncratic deals is still under-appreciated, and perhaps highlighted by TSLX’ best-in-class-peers now showing non-accruals. Moreover, we see that TSLX should receive a richer valuation for preserving a defensive and opportunistic financial position at this market stage.”TPG has 5 Buy ratings and just 1 Hold, giving the stock a Strong Buy from the analyst consensus. The stock is selling for $13.15, and the average price target of $23.13 is indicative of a 76% upside potential for the coming year. (See TPG’s stock analysis at TipRanks)Ventas, Inc. (VTR)Last on our list is Ventas, which Wells Fargo says to steer clear of. This company is a real estate investment trust, focused on health care facility properties in the US, Canada, and the UK. The company holds a varied portfolio, including medical offices, nursing homes, acute and special care centers, surgical centers, and medical labs. The portfolio is valued at more than $25 billion.You’d think that a company focused on health care properties would not be badly hurt in the current epidemic environment, but Ventas shares are down heavily in the current market downturn, having lost 61%. This comes despite the company edging over the estimates in its last quarterly report, when it showed 93 cents per share Funds from Operations and $996 million total revenue. Company management, however, is lowering its forward guidance, as it is not certain that tenants will be able to meet rent obligations as the economy comes to a halt. Health care facilities are working harder than ever – but their medical operations expenses are growing faster as they try to cope with the coronavirus, and those medical operations may be seen as a higher priority than rent. It is part of the spreading ripple of consequences the epidemic has set in motion.VTR is maintaining its divided, as REIT’s are required by law to return earnings to shareholders. The current payment is 79.25 cents quarterly, or $3.17 annually. This makes the yield 13.8%, the highest of the stocks on this list. The question for investors is, Does this yield offset the likely future risk?Todd Stender, covering the stock for Wells Fargo, says to Sell this stock, and he has lowered the price target from$56 to $29. He writes of the company, “The company did indicate that through February, its senior housing and companywide results were in line with its previous expectations; however, mgmt. felt it was prudent at this point to remove 2020 guidance not knowing how long this situation may last. The company has also shifted focus to the balance sheet and is becoming a bit more defensive given the level of uncertainty by tapping $2.75B from its $3.0B line of credit for added liquidity and flexibility.”Even though he rates the stock a Sell, Stender’s lower price target still suggests about 20% upside. This REIT may still bring a return, but as with the dividend yield, it’s not known if that return potential is enough to balance the likely near-term risks. (To watch Stender’s track record, click here)This stock’s analyst consensus rating is a Hold, based on a single Buy against 4 Holds and 3 Sells. Shares are currently trading for $22.95, and the average price target of $42.57 suggests a premium of 80% from that trading level. (See Ventas stock analysis on TipRanks)To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Hedge-fund manager Dan Niles, in a note cited by Yahoo Finance this week, warned his clients way back in February that he was getting “increasingly worried” investors weren’t ready for the impact the spread of the coronavirus could have on the U.S. economy. He’s not any more optimistic now then he was back then.
Delta CEO Ed Bastian says his company has not yet hit bottom as it is ravaged by fallout from the novel coronavirus pandemic. What's more, billionaire Warren Buffett has parted with nearly 13 million shares of Delta stock. In a memo to Delta Air Lines Inc. employees Friday, which was released as a filing with the Securities and Exchange Commission, Bastian said he expects second quarter year-over-year revenue to fall by 90%.
Many tech stocks have held up relatively well during the coronavirus crisis. Mark Grant of B. Riley FBR says long-term investors can make money ‘with a little patience.’
Shares of Delta Air Lines Inc. fell more than 8% in the extended session Friday after the airline said its second quarter will be "even more difficult than the first" and Warren Buffett's Berkshire Hathaway Inc. disclosed it sold chunks of Delta stock this week. Berkshire sold nearly 315 million shares on Wednesday and Thursday priced between $22.96 and $26.04, it said in a filing. Separately, Chief Executive Ed Bastian urged more employees to take extended leaves and said the company likely hasn't seen the bottom of the pandemic-related crisis. "This week we closed the books on the first quarter of 2020, and it was unlike any quarter in Delta's history," Bastian said in a memo to employees. The air carrier continued to see passenger volumes and revenues drop; in the past Saturday, it flew about 38,000 people, compared with a normal late-March Saturday around 600,000, he said. "Unfortunately, even as Delta is burning more than $60 million in cash every day, we know we still haven't seen the bottom," Bastian said. The company's April schedule will be about 80% smaller than planned, with 115,000 flights cancelled, Bastian said. Like other airlines, Delta said it submitted paperwork to benefit from government aid, but the funds alone "are not nearly enough" as Delta expects revenue to be down 90% for the second quarter. Without action, that money would be gone by June, he said. Delta asked employers to volunteer for unpaid leaves, including longer-term leave. The company also announced a 25% cut in hours for some employees, "essential to protecting Delta for the long term," the CEO said.
Berkshire Hathaway sold nearly $400 million of stock of the two airlines over Wednesday and Thursday. It no longer owns more than 10% of Delta or Southwest.
The generous U.S. unemployment benefits rolled out to blunt the economic harm caused by the coronavirus could have an unintended effect: it may actually be an incentive for companies to choose layoffs rather than keep staff on their books. The number of Americans filing for unemployment benefits last week shot up to more than 6 million, a record high, Labor Department data on Thursday showed. The CARES Act passed by Congress a week ago was designed to keep businesses and workers from economic freefall.
Delta Air Lines, JetBlue, United Airlines and other airline stocks fell during and after Friday's session as they laid out the coronavirus costs.
The accounting scandal at Luckin Coffee, a start-up that aimed to displace Starbucks in China, has caught out several of the world’s most powerful investors. BlackRock and Singaporean sovereign wealth fund GIC were among those who invested in private funding rounds in the months before Luckin’s initial public offering last year. Louis Dreyfus, one of the world’s biggest traders of orange juice and coffee, and Melvin Capital and Centurium Capital were also backers.