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Why Goldman Sees WTI Above $60 and 'Stick There' in 2022

Feb.02 -- Goldman Sachs Senior Oil and Gas Equity Research Analyst Brian Singer discusses the outlook for oil on "Bloomberg Markets."

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    When you buy $1,000 of a company’s stock in your Robinhood account, how much of that cash goes directly to help fund the company and its business operations? The answer is $0. Where Your Cash Goes: The issue of buying shares of stock to help “save” struggling companies like GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc (NYSE: AMC) has come up frequently on social media since the WallStreetBets-fueled meme stock buying frenzy began in January. However, experienced investors know that publicly traded companies don’t get a dime from the cash you spend buying their shares of stock. Related Link: Kevin O'Leary Of 'Shark Tank,' Benzinga CEO Jason Raznick Talk GameStop, Bitcoin And Economic Recovery Trades Companies typically raise cash in the public market when they first go public via an initial public offering (IPO), a merger with a special acquisition company (SPAC) or a direct listing. However, once their shares are trading on the public market, any shares you buy in your brokerage account are coming directly from another shareholder who is selling, not the company itself. Aside from any trading fees you may spend on the transaction, every dollar you spend buying shares of GameStop, AMC or other stocks ends up in the brokerage account of the person or institution that sold them to you. AMC and GameStop traders on Reddit and Twitter have been celebrating their efforts to “save” these companies by buying shares of stock. In reality, the companies haven’t gotten any funds from any of the recent stock buying. How Public Companies Raise Funds: Once a company is public, it must raise capital via options such as a follow-on public offer (FPO), also known as a secondary offering. FPOs can be both dilutive or non-dilutive. A non-dilutive FPO happens when the founders or other large shareholders sell some of their shares to the public. An FPO may increase a stock’s float, or free-trading shares, but it does not increase the company’s outstanding shares or decrease its EPS. A dilutive FPO happens when a company creates new shares to sell to the public. By creating new shares, the ownership stakes of existing shareholders are decreased slightly the same way the value of a currency erodes when central banks print more money. Companies can also raise capital by borrowing money. However, the company must first find a lender that will agree on a reasonable interest rate. Many lenders don’t want to touch struggling companies like AMC and GameStop because they aren’t convinced they will be able to pay back their debts. What It Means For Meme Stocks: Despite all the publicity and wild volatility in GameStop, the company itself hasn’t actually been directly helped by all the retail buying. GameStop reportedly considered selling more shares during the January rally, but the SEC has said it would closely scrutinize any company that attempted to take advantage of the extreme trading volatility to knowingly sell overpriced shares to vulnerable investors. In June 2020, bankrupt Hertz Global Holdings Inc (OTC: HTZGQ) withdrew a proposed $500 million equity offering after the SEC cracked down on the company for potentially preying on investors. AMC, on the other hand, was able to raise $1.2 billion via debt and equity deals in January after its stock rallied more than 700%. “The irony here, of course, is that GME couldn’t even tap equity markets to take advantage of the recent short squeeze,” DataTrek Research co-founder Nicholas Colas said this week. He said the so-called “dumb money” flowing into the market may not be helping the companies directly, but it is certainly making short sellers think twice. “You don’t have to be long, but betting against people who think their 10-share buy order is going to change the world is both risky and not actually a fundamentally-based investment position,” Colas said. Benzinga’s Take: GameStop hasn’t been helped directly by all the retail stock buying, but investor enthusiasm and a higher stock price definitely help more than it hurts. If GameStop can now demonstrate its army of new investors and its massive amount of free publicity has translated into improved sales and earnings numbers, the company may have several funding options open up in the near future. GameStop reports fourth-quarter earnings in late March. Photo by Sharon McCutcheon on Unsplash. Latest Ratings for GME DateFirmActionFromTo Jan 2021B of A SecuritiesMaintainsUnderperform Jan 2021Telsey Advisory GroupDowngradesOutperformUnderperform Oct 2020JefferiesDowngradesBuyHold View More Analyst Ratings for GME View the Latest Analyst Ratings See more from BenzingaClick here for options trades from BenzingaWhy GameStop Stock Traders Should Beware The 'Law Of Twos And Threes'Kevin O'Leary Of 'Shark Tank,' Benzinga CEO Jason Raznick Talk GameStop, Bitcoin And Economic Recovery Trades© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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  • Billionaire Steven Cohen Picks Up These 3 “Strong Buy” Stocks

    Last week, the NASDAQ slipped below 13,200, making the net loss from its all-time peak, reached earlier this month, 6.4%. If this trend keeps up, the index will slip into correction territory, a loss of 10% from its peak. So what exactly is going on? At bottom, it’s mixed signals. The COVID-19 pandemic is starting to fade and the economy is starting to reopen – strong positives that should boost markets. But an economic restart brings with it inflationary pressures: more people working means more consumers with money in their pockets, and the massive stimulus bills passed in recent months – and the bill working through Congress now, which totals $1.9 trillion – have put additional funds in people’s wallets and liquidity into the economy. There is pent-up demand out there, and people with money to spend, and both factors will work to push up prices. We can see one effect of all of this in the bond market, where the ten-year Treasury bond is yielding 1.4%, near a one-year high, and it has been trending upwards in recent weeks. This may be a case of jumping the gun, however, as Federal Reserve Chair Jerome Powell has said in testimony before the Senate that he is not considering a move to boost interest rates. In other words, these are confusing times. For those feeling lost in all of the stock market fog, investing gurus can offer a sense of clarity. No one more so than billionaire Steven Cohen. Cohen’s investment firm, Point72 Asset Management, relies on a strategy that involves investments in the stock market as well as a more macro approach. This very strategy has cemented Cohen’s status as a highly respected investing powerhouse, with the guru earning $1.4 billion in 2020 thanks to a 16% gain in Point72′s main hedge fund. Bearing this in mind, our focus shifted to Point72's most recent 13F filing, which discloses the stocks the fund snapped up in the fourth quarter. Locking in on three tickers in particular, TipRanks’ database revealed that each has earned a “Strong Buy” analyst consensus and boasts significant upside potential. Array Technologies (ARRY) The first new position is in Array Technologies, a ‘green tech’ company providing tracking technology for large-scale solar energy projects. It’s not enough just to deploy enough photovoltaic solar collection panels to power an energy utility; the panels have to track the sun across the sky, and account for seasonal differences in its path. Array delivers solutions to these problems with its DuraTrack and SmarTrack products. Array boasts that its tracking systems will improve the lifetime efficiency of solar array projects, and that its SmarTrack system can boost energy production by 5% overall. The company clearly has impressed its customers, as it has installations in 30 countries, in more than 900 utility-scale projects. President Biden is expected to take executive actions to boost green economic policy at the expense of the fossil fuel industry, and Array could potentially benefit from this political environment. This company’s stock is new to the markets, having held its IPO in October of last year. The event was described as the ‘first big solar IPO’ in the US for 2020, and it was successful. Shares opened at $22, and closed the day at $36. The company sold 7 million shares, raising $154 million, while another 40.5 million shares were put on the market by Oaktree Capital. Oaktree is the investment manager that had held a majority stake in the company since 2016. Among Array's fans is Steven Cohen. Scooping up 531,589 shares in Q4, Point72's new ARRY position is worth over $19.7 million at current valuation. Guggenheim analyst Shahriar Pourreza also seems to be confident about the company's growth prospects, noting that the stock appears undervalued. “Renewable energy companies have seen a large inflow of capital as a result of the ‘blue wave’ and the Democrats’ control of the White House and both chambers of Congress; however, ARRY continues to trade a significant discount to peers," the 5-star analyst noted. Pourreza added, "We continue to be bullish on ARRY’s growth prospects driven by 1) tracker market share gains over fixed-tilt systems, 2) ARRY market share gains within the tracker industry, 3) ARRY’s large opportunity in the less-penetrated international market, 4) the opportunity to monetize their existing customer base over the longer-term through extended warranties, software upgrades, etc., which are highly margin accretive.” In line with these bullish comments, Pourreza rates ARRY shares a Buy, and his $59 price target implies a 59% upside from current levels. (To watch Pourreza’s track record, click here) New stocks in growth industries tend to attract notice from Wall Street’s pros, and Array has 8 reviews on record since it went public. Of these, 6 are Buys and 2 are Holds, making the consensus rating on the stock a Strong Buy. The average price target, at $53.75, suggests room for ~45% upside in the next 12 months. (See ARRY stock analysis on TipRanks) Paya Holdings (PAYA) The second Cohen pick we're looking at is Paya Holdings, a North American payment processing service. The company offers integrated payment solutions for B2B operations in the education, government, healthcare, non-profit, and utility sectors. Paya boasts over $30 billion in payments processed annually, for over 100,000 customers. In mid-October of last year, Paya completed its move to the public market via a SPAC (special acquisition company) merger with FinTech Acquisition Corporation III. Cohen is standing squarely with the bulls on this one. During Q4, Point72 snapped up 3,288,843 shares, bringing the size of the holding to 4,489,443 shares. After this 365% boost, the value of the position is now ~$54 million. Mark Palmer, 5-star analyst with BTIG, is impressed with Paya’s prospects into the mid-term, writing, “We expect PAYA to generate revenue growth in the high-teens during the next few years, with Integrated Solutions poised to grow in the mid-20s and Payment Services set to grow in the mid-single digits. At the same time, the company’s operating expenses should grow in the 5% context, in our view. As such, we believe PAYA’s adjusted EBITDA growth will be north of 20% during the next few years, and that its adjusted EBITDA margins will expand to 28% by YE21 from 25% in 2019.” Palmer puts an $18 price target on PAYA shares, indicating his confidence in 49% growth for the year ahead, and rates the shares as a Buy. (To watch Palmer’s track record, click here) PAYA’s Strong Buy analyst consensus rating is unanimous, based on 4 Buy-side reviews set in recent weeks. The shares have an average price target of $16, which suggests ~33% upside potential from the current share price of $12.06. (See PAYA stock analysis on TipRanks) Dicerna Pharma (DRNA) Last but not least is Dicerna Pharma, a clinical stage biotech company with a focus on the discovery, research and development of treatments based on its RNA interference (RNAi) technology platform. The company has 4 drug candidates in various stages of clinical trials and another 6 in pre-clinical studies. The company's pipeline clearly got Steven Cohen’s attention – to the tune of taking a new stake totaling 2.366 million shares. This holding is worth $63.8 million at current values. The drug candidate farthest along Dicerna’s pipeline is nedosiran (DCR-PHXC), which is being investigated as a treatment for PH, or primary hyperoxaluria – a group of several genetic disorders that cause life-threatening kidney disorders through overproduction of oxalate. Nedosiran inhibits the enzyme that causes this overproduction, and is in a Phase 3 trial. Top-line results are expected in mid-’21 and, if everything goes as planned, an NDA filing for nedosiran is anticipate near the end of 3Q21. Covering the stock for Leerink, analyst Mani Foroohar sees nedosiran as the key to the company’s near-term future. “We expect nedosiran could see approval in mid-2022, placing the drug roughly a year and a half behind competitor Oxlumo (ALNY, MP) in PH1... A successful outcome will transform DRNA into a commercial rare disease company in an attractive duopoly market with best-in-class breadth of label," Foroohar noted. To this end, Foroohar rates DRNA an Outperform (i.e. Buy), and his price target of $45 suggests a one-year upside potential of 66%. (To watch Foroohar’s track record, click here) All in all, Dicerna Pharma has 4 Buy reviews on record, making the Strong Buy unanimous. DRNA shares are trading for $26.98, and their $38 average price target puts the upside at ~41% over the next 12 months. (See DRNA stock analysis on 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. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

  • Buffett’s ‘Tone Deaf’ Annual Letter Skirts Major Controversies

    (Bloomberg) -- Warren Buffett’s 15-page annual letter to shareholders on Saturday made mention of the pandemic that ravaged the globe in 2020 exactly once: One of his furniture companies had to close for a time because of the virus, the billionaire noted on page nine.Buffett likewise steered clear of politics, despite the contested presidential election and riots at the U.S. Capitol, and never touched on race or inequality even after protests and unrest broke out in cities across the nation last year. He also avoided delving into the competitive deal-making pressures faced by his conglomerate, Berkshire Hathaway Inc., a topic routinely dissected in past year’s letters.“Here you have a company with such a revered leader who’s held in such high regard -- whose opinion matters, who has businesses that were directly impacted by the pandemic, insurance companies that were influenced by global warming and social inflation -- and there was not one word about the pandemic,” Cathy Seifert, an analyst at CFRA Research, said in a phone interview. “That to me was striking. It was tone deaf and it was disappointing.”Buffett, 90, has been unusually quiet since last year’s annual meeting in May amid a multitude of issues facing Americans. His annual letters are often seen as a chance to offer investors help in understanding his thinking on broad topics and market trends, in addition to details on how his conglomerate is faring.But the Berkshire chief executive officer carefully weighs his words, and some topics, such as the pandemic, risk veering into highly controversial political territory, Jim Shanahan, an analyst at Edward D. Jones & Co., said in an interview.“There’s been a lot of comments about the pandemic and the impact on the businesses, but by not saying something in the letter, I think it’s just a way to try and avoid saying something that could be perceived as a political statement, which he’s been less willing to do in recent years,” Shanahan said.A representative for Buffett didn’t immediately respond to a request for comment placed outside routine office hours.Buffett also stayed quiet on topics that are key to his conglomerate, such as the market environment amid a tumultuous year -- and the work of key investing deputies like Todd Combs and Ted Weschler, according to Cole Smead, whose Smead Capital Management oversees investments in Berkshire.“There’s more found by what’s not in the letter,” said Smead, the firm’s president and portfolio manager. “I think just time and time again in this letter were sins of omission.”Here are other key takeaways from Buffett’s letter and Berkshire’s annual report:1. Buffett Relies on Buybacks Instead of DealsBerkshire repurchased a record $24.7 billion of its own stock as Buffett struggled to find better ways to invest his enormous pile of cash.And there’s more where that came from: The conglomerate has continued to buy its own stock since the end of last year, and is likely to keep at it, Buffett said Saturday in his annual letter.“That action increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet,” Buffett said in the letter, which pointed out that the company “made no sizable acquisitions” in 2020.Berkshire did make a small amount of progress in paring the cash pile, which fell 5% in the fourth quarter to $138.3 billion. Buffett has struggled to keep pace with the flow in recent years as Berkshire threw off cash faster than he could find higher-returning assets to snap up, leading to the surge in share repurchases.2. Apple Is as Valuable to Berkshire as BNSF RailroadBerkshire’s $120 billion investment in Apple Inc. stock has become so valuable that Buffett places it in the same category as the sprawling railroad business he spent a decade building.He began building a stake in the iPhone maker in 2016, and spent just $31.1 billion acquiring it all. The surge in value since then places it among the company’s top three assets, alongside his insurers and BNSF, the U.S. railroad purchase completed in 2010, according to the annual letter.“In certain respects, it’s his kind of business,” said James Armstrong, who manages assets including Berkshire shares as president of Henry H. Armstrong Associates. “It’s very much brand name, it’s global, it’s an absolutely addictive product.”Buffett had always balked at technology investments, saying he didn’t understand the companies well enough. But the rise of deputies including Combs and Weschler has brought Berkshire deep into the sector. In addition to Apple, the conglomerate has built up stakes in Amazon.com Inc., cloud-computing company Snowflake Inc., and Verizon Communications Inc.3. Buffett Concedes Error in $37.2 Billion DealBuffett admitted he made a mistake when he bought Precision Castparts Corp. five years ago for $37.2 billion.“I paid too much for the company,” the billionaire investor said Saturday in his annual letter. “No one misled me in any way -- I was simply too optimistic about PCC’s normalized profit potential.”Berkshire took an almost $11 billion writedown last year that was largely tied to Precision Castparts, the maker of equipment for aerospace and energy industries based in Portland, Oregon.The pandemic was the main culprit. Precision Castparts struggled as demand for flights plummeted, prompting airlines to park their jets and slash their schedules. Less flying means lower demand for replacement parts and new aircraft. Precision slashed its workforce by about 40% last year, according to Berkshire’s annual report.4. Profit Gains Thanks to Railroad, ManufacturersDespite the pandemic’s effects continuing to hit Berkshire’s collection of businesses, the conglomerate posted a near 14% gain in operating earnings in the fourth quarter compared to the same period a year earlier.That was helped by a record quarter for railroad BNSF since its 2010 purchase and one of the best quarters for the manufacturing operations since mid-2019.5. Good-bye Omaha, Hello Los AngelesBerkshire’s annual meeting has for years drawn throngs of Buffett fans to Omaha, Nebraska, where the conglomerate is based. This year, the show is moving to the West Coast.While still virtual because of the pandemic, the annual meeting will be filmed in Los Angeles, the company said Saturday.That will bring the event closer to the home of Buffett’s longtime business partner, Charlie Munger. Buffett and Munger will be joined by two key deputies, Greg Abel and Ajit Jain, who will also field questions.Buffett and Abel, who lives closer to Berkshire’s headquarters, last year faced “a dark arena, 18,000 empty seats and a camera” at the annual meeting, Buffett said in his letter. The 90-year-old billionaire said he expects to do an in-person meeting in 2022.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Warren Buffett In Annual Letter Signals More Stock Buybacks Coming This Year, Says Don't 'Bet Against America'

    Warren Buffett in his annual letter to shareholders offered words of encouragement to a battered country while also signaling that more stock buybacks are to come. Buffett's Annual Letter: The letter from the 90-year-old chief executive officer of Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) was even more anticipated than usual this year, because his influential voice has largely been silent since his last letter, which came in the very early days of the pandemic. A lot has happened since, from the contentious election and ensuing fallout, to the arrival of retailer investors pushing "stonks," not to mention the meteoric rise of Bitcoin (CRYPTO: BTC). Buffett's lieutenant, Berkshire Hathaway Vice Chairman Charlie Munger, spoke on Wednesday about some of these issues. He said the trading in stocks such as GameStop Corp. (NYSE: GME) was tantamount to "betting on racehorses" and cast doubt on the idea that Bitcoin will ever replace regular money as the world's primary medium of exchange. Buffett in his letter did not talk about cryptocurrency or GameStop, but he did touch on the turmoil of the past year, without directly referencing any particular event. He used the stories of companies throughout the country that he has invested in, such as GEICO and Pilot Travel Centers, to deliver a simple, clear message: "Never bet against America." (Italics in original.) "There has been no incubator for unleashing human potential like America. Despite some severe interruptions, our country’s economic progress has been breathtaking," he wrote. "Beyond that, we retain our constitutional aspiration of becoming 'a more perfect union.' Progress on that front has been slow, uneven and often discouraging. We have, however, moved forward and will continue to do so." Earnings, Stock Repurchases: As for the latest numbers on the company's performance, the letter showed Berkshire earned $42.5 billion last year, down 48% from 2019's $81.4 billion. This included an $11 billion loss from a write-down in subsidiary and affiliate businesses, particularly the 2016 purchase of Portland, Oregon-based metal fabricator Precision Castparts. The company does business in the aerospace industry — not the best one to be in last year. In his letter, Buffett said he overpaid for the company and that last year's "adverse developments" in the industry made that clear. "I was simply too optimistic about PCC’s normalized profit potential," Buffett wrote. The company spent $24.7 billion to repurchase the equivalent of 80,998 "A" shares last year, including $9 billion in the fourth quarter. That is likely to continue: "Berkshire has repurchased more shares since year-end and is likely to further reduce its share count in the future," Buffett wrote. Berkshire also as usual listed its top holdings by market value. They included Apple Inc (NASDAQ: AAPL), Coca-Cola Co (NYSE: KO), American Express Company (NYSE: AXP) and Bank of America Corp (NYSE: BAC). Filings from Berkshire earlier this month showed the company trimmed its positions in Apple while piling into drug, telecom and oil companies in the latest quarter. Recent Price Action: Berkshire's class B shares ended Friday at $240.51, down for the week at 0.54%. Class A shares were down 0.88% to $364,580. Photo Courtesy Wikimedia Commons. See more from BenzingaClick here for options trades from BenzingaBitcoin Hits Another All-Time High30,000 Macs Infected With Newly Detected Form Of Malware, Dubbed 'Silver Sparrow'© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  • No such thing as 'too much:' Warren Buffett quotes Mae West in defense of stock buybacks

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  • Judge Approves 'Landmark' $650 Million Class-Action Suit Against Facebook Over Privacy Claims

    A federal judge has approved a $650 million settlement of a class-action privacy lawsuit against Facebook that claimed the company used its facial recognition feature without user consent. What Happened: In 2015, Chicago attorney Jay Edelson filed a lawsuit against Facebook, Inc (NASDAQ: FB) in Cook County Circuit Court. According to the lawsuit, Facebook violated Illinois' Biometric Information Privacy Act, by failing to get consent before using facial-recognition technology, which scans photos uploaded by users to create and store faces digitally, The Verge has reported. Along with the settlement amount, the judge also ordered the 1.6 million members of the class-action lawsuit in Illinois to be paid “as expeditiously as possible.” Why It Matters: According to the order by Judge James Donato of the Northern District of California, the three named plaintiffs will each receive $5,000 and others in the class-action lawsuit will get at least $345 each, the report said. Donato described the settlement as a “landmark result” and said it "is one the largest settlements ever for a privacy violation." In a statement, Facebook said, “We are pleased to have reached a settlement so we can move past this matter, which is in the best interest of our community and our shareholders.” Facebook isn't the only company to run into the Illinois law. Sony Corp (NYSE: SNE) doesn't sell its robot dog, aibo, which has facial recognition technology, in the state because of the law. See more from BenzingaClick here for options trades from BenzingaThousands Of Bots May Have Played Role In GameStop Hype: ReportSEC Suspends Trading In 15 Stocks Over Social Media Concerns© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  • AstraZeneca has sold its stake in Moderna for more than $1 billion: The Times

    The report added that it was not clear over what period British-based AstraZeneca sold its holding in Moderna. AstraZeneca and Moderna did not immediately respond to requests for comment. AstraZeneca is retaining partnership with Moderna on other disease treatments and could sell its AstraZeneca/Oxford University COVID-19 vaccine on a commercial basis in future if the virus becomes endemic, the report added.

  • Cathie Wood’s Power in Some Stocks Is Even Bigger Than It Seems

    (Bloomberg) -- A rough week for Cathie Wood is reminding Wall Street that Ark Investment Management has a lot of cash in not that many companies. In fact, the firm’s dominance in some stocks may be even greater than it seems.Ark now owns more than 10% of at least 29 companies via its exchange-traded funds, up from 24 just two weeks ago, according to data compiled by Bloomberg.Less discussed are holdings of Nikko Asset Management, the Japanese firm with a minority stake in Ark that it has partnered with to advise on several funds.When combined, the pair own more than 25% of at least three businesses: Compugen Ltd., Organovo Holdings Inc. and Intellia Therapeutics Inc. Together they control 20% or more of an additional 10 companies.These concentrations would appear to exist because several Nikko products follow the investment blueprint provided by Ark. The company Wood founded in 2014 invests in disruptive themes like genomics and fintech -- and the Nikko products do, too.Because there are only so many stocks that fit these emerging themes and Wood has been so successful at attracting new cash, much of it floods into the same companies.“At arms-length, Ark provides non-discretionary investment advisory services to certain Nikko products, and Nikko is a distributor of Ark’s products,” a spokesperson for the U.S. firm said. Ark’s website identifies five of its strategies as being “available in Japan in partnership with Nikko Asset Management.”Ark and Nikko did not respond to requests for comment on the concentration risk.The high shareholdings aren’t necessarily a problem for either the fund managers or the companies, and the relationship between the two firms is clearly announced on both their websites. But such concentrated ownership stirs concern in some quarters about unintended consequences.“The biggest risk has everything to do with their footprint,” said Ben Johnson, Morningstar’s global director of ETF research. “Even treading lightly, they’re going to have some sort of market impact that is going to push prices against them.”In other words, fund outflows could have an outsized impact on the shares held by Ark and Nikko if they are forced to sell.There’s no sign of this yet. Three of Wood’s funds -- the flagship ARK Innovation ETF (ARKK), ARK Genomic Revolution ETF (ARKG) and the ARK Next Generation Internet ETF (ARKW) -- are on track for record outflows this week after rising yields and lofty valuations hit the tech sector, but there has been no obvious specific contagion. ARKK closed up 0.7% on Friday after a four-day slump, bringing its weekly loss to 14.6%.Wood has been using mega-cap stocks to soak up the pile of cash her firm received, which should help limit Ark’s impact in less-liquid names.Still, there are worries that these ownership concentrations are a risk for Ark and Nikko and their investors. A pullback in any of the heavily owned sectors could force them to reduce their stakes, which could trigger more declines and therefore more selling.“The concern would be performance slips, investors begin exiting the Ark funds and that would ultimately result in redemptions,” said Nate Geraci, president of the ETF Store, an advisory firm. “That could put further negative pressure on those securities and you create this negative feedback loop. This isn’t an issue for larger broad-based ETFs, but for ETFs that are more concentrated and own small-cap securities there absolutely could be some negative pressure there.”In general, companies heavily owned by Ark show higher-than-average short interest, though it’s impossible to say if that’s linked to worries about ownership or simply because they are riskier bets.The average short interest as a percentage of float for ARKK holdings is 4.4%, according to Bloomberg calculations based on data from IHS Markit Ltd. The average is 3.4% for Russell 3000 companies and 2.3% for those in the Russell 1000.The options market shows that bears haven’t jumped in quite yet, however. Of the 29 stocks that ARKK owns more than 10% of, only five have seen more puts than calls trade on average over the last five days. While put activity has increased broadly, the average put-to-call ratio stands at 0.7, a little more than half of what it is for Russell 3000 stocks.Perhaps that’s because wagering against Wood hasn’t worked out very well in the past. Almost every bet like that has lost money in the subsequent six months as prices rebounded, Bloomberg Intelligence analyst Eric Balchunas wrote in a note this week.“The fund’s outflows rarely last, and dips have tended to attract buyers in the past,” Balchunas wrote.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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  • Danone Prepares to Sell $1 Billion Stake in China’s Mengniu

    (Bloomberg) -- Danone is paving the way to sell its stake in China Mengniu Dairy Co. later this year by converting the investment into a direct holding.The 9.8% stake is currently held indirectly and has a book value of 850 million euros ($1.03 billion), the world’s largest yogurt maker said in statement Sunday. The majority of the proceeds will be returned to shareholders through a share buyback program.China Mengniu shares climbed as much as 3.4% early Monday amid a broader market rally in Hong Kong.Danone started a strategic review in October, when it also announced plans to sell smaller businesses such as the Vega protein-powder brand and Argentinian operations. Chief Executive Officer Emmanuel Faber also said earlier this month that Danone will divest assets that don’t contribute to profitable growth.Faber is under scrutiny after the stock lost a quarter of its value last year, and has faced increasing pressure from investors. Artisan Partners Asset Management Inc. and Bluebell Capital Partners have called on the company to replace him in order to ensure change and improved performance.Danone CEO to Open Talks With Shareholders as Sales Decline“Today’s announcement is an example of our commitment to deliver portfolio optimization and improve returns to shareholders through disciplined capital allocation,” Chief Financial Officer Juergen Esser said in an emailed statement.Danone first took a stake in Mengniu in 2013, and said that China will remain highly strategic for the company following the sale.The conversion process is subject to regulatory approval and the divestiture could take place in one or several transactions, depending on market conditions, the company said.The stake contributed 57 million euros to Danone’s recurring income from associates in 2019.Mengniu said in a statement it respects Danone’s decision and the move won’t affect its business strategies and plans. The planned sale of shares, which are indirectly owned by Danone and COFCO Corp., Mengniu’s biggest shareholder, will cut COFCO’s holding to 21.43% from the current 31.25%.The Chinese dairy maker is expected to post a 17% profit decline for 2020 amid the pandemic’s disruption of the supply chain and logistics, after reporting profit growth of more than 30% in both 2018 and 2019.(Updates with response from Mengniu in last two paragraphs)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Roth Conversion Makes Sense at Today's Low Tax Rates

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  • Buffett’s Heading to LA in Rare Switch-Up for Annual Meeting

    (Bloomberg) -- Warren Buffett’s annual meeting normally draws thousands to his home in Omaha, Nebraska. This year, he’s taking the show to the West Coast.His Berkshire Hathaway Inc., which plans to hold the meeting virtually again this year, will film it from Los Angeles, near the home base of Buffett’s longtime business partner, Charlie Munger. Buffett and Munger will be joined by two key deputies, Greg Abel and Ajit Jain, who will also field questions.Berkshire had to scrap its plans for an in-person meeting last year as the pandemic swept the U.S. That meant Buffett and Abel, who lives closer to Berkshire’s headquarters, faced “a dark arena, 18,000 empty seats and a camera” last May instead of the sea of loyal shareholders that normally pack the place, Buffett said in his annual letter released Saturday. The 90-year-old billionaire said he expects to do an in-person meeting in 2022.“This year our meeting will be held in Los Angeles... and Charliewill be on stage with me offering answers and observations throughout the 3 1/2-hour question period,” Buffett said in the letter. “I missed him last year and, more important, you clearly missed him.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Philippine Peso Eyes Technical Support to Brave U.S. Yield Storm

    (Bloomberg) -- The Philippine peso has been under siege from rising Treasury yields and buoyant crude prices. But technicals may offer some support.The peso slumped to its lowest level in six months last week following an extension of coronavirus-led curbs in the nation and delays in vaccine rollouts. The 10-year Treasury yield’s surge to 1.6% added to the bearish sentiment.Still, losses have been limited to near the dollar-peso’s 200-day moving average so far, spurring hopes that the barrier may hold at least in the near term. The pair’s relative strength index, a momentum indicator, is in the overbought territory, providing further support to the Philippine currency.Still, expectations that U.S. yields will rise further is keeping sentiment cautious toward the peso. Especially after the rout in emerging market assets on Friday brought back memories of the 2013 taper tantrum among investors.“How U.S. yields evolve from here and the broad USD picture will be the key driver of USD/PHP,” said Irene Cheung, an currency strategist at Australia & New Zealand Banking Group Ltd. She sees the peso at 48.30 per dollar at the end of the quarter.The peso is among Southeast Asia’s worst performing currencies this year. It’s declined 1.1% so far this month to 48.59 as global funds sold $171 million Philippine stocks during this period.Inflation FocusTechnical factors supporting the peso are likely to come into focus once again on Friday, when February inflation data is due. If price pressures quickened, this could erode the nation’s real yields and weigh on the currency.Comments from Bangko Sentral ng Pilipinas Governor Benjamin Diokno that the rise in the nation’s consumer prices is temporary will also be put to the test. A Bloomberg survey forecasts inflation quickened to 4.8% in February, which would be the fastest since December 2018.“Rising inflation has pushed Philippines’ real rates into the negative territory,” said Divya Devesh, head of Asean and South-Asia currency research at Standard Chartered Bank in Singapore. “Depressed real rates and elevated real effective exchange rate is a negative for the PHP,” he said, adding that the peso may fall toward 45.50 per dollar this year.Below are the key Asian economic data and events due this week:Monday, March 1: Australia home loans, 4Q company operating profit and inventories, China Caixin manufacturing PMI, Japan manufacturing PMI, South Korea trade balance, Indonesia CPI, Thailand business sentimentTuesday, March 2: RBA policy decision, Australia building approvals and 4Q BoP current account balance, net exports of GDP, New Zealand 4Q terms of trade, Japan jobless rate and 4Q capita spending, South Korea industrial productionWednesday, March 3: Australia 4Q GDP, New Zealand building permits, China Caixin services PMIThursday, March 4: Australia retail sales and trade balance, RBNZ Governor. Orr speaks, South Korea CPI and 4Q GDP, BNM policy decision, Thailand consumer confidenceFriday, March 5: New Zealand 4Q volume of all buildings, Philippine CPI, Singapore retail sales, Thailand CPIFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Gold Steadies After Worst Month in Four Years as Yields in Focus

    (Bloomberg) -- Gold steadied after its biggest monthly slump since late 2016 as investor focus remained on bond yields and the outlook for growth.Last week’s sell-off in global bonds stabilized after central banks from Asia to Europe moved to calm a panic that had sent Treasury yields to their highest level in a year. Bets on accelerating inflation are raising concerns that there could be a pullback in monetary policy support despite assurances from the Federal Reserve that higher yields reflect economic optimism for a solid recovery.“Bond markets continue to signal the end of the interest rate reduction cycle,” said Michael McCarthy, chief market strategist at CMC Markets. “If the inflationary pressures reflected by sharply lower bond prices are evident by mid-year, central banks will have little choice but to wind back their current support. A falling gold price shows that the main concerns are about higher rates, over-riding any safe haven attraction to the yellow metal.”Bullion’s had a rocky start to the year as the higher Treasury yields weighed on demand for the non-interest-bearing metal and as the roll-out of vaccinations worldwide spur optimism about a recovery from the pandemic. Over the weekend, the U.S. House of Representatives passed President Joe Biden’s $1.9 trillion Covid-19 aid package and the bill now heads to the Senate.Spot gold rose 0.4% to $1,741.55 an ounce by 9:14 a.m. in Singapore after slumping 2.1% on Friday. That brought the loss in February to 6.2%, the most since November 2016. Silver, platinum and palladium all climbed. The Bloomberg Dollar Spot Index fell 0.2%.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.