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Valued Contributor

From Barron’s, March 16, 2020 (Part 1)

 

 

[Italics-bold within the brackets are my additions/elaborations] [New M* Discussions doesn’t allow any colors for cut-and-paste from WORD]

 

Pg M1, Trader: Panic! Coronavirus pandemic. Oil shock. National emergency. Fastest decline [19 days] into bear market. Extreme volatility. Earnings estimates are falling and the fwd P/Es are near 2002, 2016, 2018 levels. Market is pricing a recession. But it is time to do something – buy good cyclicals, healthcare, financials, homebuilders.

Speculations on what Warren Buffett [BRK-A/B] may do with $128 billion in cash. He may buy blue-chip stocks or entire companies.

 

[The CME FedWatch tool, based on current fed fund futures quotes, shows the following probabilities for 2020:

For 75 bps cut,

     100% at FOMC 3/18//20 [for 1% cut, 67.9%]

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]

 

For the week [index changes only], DJIA -10.36%, SP500 -8.79%, Nasdaq Comp -8.17%, Russell 2000 -16.50%. DJ Transports -11.35%; DJ Utilities -15.43%. US$ +2.53% (large move), oil/WTI -23.14% (huge move), gold -9.28%. There was no safe haven.

YTD [index changes only], DJIA -18.76%, SP500 -16.09%, Nasdaq Comp -12.23% [energy -47.14%].

 

Pg M4, Europe: UK quality-control and product-testing company Intertek [ITRK.uk/IKTSY; fwd P/E 25.3] is overvalued. Its operations in 100 countries will be impacted significantly by coronavirus.

 

Pg M4, Emerging Markets: Asian emerging markets [China, India] will benefit from low oil prices and weakening dollar. China and S Korea have responded decisively on coronavirus and have included fiscal stimulus. However, oil-exporting EMs [Brazil, Mexico] and those with current account deficits [Turkey, South Africa] will suffer.

 

Pg M6, Commodities: Dr Copper is a leading economic indicator. It peaked in January but has done better than oil and some other commodities. Impact of coronavirus may be sharp but short. China will respond to government stimulus. Global central banks also have easy monetary policies.

 

Pg M7, Options: Liquidity is inversely proportional to volatility. Act like market-makers. Use limit-orders. Trade selectively.

[SP500 VIX 57.83 (high), SKEW 132.37] [10-Yr TYVIX 9.55 (high)] [Yahoo Finance data]

 

Pg M27, M32: An ugly week in Europe [Switzerland -14.69%, Italy -27.76%] and an ugly week in Asia [Malaysia -5.46%, Thailand -18.89%]. The equity CEF index [data to Thursday] underperformed the DJIA and its discount was -10.8% [huge change].

Treasury rates 3-mo yield 0.28%, 2-yr 0.49%, 5-yr 0.70%, 10-yr 0.94%, 30-yr 1.56% [yield-curve partially inverted] [Treasury data*]. Dollar rose sharply, DXY 99.48, +2.4% [M35]. Gold tumbled, $1,563, -7.2%; the gold-miners crashed [M38]. [^XAU was at 70.26, -31.79% for the week]

*Treasury Yield-Curve https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=y...

Top FDIC insured savings deposit rates*: Money-market accounts 1.78%; 1-yr CDs 1.84%; 5-yr CDs 2.23% [M33].

*For local rates https://www.depositaccounts.com/banks/rates-map/

 

Pg 23: Cover What’s Next for Airline Stocks? Things Could Get Even Worse”.

 

Supplement, America’s Top 1200 Financial Advisors has features and listing by states.

 

Pg 7, Up and Down Wall Street: Coronavirus pandemic will affect work and living habits. Oil war between Saudi Arabia and Russia will affect businesses differently. The Q2 GDP may be negative, -1% to -2%. Earnings estimates are coming down. Stocks fell into bear market. While other countries have taken stronger and comprehensive measures, the US response so far has been piecemeal.  – declaration of national emergency; travel ban from Europe; suspension of interest payments on federal student loans; oil purchase for SPR, etc. The Fed provided liquidity and may cut rates by a full point [100 bps] to ZIRP 0-0.25%.

Last week was the 20th anniversary of dot.com bubble peak of Nasdaq on 3/10/2000; this year TSLA and SPCE provided a taste of that craziness. Some hot names from then have disappeared via M&A [AOL, Yahoo!], some have languished [SIRI, NTAP]; strong performers have been MNST, ORLY, ANSS, AAPL, MSFT. Some current names didn’t exist back then [GOOGL, FB].

 

Pg 11, Streetwise: Covid-19 and oil-war between Saudi Arabia and Russia made bad situation worse. Many events and games have been cancelled; many schools are closed; Disney/DIS closed its CA and FL parks. Impact of low oil prices and related downgrades will be felt far beyond the oil/gas sector. Stocks fell into bear market; SP500 P/E is 16.7 on flat earnings and 19.2 on bearish earnings forecasts; risk is that low stock prices will hurt business and consumer spending. Treasury yields are at record lows. In shopping for stocks, think like a lender – look for good balance sheets and cash flows. Check your asset allocations. David Harden of large-cap SILVX likes ZTS, AMZN, MSFT, AAPL, BRK-A/B.

 

More later….

YBB
4 Replies
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Participant ○○

Re: From Barron’s, March 16, 2020 (Part 1)


@yogibearbull wrote:

 

consumer spending. Treasury yields are at record lows. In shopping for stocks, think like a lender – look for good balance sheets and cash flows. Check your asset allocations. David Harden of large-cap SILVX likes ZTS, AMZN, MSFT, AAPL, BRK-A/B.

 

More later….


@yogibearbull 

Thanks Yogi.  

I've been watching ZTS as well.  I know pet sciences is a growth area, but how long can that growth be sustained is the big question.  I'd rather buy MSFT at 27 P/E and hope for continued Cloud growth than ZTS at 40 P/E.  

I was hoping that Friday was going to be another sh**show where traders needed to sell their good stuff.  But, alas, that didn't happen.  

ctyankee

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Explorer ○

Re: From Barron’s, March 16, 2020 (Part 1)

Thanks Yogi...  !

Time to buy something....So I have added of late into the declines all of those stocks listed as favorites of David Harden.  all Except ZTS a symbol that does not jog my gray cells.   Oh yea, Animal Health.  We have been seeing a lot of recs on this theme of late as also the newer fresh food packers and ides like Blue Buffalo.  

As  of Thursday's close I am virtually all in, just holding back my first buckets.  But with the big cash dividend distributions hitting me on Monday I may have a marginal sum still, to round up some of the positions to multiples of 5 shares.  No one knows where the bottom will ultimately be made but for now I think my dividend incomes have risen by about 15% in the last 3 weeks.

Buffet BRK/B a stock I have added to in the last week, may make a move on either Jet Blue or Delta Air.  His recent foray into Tech left him as an unrequited suitor.  (outbid) But there are plenty of tech names mostly in Digital/ cloud tech or medium cap health care techs he might target.  The here to fore unthinkable could also come into play if Berkshire decides to buy back some shares.  

My guru now has the likely bottom pegged at a target between a 2560 and 2235 S&P 500, depending how bad the now nearly certain ensuing recession gets.  That is not a lot of help vs that being such a wide range .

UGLY ?  It is all ugly....  The toilet paper shelves are emptying out.  Bar soap, Tide, packs of Marlboros, bottles of Johnny Walker Black, cans of albacore tuna ?  All items that could become common currency trading items.  Tomatos from Mexico and Canada may disappear from the markets as well ?   Time to add to WMT the Sams Club operator.  COST ?

Also adding of late to AAPL, FB and MSFT.  Dumped cash into the three FAANG funds FDN, JAMFX and CTHCX. the last open ended Mutual fund having no ST trading restrictions other than the 1% load vs CTCAX the A shares.    

Beyond ugly is the plain old broken.  When you see a bank preferred share trading below $24 that is callable at the end of June at $25.... With the .TNX collapsing below 1% something like that paying one more +6% dividend  will not be called?

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Participant ○○

Re: From Barron’s, March 16, 2020 (Part 1)


@NomasDOZ wrote:

Thanks Yogi...  !

.... snip

Also adding of late to AAPL, FB and MSFT.  Dumped cash into the three FAANG funds FDN, JAMFX and CTHCX. the last open ended Mutual fund having no ST trading restrictions other than the 1% load vs CTCAX the A shares.    

 


@NomasDOZ 

Not sure why you have three so-called FAANG funds when one would do.  However, JAMFX is hardly a FAANG fund (and you probably wish it was given its recent performance compared to the two others).  That said, QQQ outperformed all three in the last 14 days ... so not a wonderful sign.  However, they could have gone to cash or cash-like products, so maybe active management finally kicked in a helpful way that is non-transparent and will serve them well if things continue to tank.   Only time will tell ... including, what lovely capital gains might be coming your way. 

ctyankee 

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Participant ○○○

Re: From Barron’s, March 16, 2020 (Part 1)

ZTS is a PFE spinoff.

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