Activist investor Elliott Management has amassed a $3.2 billion stake in AT&T and is advocating for the sale of underperforming assets. The investors claim that AT&T is more valuable than its recent share price would suggest and that it should be run more like Verizon. Connor Smith reports at Barron's: AT&T shares shot up after Elliott Management revealed a $3.2 billion stake in the company, as well as a plan the activist investor says could bring a 65% gain in the stock by the end of 2021. Elliott Management’s Jesse Cohn and Marc Steinberg wrote in a letter to AT&T’s … [Read more...]
Take it from the Forty-Niners, There’s a Better Way to Play Marijuana Stocks
In 1848, there were around 1,000 non-native people living in California. By the end of 1849's Gold Rush, there were over 100,000 living in the territory. By 1852, those settlers had found $2 billion worth of gold in the area. Despite the fortunes made by gold, most of the forty-niners weren't successful. The Sacramento Bee reports that "one in every five miners who came to California in 1849 was dead within six months." Legend has it that the people who really made money during the Gold Rush weren't the many prospectors who spent their time panning and digging for gold, but those who sold them … [Read more...]
Automation is Making Markets more Volatile
Analysts say using computers to automate the selling of stocks in volatile markets is making them even more volatile reports Richard Henderson in the Financial Times. He writes: So-called “volatility-targeting” funds that manage about $400bn in assets have bought up stocks this year as markets have calmed since markets’ dramatic end to 2018. But the renewed turmoil means they were pegged to sell $50bn by the end of Wednesday, according to Wells Fargo estimates. “When volatility jumps, systematic funds rebalance portfolios away from risky assets like equities,” said Pravit Chintawongvanich, … [Read more...]
Who’s Really Moving the Market?
After a recent spate of losses in stock markets, a wave of buying began, but it wasn't retail investors stepping in to take advantage of lower prices. Instead, the publicly traded companies themselves were propping up markets by buying back shares. Bloomberg's Lu Wang reports: As the S&P 500 slumped 6% over six days through Monday, companies boosted share buybacks to almost $10 billion a day from $3 billion previously, the firm [JPMorgan Chase & Co.] estimates. With stocks sinking and bonds rallying, the big gap in performance spurred a rotation to equities among funds that need to go … [Read more...]
Time to Get Defensive?
The Wall Street Journal's Corrie Driebusch reports a move toward consumer companies in stock markets. Driebusch calls the move "a sign that investors are hedging their bets by picking up shares of firms they believe will provide returns in a struggling economy." You'll notice on my chart below during this century, consumer staples have beaten tech stocks and the S&P 500 index. Now it seems, investors are buying consumer staples in a bid for defense against a potential economic recession. Driebusch writes: One of the hottest stock-trading strategies lately is buying shares of … [Read more...]
The Fourth—and Most Dangerous—Investment Super Cycle of My Career
I have now been working in the investment industry for 55 years, and over that time I have lived through four stock market super cycles, including the present, and most dangerous one. I explained the four cycles in March 2011, writing: Stock Market Super cycles I assure you, I do not plan to get gored on the next angry charge. Here is exactly how to look at things. Read and re-read what I am going to tell you here, and remember this stuff for the rest of your life. Since I got into the investment business, there have been three completed big cycles swings in the stock market. Cycle number … [Read more...]
Is There Room for Growth in Presidential Election Year Markets?
Yesterday, I explained the past performance in equities markets during each year of the presidential election cycle. I also noted that the tradition of strong performance during the year before and of the election have broken down somewhat this century. With that in mind, I'd like you to look at the so-called Buffett Valuation Indicator, known as a tool Warren Buffett uses for getting a feel for market under- or over-valuation. The tool is simple, it's the market cap of American stock markets divided by the country's GDP. The higher the ratio, the more likely markets are overvalued, and … [Read more...]
What the Presidential Election Cycle Tells Us about Stocks
As you can see below, the years prior to a presidential election, and the election year itself, tend to be good for stocks as candidates make promises for a new tomorrow. Then, after the honeymoon is over, reality sets in and the bills come due. But twice this century, in 2000 and 2008, stock market performance during election years was not good at all, as hanging chads and “hope and change” polarized investors. And the years before the elections were not much to write home about either. America is currently in the year before a presidential election and, so far, markets are … [Read more...]
Arnott on FANG Stocks “You Would Have to Use Implausible Assumptions to Justify Today’s Price”
Research Affiliates' Rob Arnott tells Bloomberg that "You would have to use implausible assumptions to justify today's price," in reference to markets. He also specifically calls out Tesla and Netflix as "zombie companies." Then Arnott slams down on the valuations of the "FANMAG" companies, noting that their combined valuation is greater than that of entire national markets, saying “If you count up the whole roster of FANMAG companies, that’s the Fang stocks plus Apple, plus Microsoft, their aggregate market value exceeds every market in the world except Japan and the U.S. That’s strange. … [Read more...]
Man vs. Machines: Can Humans Win a New Stock Market War?
In a market that is increasingly dominated by robots, indexing, and algorithms, humans are beginning to play to their own strengths. The predictability of computers and passive funds has created a possible opening for some investors. Bloomberg's Justina Lee and Yakob Peterseil report: Some 60% of assets in U.S. equities are housed in passive products, while quant strategies comprise another 20%, according to JPMorgan Chase & Co. All told, index and exchange-traded funds, quants and options-related strategies dominate all but 10% of U.S. stock trading, the bank calculates. “What it … [Read more...]
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