Tuesday, March 19, 2019

Market update: key market catalysts (19 March 2019)

SPY daily and monthly

$SPX last 5 sessions

1.  Bank of America/Merrill Lynch fund manager survey
  • Latest survey showed allocation to equities is at its lowest since September 2016.  Implies many fund managers have missed/trailed the 2019 rally effort and will need to play catch up, providing more fuel to keep the rally going.
2.  Green shoots of economic optimism
  • Economic sentiment in Germany was better than expected in March and employment trends in the UK were also better than expected, highlighted by the lowest unemployment rate (3.9%) since 1975, according to Reuters.
  • The reassuring data helped stoke the narrative that the global economy may be bottoming (or has bottomed), which has driven buying interest in cyclical sectors.
3.  Ongoing leadership from the semiconductor stocks
  • This industry group is regarded as having leading indicator status, so it resonates as a positive marker that the Philadelphia Semiconductor Index is up 21.9% year-to-date, including today's 1.4% gain.
  • Strength in the semis has been a key source of support for the information technology sector (+0.3%), which is the market's most heavily-weighted sector.
4.  Frontrunning the Fed
  • The stock market knows the Fed is on its side at the moment.  On Wednesday, it expects the FOMC to reinforce that position by holding the fed funds rate steady and reiterating a patient mindset. 
  • This expectation, and the speculation that the dot plot will show a reduced rate-hike projection for 2019 (the median estimate in December called for two rate hikes), and that the Fed could announce a plan regarding the timing for ending its balance sheet runoff, have helped keep selling interest in check.

President Trump hosts Brazil’s new leader

Today, President Trump welcomed the recently elected President of Brazil, Jair Bolsonaro, to the White House.

President Bolsonaro’s election marked a historic opportunity for the United States and Brazil—the two largest democracies in the Western Hemisphere—to build a new partnership focused on increased prosperity, strong security, and national sovereignty.

Perhaps most important, Brazil is a crucial ally in President Trump’s stand against the corrupt, socialist Maduro dictatorship in Venezuela. President Bolsonaro reiterated that Brazil stands with Venezuelan Interim President Juan Guaido, as well as with the democratically elected National Assembly and the Venezuelan people in their fight against tyranny.

“The twilight hour of socialism has arrived in our hemisphere,” President Trump said from the Rose Garden this afternoon. “And hopefully, by the way, it’s also arrived—that twilight hour—in our great country.”

“I have always admired the United States of America,” President Bolsonaro added. “And this sense of admiration has just increased after you took office.”

President Trump said he will designate Brazil as a major non-NATO ally during the visit of Brazil's President Jair Bolsonaro to the White House. Argentina is the only other South American country with that designation.

President Jair Bolsonaro, left, presents Donald Trump with a Brazil national football jersey after the US leader gave him a US soccer team shirt

Thursday, February 28, 2019

Auto stocks

(by market cap)                        
Company name Mkt Cap
  1. TM Toyota Motor  Japan 183.84B
  2. HMC Honda Motor Co. Japan 65.66B
  3. F Ford Motor Co. USA 60.67B
  4. GM General Motors  USA 51.22B
  5. NSANY Nissan Motor Co. Japan 36.48B
  6. TSLA Tesla Motors USA 31.01B
  7. TTM Tata Motors Ltd. India 21.16B
  8. FCAU Fiat Chrysler   20.37B
  9. SPAR  Spartan Motors 515.88M
  10. KNDI Kandi Technologies China 393.78M
  11. SORL SORL Auto Parts China 87.84M
  12. +RACE
finviz charts (ave vol - 30 days, new window): http://finviz.com/screener.ashx?v=211&t=TM,HMC,F,GM,NSANY,TSLA,TTM,KNDI,SORL&ta=0&o=-averagevolume

  • Mercedes-Benz (OTCPK:DDAIF)
  • Nissan (OTCPK:NSANY)
  • PSA Peugeot Citroen (OTCPK:PEUGF)
  • Renault (OTC:RNSDF)
  • Volkswagen AG (OTC: VLKAY)
  • Hyundai (OTCPK:HYMLF)
  • Subaru (OTCPK:FUJHY)
  • Porsche (OTCPK:POAHY)
  • Mazda (OTCPK:MZDAY)
9/15:  Volkswagen emission-cheating scandal - VW, BMW, GM, F and S&P  

Also related to auto industry:
  • JCI      Johnson Controls    34.77B
  • ORLY   O'Reilly Automotive   23.24B
  • AZO   AutoZone    22.28B
  • MGA  Magna International  16.95B
  • AA      Alcoa           16.12B
  • GPC   Genuine Parts Company   14.22B
  • AAP   Advance Auto Parts   11.15B
  • KMX   CarMax   10.61B
  • AN    AutoNation      6.49B     automotive retailer
  • ADNT   Adient     6.0B   The world's largest global automotive seating supplier. (spinoff from Johnson Controls)
  • PAG  Penske Automotive 3.87B
  • GPI   Group 1 Automotive  1.77B 
  • AXL    American Axle & Manufacturing 1.41B   automotive supplier
  • MTOR   Meritor  1.28B
  • CARZ  First Trust NASDAQ Global Auto ETF   33.50M
  • +Carvana CVNA; +TRUE


6/15:  major automakers - 3 months (click for a live chart)

Share of global car market, 2017:
  • Toyota: 9.2%
  • Volkswagen: 7.2%
  • Ford: 6.5%
  • Honda: 5.4%
  • Nissan: 5.4%
  • Hyundai: 4.7%
  • Chevrolet: 4.4%
  • Kia: 3%
  • Renault: 2.8%
  • Mercedes: 2.7%
  • Peugeot: 2.2%
  • BMW: 2.2%
  • Audi: 2%
  • Maruti: 1.7%
  • Mazda: 1.7%
  • Fiat: 1.7%
  • Suzuki: 1.6%
  • Buick: 1.5%
  • Jeep: 1.5%

Monday, January 28, 2019

The U.S. announces sanctions on Venezuela's state oil firm PDVSA

The Trump administration issued new sanctions on Venezuela’s PDVSA that effectively block the regime of President Nicolas Maduro from exporting crude to the U.S.

  • PDVSA is the state-owned oil & gas company.
  • Venezuela has the largest oil reserves in the world.
  • The U.S. recognizes National Assembly leader Juan Guaidó as interim president of Venezuela. Guaidó has promised to host free and fair elections.
  • The Trump administration announced it is blocking all U.S. revenue to Venezuela’s national oil company and called on members of the armed forces to switch their allegiance to Juan Guaidó.

Juan Guaidó, left, and Nicolás Maduro are locked in a confrontation over the right to govern Venezuela.

Oil has advanced 14 percent this year as the Organization of Petroleum Exporting Countries and allies curbed output to ease glut concerns. Nevertheless, price gains have been capped by record American output, expanding stockpiles and the U.S.-China trade war. Talks between the world’s two biggest economies later this week may provide the catalyst for crude to break out of its recent tight trading range.

West Texas Intermediate crude for March delivery rose 19 cents to $52.18 a barrel on the New York Mercantile Exchange at 9:11 a.m. in Singapore. The contract fell $1.70 to close at $51.99 a barrel on Monday.

Brent for March settlement declined 10 cents to $59.83. It broke below $60 for the first time in almost two weeks on Monday, dropping $1.71 to $59.93 on the London-based ICE Futures Europe exchange. The global benchmark crude was at a $7.94 premium to WTI.

Thursday, January 10, 2019

Frontier-market stocks seen rising after lost decade

Frontier markets are poised to rise this year as they benefit from lower valuations and a “reasonably solid” economic outlook, according to Andrew Howell, a Citigroup Inc. equity strategist. 
  • Howell provided the view in a report released Wednesday. Any advance might be well received because these stocks have been through what can be considered a lost decade. The MSCI Frontier Markets Index rose just 9.5 percent from 2009 through 2018. 
  • During the same period, the MSCI Emerging Markets Index added 70 percent and the MSCI World Index of developed markets climbed 112 percent.

Friday, December 28, 2018

Apple (AAPL) suppliers

Ticker       Company name Mkt Cap
  • CRUS     Cirrus Logic   1.93B ; Austin, Texas-based; Apple supplier; makes audio integrated circuits and microphones used in smartphones.  Apple represents 75% of company's revenue. That is the highest percentage among Apple suppliers, according to FactSet.
  • SWKS    Skyworks Solutions   11.29B : Woburn, Mass.-based; The company makes radio frequency chips used in Apple's iPhone 6, Samsung's Galaxy GS5 as well as many other wireless devices.   Gets 40% of its revenue from Apple.
  • AVGO    Broadcom  94.9B;  San Jose, California-based; top supplier to both Samsung and Apple.
  • QRVO   Qorvo 3.72B: North Carolina; radio frequency (RF) solutions for mobile, infrastructure, and aerospace and defense applications.
  • JBL    Jabil Circuit 3.84B: contract manufacturer; gets about 25% of its revenue from Apple. 
  • LITE   Lumentum   3.11B
  • OLED  Universal Display Corp.  4.109B  (Two new iPhones have OLED screens, all three with 3D sensing)
  • QCOM Qualcomm    67.82B   makes most of its $22.3 billion sales from smartphones
  • NXPI      NXP Semiconductors N.V.     22.5B: Netherlands-based; the world’s number one supplier for small-signal discretes; will supply the near field communications (NFC) module and secure element NFC booster chip. NFC is a set of standards for smartphones and other devices like the Apple Watch to establish radio communication with each other by touching them together or bringing them into close proximity, usually no more than a few centimeters.
  • FNSR Finisar  2.52B   Sunnyvale, California
  • MU  Micron Technology  37.824B  Boise, Idaho; memory and storage solutions
  • AMAT  Applied Materials   31.55B  Santa Clara, California
  • XLNX  Xilinx   22.28B  San Jose, California
  • TXN   Texas Instruments  90.66B Dallas, Texas
  • STM   STMicroelectronics  11.68B  Geneva, Switzerland
  • KN Knowles Corporation 1.15B Itasca, Illinois
  • GLW   Corning   23.59B  Corning, New York
  • ADI   Analog Devices  31.55B  Norwood, Massachusetts
SMH VanEck Vectors Semiconductor ETF
Apple suppliers' stocks:  (vol) https://finviz.com/screener.ashx?v=211&t=AAPL,CRUS,SWKS,QRVO,JBL,LITE,OLED,QCOM,NXPI,FNSR,MU,AMAT,XLNX,TXN,STM,KN,GLW,ADI,SMH&ta=0&o=-volume

  • InvenSense (traded as NYSE:INVN ) acquired  by TDK Corporation for $13.00/share in cash  Dec. 2016.
  • ARM Holdings  (traded as Nasdaq: ARMH)  United Kingdom; Apple supplier; maker of chips used in smartphones;  acquired by SoftBank Group (SFTBY) for $31.4 bln (July 2016)
  • Broadcom Corp.  (traded as Nasdaq: BRCM) ; California-based; top supplier to both Samsung and Apple. Acquired by Singapore-based Avago Technologies (AVGO) for $37 billion in Feb 2016.  Avago took the Broadcom name after the acquisition. The ticker symbol AVGO that represented old Avago now represents the new merged entity. The Broadcom Corporation ticker symbol BRCM was retired.

  • Jan 9, 2019: Apple (AAPL) will cut production of its three new iPhone models by 10% in the January-March quarter, the Nikkei Asian Review reported Wednesday. Last week, Apple shares tumbled after the tech giant announced disappointing iPhone sales and a sharply lower revenue forecast for the holiday quarter. The Nikkei said Apple has asked suppliers twice in the past two months to trim planned production of the iPhone XR, XS and XS Max. The latest request was reportedly made before last week's announcement. The Nikkei reported the move would reduce the total number of iPhones made this quarter from the previously estimated range of between 47 million and 48 million, to between 40 million and 43 million, or more than 20% less in terms of year-over-year quarterly production. 
  • Jan, 2019: Apple's latest iPhone models are seeing huge discounts from retailers in China. The technology giant recently revised its first quarter sales forecast downward, putting a large part of the blame on a slowdown in the Chinese market. Experts said a mixture of a poor pricing strategy and a lack of exciting features compared to local rivals like Huawei has led to the newest iPhones' weak performance in China.
  • Apple's 512GB iPhone XS Max, the most expensive of the new models, costs $1,499 in the U.S. But in Asia's largest economy, the un-discounted price is 12,799 yuan, or nearly $1,900 — a more than 26 percent premium. Other variations of the latest iPhone models have similar price premiums in China.
  • Jan 2, 2019 : (source) Reportedly, Apple is collaborating with Sony Corp.(SNE) to deploy 3D cameras on iPhone XI in a bid to revive dwindling iPhone sales globally. The company plans to leverage Sony’s long-range 3D Camera based on Time of Flight (ToF) technology.This move is expected to enhance iPhone’s photography, security and gaming features, which will help in luring more customers. Further, it will enable users to precisely map objects in 3D and focus on every part of the picture up to five meters. Moreover, it can also be used to track objects in the dark.
  • Dec 2018: Apple (AAPL)announced they’ll no longer disclose iPhone sales, a major metric of business health for investors and analysts.

Thursday, November 8, 2018

The Black–Scholes model

What does it mean?: Prices a derivative based on the assumption that it is riskless and that there is no arbitrage opportunity when it is priced correctly. 

History: Developed by Fischer Black and Myron Scholes, then expanded by Robert Merton. The latter two won the 1997 Nobel Prize in Economics for the discovery.   
Importance: Helped create the now multi trillion dollar derivatives market. It is argued that improper use of the formula (and its descendants) contributed to the financial crisis. In particular, the equation maintains several assumptions that do not hold true in real financial markets.  
Modern use: Variants are still used to price most derivatives, even after the financial crisis.

The Black-Scholes Model or Formula calculates an theoretical value of an option based on 6 variables. These variables are:
  • Whether the option is a call or a put
  • The current underlying stock price
  • The time left until the option's expiration date
  • The strike price of the option
  • The risk-free interest rate
  • The volatility of the stock
The Black-Scholes (1973) was originally formulated to price European-style options, and does not account for dividend payment and early exercise. The Cox-Ross-Rubenstein Binomial model (1979) is a variation on the original Black-Scholes. The Barone-Adessi & Whaley, or "Whaley" model (1987), accounts for early exercise of call options due to dividend payment and is widely used among individual investors for pricing American-style equity options.

Sunday, October 14, 2018

Company profile: Sun Capital Partners

Private-equity firm
Founded 1995; 23 years ago
Headquarters Boca Raton, Florida, US
Key people:
Rodger Krouse (co-CEO)
Marc J. Leder (co-CEO)
Website www.suncappart.com

Founded by two onetime colleagues at Lehman Brothers, Marc Leder and Rodger R. Krouse, Sun Capital manages billions in private-equity investments, buying and selling companies for profit. The public face of the firm is Leder, a co-owner of the Philadelphia 76ers basketball team and the New Jersey Devils hockey team. Noted for his extravagant parties and yachting expeditions, he has been dubbed by tabloids as “the Hugh Hefner of the Hamptons.”

Marc Leder, left, and guests attend a 2015 benefit in the Hamptons. 

Politically, he may be best known for hosting the Boca Raton, Fla., dinner where presidential candidate Mitt Romney made what became infamous comments about the “47 percent of the people .. who are dependent upon government, who believe that they are victims.”

Underfounded pensions
Over the past 10 years, Sun Capital has taken five companies into bankruptcy while leaving behind debts of about $280 million owed to employee pensions.

At two of them, Sun Capital took millions of dollars out of the companies while leaving pensions underfunded.

At Powermate, a manufacturer of electric generators with a factory in Nebraska, Sun Capital took $20 million from the company as a dividend in 2006, according to court documents. Two years later, it sent the company into bankruptcy court, leaving the government insurer to pay for the underfunded pension covering 600 workers.

At Indalex, an Illinois-based aluminum parts maker, Sun extracted a dividend of $70 million in 2007, according to court documents. Two years later it sent the company into bankruptcy, leaving the government insurer to pay more than 3,000 pensioners.

At the other two companies, Friendly’s in 2011 and Fluid Routing Solutions in 2009, Sun Capital used the bankruptcy court to shed the pension obligations — and then kept operating. First, Sun put each company into bankruptcy, essentially relinquishing control. In bankruptcy court, the companies were absolved of their pension debts of $115 million and $30 million, respectively. Then, once the companies were pension-free, Sun Capital bought the same companies out of the ensuing bankruptcy auction.

During the period when these five companies filed for bankruptcy with underfunded pensions, Sun had investments in more than 80 companies.