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Buy, Sell, or Hold: What to Do with AMC Entertainment Stock? 2024-06-17 14:09:00+00:00 - The honest answer to this question may be easier said than done, as the recent revival of the so-called ‘meme stocks’ also sparked fear of missing out (FOMO for short) in most investors. Only the most disciplined ones can watch GameStop Corp. shares NYSE: GME and AMC Entertainment Holdings Inc. NYSE: AMC skyrocket and not feel a thing. Still, that type of emotional discipline takes years to master. AMC Entertainment Today AMC AMC Entertainment $4.89 -0.10 (-2.00%) 52-Week Range $2.38 ▼ $62.30 Price Target $5.54 Add to Watchlist One way to begin this approach is by sticking with a time-tested and logical methodology when picking a stock to invest in, often called a fundamental approach. Today, investors who doubt whether they should follow along in AMC stock’s potential road to riches but still fear the demise of their portfolios if this is, in fact, another failed attempt for the meme stock can get a better view of the land by following a simple checklist. Get Roku alerts: Sign Up This checklist includes an overview of the entertainment industry and how movie theaters play a role today. This way, investors can develop a reasonable valuation for AMC stock. More than that, investors will explore how the market and Wall Street feel about these potential prospects for the company moving forward. AMC Stock and Its Role in the Entertainment Industry: What Investors Should Know Movie theaters today are like the drive-in theaters of the past, which sometimes offer an uncomfortable experience with setting up your car and ensuring the elements are nice enough to stay and watch the whole movie. Movie theaters fixed some of the comfort issues. Because their sizes achieved economies of scale, they could offer tickets at cheaper prices. However lovely and nostalgic theaters may be, more and more consumers are choosing the most comfortable (and affordable) route today. Companies like Netflix Inc. NASDAQ: NFLX and Amazon.com Inc. NASDAQ: AMZN have taken over the streaming and entertainment industry and, arguably, the consumer discretionary sector. Access to hundreds of movies at the cost of a single movie theater ticket in most cases and the privacy of watching at home with unlimited bathroom breaks and snacks just make movie theaters an obstacle to pleasure. Even though AMC owns roughly 23.2% of the movie theater industry’s market share, this space is only expected to grow by 5.1% compounded annual growth rate (CAGR) for the next 5 years, nothing to get excited about. And That's Why AMC Stock's Valuation Can't Stay High for Much Longer Today, AMC stock trades at a price-to-sales (P/S) ratio of 2.2x, which is significantly above other entertainment services like Roku Inc. NASDAQ: ROKU, which trades at 1.8x P/S while having the benefit of online economies of scale discussed earlier. Even Warner Bros Discovery Inc. NASDAQ: WBD trades below AMC at 1.4x P/S. The question is whether AMC can sustain or justify its current high valuation. AMC Entertainment MarketRank™ Stock Analysis Overall MarketRank™ 1.55 out of 5 Analyst Rating Strong Sell Upside/Downside 12.8% Upside Short Interest Bearish Dividend Strength N/A Sustainability -2.27 News Sentiment 0.77 Insider Trading N/A Projected Earnings Growth Growing See Full Details The short answer is no; now, here’s the long answer. All five analysts covering AMC stock have rated it as a ‘sell,’ with Citigroup bringing their latest price targets down to $3.2 a share, or 36% below today’s stock price. In addition, bearish traders have come in to short the stock, as AMC stock’s short interest rose by 2.6% in the past month. To top it off, Antara Capital, one of AMC’s largest shareholders, has been selling heavy share blocks all month. The company’s financials can be to blame for the current sentiment, as the first quarter 2024 earnings results show that a revenue decline was the least of investor worries. Operating cash flows were negative $188.3 million for the quarter, which, after $50.5 million in capital expenditures, represented a net outflow of $238.8 million for the company. Because of this inability to generate cash, management has only two options to keep the company running. First, it can issue bonds as borrowed money to keep operations going. Still, nobody is looking to lend this company money for reasons already discussed. Second, management can issue more shares to fund operations, meaning existing shareholders will suffer from dilution of ownership and a lower stock price. Having no other option, management issued over 130 million shares in the past quarter, taking advantage of the short-lived rally after GameStop. The only certainty to be expected from AMC is further share dilution unless an overnight invention comes to transform the movie theater industry and position AMC at the top of its new run. Otherwise, it is hard to see whether AMC will become profitable again. AMC Entertainment Holdings, Inc. (AMC) Price Chart for Monday, June, 17, 2024 Before you consider Roku, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Roku wasn't on the list. While Roku currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here
Moody’s withdraws credit rating of Warrington council 2024-06-17 14:02:00+00:00 - Warrington council’s inability to find an auditor to sign off its accounts has led the credit rating agency Moody’s to withdraw its monitoring of the authority, amid mounting concern about the broader crisis in local government funding. In a statement, Warrington borough council said Moody’s Investors Service was no longer providing it with a credit rating, a crucial metric used by potential lenders to assess a borrower’s creditworthiness. The local authority, one of many struggling with the impact of years of funding cuts from the Conservative government, has £1.8bn of debts and has faced scrutiny over a “high-risk” investment strategy it pursued to raise cash. On Monday, the council said it had been unable to provide Moody’s with assurances its accounts had been approved by external auditors. It blamed “challenges which apply across the local government sector as a whole in securing auditors of sufficient capacity and capability”. The council is now seeking a rating from another agency for £150m of bonds that mature in 2055, and says it remains compliant with the terms of these bonds. Like many UK councils, Warrington has ploughed cash into commercial schemes in the hope of generating returns. These included a stake in Together Energy, which fell into administration in 2022, and a £200m loan facility to Matthew Moulding, the billionaire owner of the Hut Group. In May, the heavily indebted council refused to hand crucial information to the auditing firm Grant Thornton, restricting its ability to scrutinise the books. Earlier that month, the government appointed an inspector to undertake an independent investigation to determine whether the authority was meeting its best value duty, an obligation to improve the way it functions. The chief executive of the council, Steven Broomhead, insisted earlier in June that the £1.8bn of debt was actually an investment. He said: “A lot of what we’ve done in Warrington has been what I call ‘civic entrepreneurism’. We’ve been very commercial in the way we’ve operated. “We’ve been so commercial that we’ve attracted the attention of government, who are carrying out a best value inspection in what we’ve been doing. skip past newsletter promotion Sign up to Business Today Free daily newsletter Get set for the working day – we'll point you to all the business news and analysis you need every morning Enter your email address Sign up Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy . We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply. after newsletter promotion “We haven’t been borrowing money to invest for a return. We’ve been borrowing money for regeneration. What the hell is wrong with that?” A string of councils have reported financial difficulties in recent years, forcing deep cuts to essential local services. Andy Haldane, the chair of the government’s levelling up advisory council and former chief economist of the Bank of England, singled out austerity measures imposed by successive Tory governments as the “root cause” earlier this year. Increasing numbers of councils in England are warning they in effect face bankruptcy. Despite ministers taking evasive action with an extra £600m to top up funding plans for next year, MPs and council leaders from across the political divide say local authorities are still £4bn short in an “out of control” financial crisis.
Balance effects of AI with profits tax and green levy, says IMF 2024-06-17 14:01:00+00:00 - Governments faced with economic upheaval caused by artificial intelligence should consider fiscal policies including taxes on excess profits and a green levy to atone for AI-related carbon emissions, according to the International Monetary Fund. The IMF said unlike previous technological breakthroughs such as the steam engine, generative AI – the term for computer systems such as ChatGPT that can produce convincing, human-like text, voices and images from simple prompts – can spread “much faster” and advances in the technology are happening at “breakneck speed”. The international lender of last resort said governments should consider a range of policies to mitigate the impact on jobs, including a carbon tax to account for the environmental impact of operating the computer servers that train and operate AI systems. “Given the large amount of energy consumed by AI servers, taxing the associated carbon emissions is a good way to reflect the external environmental costs in the price of the technology,” said the IMF in a report published on Monday. AI currently accounts for less than half of electricity use in datacentres but it could become their main source of consumption and push up the overall amount of electricity such facilities require, according to a recent report. Datacentres, servers and data transmission networks account for up to 1.5% of global emissions at present. The report also warned that the share of wages as a proportion of national income may decline further as a result of AI, causing a widening of inequality, while dominant tech companies could reinforce their market power and reap excessive financial rewards. The IMF report counselled against taxing investment in AI but suggested raising capital income taxes such as corporation tax and personal income taxes on interest, dividends and capital gains. The changes could include an excess profits tax, said the IMF. It added that corporate income tax had recently come under “severe pressure” from profit shifting and some countries lowering their rates. “More effective taxation of capital income requires restoration of the corporate incomes tax and calls for well-designed excess profit taxes, higher personal income taxes on capital through better enforcement of automatic information exchange between countries, and enhanced taxation of capital gains,” said the IMF. The IMF said there were many potential benefits for the private and public sectors including cost savings, new sources of revenue and more efficient delivery of services. However, it warned that AI could hit jobs across the skills spectrum, affecting both white-collar and blue-collar jobs. Research suggests that AI will primarily affect white-collar professions such as law, finance and medicine, but the IMF added that manufacturing or trade-related jobs in the blue-collar sector could also be hit. The IMF estimates about 60% of jobs in advanced economies such as the US and UK are exposed to AI and half of these jobs may be negatively affected. “Labour-saving automation could amplify job losses in both low-skill and cognitive occupations,” said the IMF. It added that an AI-related increase in productivity – a measure of economic efficiency, or the amount of output generated by a worker for each hour worked – could create new jobs but such a transition could be “costly”. skip past newsletter promotion Sign up to Business Today Free daily newsletter Get set for the working day – we'll point you to all the business news and analysis you need every morning Enter your email address Sign up Privacy Notice: Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Newsletters may contain info about charities, online ads, and content funded by outside parties. For more information see our Privacy Policy . We use Google reCaptcha to protect our website and the Google Privacy Policy and Terms of Service apply. after newsletter promotion The report, Broadening the Gains from Generative AI, made a number of other recommendations, including: extending unemployment insurance to self-employed workers; targeting social benefits at people “permanently displaced” by AI-related job disruption; and gearing education and training towards giving workers new skills and ability to adapt to new technologies. It also recommended using AI, and its analytical abilities, to overhaul the tax systems and introduce new levies, such as a real-time market-value-based property tax. The report also expressed caution about universal basic income, under which working-age adults are given a state stipend regardless of their earnings or employment status, saying it would generate significant costs. It said providing “unconditional benefits to all” would cover higher-income groups, “potentially generating significant fiscal costs”. Era Dabla-Norris, the deputy director of the IMF’s fiscal affairs department and a co-author of the report, said if AI led to “much more significant disruption” in the future, then governments might consider UBI. “Countries could start thinking about how such systems could be designed and implemented,” she added.
Is the Disney Stock Sell-Off a Prime Buying Opportunity? 2024-06-17 13:56:00+00:00 - Walt Disney Today DIS Walt Disney $101.52 +1.55 (+1.55%) 52-Week Range $78.73 ▼ $123.74 Dividend Yield 0.30% P/E Ratio 110.35 Price Target $126.29 Add to Watchlist Entertainment powerhouse The Walt Disney Co. NYSE: DIS has already had a drama-filled year. CEO Bob Iger had to fend off a proxy battle for board seats with billionaire activist investor Nelson Peltz and his Trian Fund. While the S&P 500 index has been rising 14% year-to-date (YTD), Disney shares have been selling off from a peak of $123.58 in April to $99.66 by June 14, 2024. While shares are still up 10% YTD, the stock has fallen over 19% since its peak. Disney competes in the consumer discretionary sector with media and entertainment giants, including Comcast Co. NASDAQ: CMCSA, down 15%; Warner Bros. Discovery Inc. NASDAQ: WBD, down 36%; and Paramount Global NASDAQ: PARA which is down 29% YTD. Incidentally, Disney is outperforming its peer stocks, which are trading near their respective 52-week lows. Get Walt Disney alerts: Sign Up Walt Disney Stock Climbed 33% During the Proxy Battle While CEO Bob Iger maintain the board seats and his position from winning the proxy fight, no one can deny the benefits the proxy battle did for shares leading up to the annual meeting and shareholder vote. Disney stock was languishing in the low $80s at the start of November 2023; These are share price levels that had not been seen since the pandemic lows of March 2020. On November 30, 2023, Nelson Peltz waged the ‘Restore the Magic’ proxy battle requesting three board seats, which kickstarted a 33% rally from $93.86 up to the $123.69 peak on April 3, 2024, during the shareholder vote. Peltz Loses the Proxy Battle But Won Nearly $1 Billion in Profits On May 29, 2024, CNBC reported that Nelson Peltz sold all his Disney stock around $120 per share, profiting nearly $1 billion. Disney shares have slid 19% from their $123.69 high to $99.66 on June 14, 2024. Disney DTC Generates Profits Ahead of Schedule Shareholders are now in for the ride. Prior to the proxy vote, CEO Iger made a bold forecast that the direct-to-consumer (DTC) entertainment division would be profitable in 2024. The DTC segment includes its streaming networks Disney+, Hulu, and Disney+ Hotstar, an Indian subscription streaming service. The DTC segment actually generated a $47 profit in Q2 2024, compared to a loss of $587 million in the year-ago period. DIS Stock is in a Descending Triangle Pattern As It Falls to Critical Support The daily candlestick chart on DIS illustrates a descending triangle pattern. This pattern is comprised of a descending (falling) trendline resistance that formed at the $123.69 high on April 3, 2024, capping bounces at lower higher. The flat-bottom lower horizontal trendline formed at $99.74, which is a critical support as it represents the gap fill on the February 7, 2024, earnings gap. DIS completed the gap fill; next, it will either bounce from here or trigger a descending triangle breakdown if shares fall under the lower trendline. The daily relative strength index (RSI) fell back under the 35-band. Pullback support levels are at $96.51, $93.86, $91.54, and $87.60. Disney’s Scores a Profitable Quarter, But Shares Gap Down Anyways On May 7, 2024, Disney reported its Q2 2024 adjusted EPS of $1.21, beating $1.10 consensus estimates by 11 cents. Revenues rose 1.2% YoY to $22.08 billion, missing $22.12 consensus analyst estimates. The company purchased $1 billion of stock in the quarter. Strength was attributed to its Experiences segment, which had 10% YoY revenue growth and 12% operating income growth, with 60 bps of margin expansion and streaming business. Sports operating income fell slightly from the year-ago period due to the timing impact of College Football Playoff games at ESPN. True to CEO Iger's words, the DTC segment turned a profit. However, those expectations were already priced into the stock as a sell, and the new reactions took over. Disney DTC Entertainment Segment Turns Profitable But Expects Softness in Q3 2024 The DTC segment generated $47 million in profits in Q2 2024. However, Q3 2024 is expected to be soft due to the integration of Disney+ Hotstar. This contributed to the stock's sell-off. Profits are on track to resume in Q4 2024. Disney+ Core subscribers grew by over 6 million in the quarter as average revenues per user (ARPU) increased by 44 cents. Disney's Guidance was Reaffirmed for the Full Year 2024 Disney reaffirmed the full-year 2024 adjusted EPS growth to around 25% or $4.70 versus $4.71 consensus estimates. The company remains on track to generate nearly $14 billion of cash and more than $8 billion in free cash flow (FCF) in fiscal 2024. Walt Disney MarketRank™ Stock Analysis Overall MarketRank™ 4.85 out of 5 Analyst Rating Moderate Buy Upside/Downside 24.4% Upside Short Interest Healthy Dividend Strength Weak Sustainability -0.46 News Sentiment 0.81 Insider Trading Acquiring Shares Projected Earnings Growth 14.29% See Full Details CEO Iger commented, “Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results. We have a number of highly anticipated theatrical releases arriving over the next few months; our television shows are resonating with audiences and critics alike. “ He concluded, “ESPN continues to break ratings records as we further its evolution into the preeminent digital sports platform, and we are turbocharging growth in our Experiences business with a number of near- and long-term strategic investments.” Disney analyst ratings and price targets are at MarketBeat. The consensus price target is $126.29, with a 26.34% upside. Before you consider Walt Disney, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Walt Disney wasn't on the list. While Walt Disney currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here
Overbought vs Oversold Stocks: Key Differences and Examples 2024-06-17 13:55:00+00:00 - We’re all familiar with the story of Icarus, who flew too close to the sun and faced the consequences. Stocks sometimes face a similar fate when they ascend too high too quickly, only to suffer a stark decline shortly after that. Thankfully, investors have tools that provide hints when a soaring stock is due for a decline or if a beaten-down stock is due for a bounceback. These are known as overbought or oversold conditions, and technical analysis is used to locate them. Overbought Conditions Sometimes, a stock chart looks more like an Olympic ski slope than a series of asset prices. When a security’s price increases quickly and forcefully, cautious investors seek overbought signals that could precede a pullback. Get analyst upgrade alerts: Sign Up How can we tell when a stock is overbought? Certain technical indicators can light the way, especially ones designed to look for changes in momentum. Overbought stocks may have volatile price movements or volume changes that are best picked up by indicators like the Relative Strength Index (RSI). Here are a few commonly used indicators and the readings that indicate overbought status: Relative Strength Index (RSI) - Uses average gains and losses over 14 days to track momentum on a scale of 0 to 100. An RSI reading over 70 may indicate overbought, but some analysts prefer higher values like 80. - Uses average gains and losses over 14 days to track momentum on a scale of 0 to 100. An RSI reading over 70 may indicate overbought, but some analysts prefer higher values like 80. Stochastic Oscillator - Similar to RSI, but uses 2 variables (closing prices and 3-day moving average of closing prices) to track momentum as multiple variables can help smooth data sequences. It also uses a 0 to 100 scale, with 80 indicating overbought. - Similar to RSI, but uses 2 variables (closing prices and 3-day moving average of closing prices) to track momentum as multiple variables can help smooth data sequences. It also uses a 0 to 100 scale, with 80 indicating overbought. Bollinger Bands - The 20-day moving average of an asset price enveloped by upper and lower bound lines set 2 standard deviations from the central line. When the asset price breaks the upper bound, it could imply overbought conditions. Oversold Conditions If investors can become irrationally exuberant about the upside, it stands to reason they might also become overly pessimistic about the downside. When a stock drops rapidly despite solid fundamentals or a previously strong uptrend, it could enter oversold territory and become a buying opportunity for savvy investors. Oversold conditions can be found using the same technical tools as overbought, just with the opposite sides of the spectrum. For example, on the RSI scale of 1 to 100, readings of 30 or below could indicate an oversold asset. On the stochastic oscillator, readings of 20 or below are generally considered oversold. Finally, Bollinger Bands demonstrate an oversold stock when the price pierces the lower bound line. Note that overbought and oversold readings aren’t guaranteed to precede price trend reversals. Using multiple indicators together can increase accuracy, but technical analysis isn’t perfect and overbought or oversold stocks can behave erratically, especially in volatile markets or stock sectors. The Difference Between Overbought and Oversold Conditions Overbought and oversold conditions aren’t just lines on technical indicators. Market sentiment and investor psychology also play a prominent role in sustaining price pressure until stocks reach a saturation point. Here are 2 factors to consider when looking for overbought or oversold reversals. Market Sentiment If markets were completely efficient, stocks would likely reverse course long before they entered overbought or oversold territory as rational investors took profits. But when a stock makes a parabolic move (especially to the upside), it’s hard for investors to separate emotional thinking from careful investment planning. Overbought means excessive optimism is setting in; likewise, pessimism with oversold securities. Market sentiment can be a double-edged sword. The same factors that cause a stock to reach overbought or oversold status can also hold the price there longer than investors anticipate. Stocks can trend at these levels for weeks or even months, frustrating technical traders and draining portfolios. Price Action and Trends Overbought and oversold stocks are characterized by steep and abrupt price movements, with significant gains or losses occurring in brief periods. The charts of these stocks are easy to identify; the price action is practically vertical, and the volume is mostly going in one direction. Stock price gaps are often present as well. Overbought price action looks like a steep line upward, while oversold price action is equally steep to the downside. The price action often looks unsustainable even before further analysis, but remember that sentiment and trend can result in false positive signals from technical indicators. Real-World Examples of Overbought and Oversold Conditions Stocks often enter overbought or oversold territory during volatile periods like the Great Recession or the 2020 COVID crash. In fact, the same stock can waver from overbought to oversold in a relatively brief period when markets are uncertain. PayPal Today PYPL PayPal $60.13 -0.50 (-0.82%) 52-Week Range $50.25 ▼ $76.54 P/E Ratio 15.15 Price Target $73.82 Add to Watchlist Take PayPal Holdings Inc. (NASDAQ: PYPL), for instance, which bounced from overbought to oversold in about 18 months during the COVID-19 pandemic. PYPL shares skyrocketed during the COVID market recovery, bouncing from a low of $85 in March 2020 to $300 by February 2021. During the parabolic upward move, the RSI triggered an overbought signal twice, first in mid-2020 and again in early 2021. The stock peaked in late 2021 and crashed hard into 2022. In early 2022, the RSI triggered an oversold signal near 20 as the stock price dropped below the COVID lows. But despite this strong signal, a rebound never materialized. In fact, PYPL shares still haven’t rebounded to post-COVID levels and remain range-bound as of this writing, more than 2 years after the oversold RSI signal. Overbought and Oversold are Useful Signals, But Not Crystal Balls The PYPL example above highlights both the strengths and weaknesses of technical signals like overbought and oversold. Sometimes, these indicators trigger buy or sell signals before the price action changes course; other times, they send a false alarm, and the asset price continues along its current trajectory. No single indicator or market signal has a 100% success rate. Every investor must learn to handle losses and stick to their plan. Technical trading features like overbought and oversold provide plenty of helpful hints but should be part of a comprehensive process. Never rely on just 1 or 2 tools in your investment analysis. Invest Wisely with Insights from MarketBeat Are you looking to learn more about technical analysis? MarketBeat has the educational resources you need to get started today. Click here to learn more. Before you make your next trade, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list. They believe these five stocks are the five best companies for investors to buy now... See The Five Stocks Here
Social media platforms should have health warnings for teens, U.S. surgeon general says 2024-06-17 13:38:00+00:00 - U.S. surgeon general calls for health warning for teens on social media apps Social media platforms should post warning labels, similar to those now used on cigarette packs, for teenagers who are increasingly suffering from mental health issues that are partly tied to the apps, U.S. Surgeon General Vivek Murthy said Monday in an opinion piece in the New York Times. "It is time to require a surgeon general's warning label on social media platforms, stating that social media is associated with significant mental health harms for adolescents," Murthy wrote. The push would be similar to the warnings printed on cigarette packages, which Murthy noted have shown to "increase awareness and change behavior." However, adding warning labels to social media platforms would require Congress to pass legislation, he noted. Meta, the parent company of Facebook and Instagram, didn't immediately respond to a request for comment. Murthy has previously stressed the potential harms that teenagers encounter from social media platforms, pushing last year for stronger guidelines for children and teens amid growing research that indicates the apps pose what he described at the time as a "profound risk" to young people's mental health. On Monday, Murthy noted that warning labels alone wouldn't make the platforms safe for kids and said that creating safety measures "remain the priority." Congress also needs to implement legislation that will protect young people from online harassment, abuse and exploitation and from exposure to extreme violence and sexual content, he wrote. "The measures should prevent platforms from collecting sensitive data from children and should restrict the use of features like push notifications, autoplay and infinite scroll, which prey on developing brains and contribute to excessive use," Murthy said. The surgeon general is also recommending that companies be required to share all their data on health effects with independent scientists and the public — which they currently don't do — and allow independent safety audits. Murthy said schools and parents also need to participate in providing phone-free times and that doctors, nurses and other clinicians should help guide families toward safer practices. —With reporting by the Associated Press.
Watch These 3 Stock Dips as Consumer Sentiment Hits 7-Month Low 2024-06-17 13:29:00+00:00 - Markets that go through cycles are good since they create opportunities for patient investors who watch for the best deals in the stock market. Today, a shift in the U.S. economy is causing some stocks to come into and out of favor, a most welcomed sign of the rinsing effect that brings on compounding opportunities. After the U.S. consumer sentiment index had its lowest reading in over 7 months, some companies in the consumer discretionary sector have fallen to unjustifiably low valuations. This is where these patient and watchful investors have a chance to add names like Lululemon Athletica Inc. NASDAQ: LULU, Starbucks Co. NASDAQ: SBUX, and even Ulta Beauty Inc. NASDAQ: ULTA to a potential ‘buy the dip’ watchlist. These stocks have more in common than just being in the NASDAQ index; they all share an almost obvious brand moat and predictability regarding their future cash flows, but these only come quickly to the savvy investor. As every investment is valued as the present value of all future cash flows, here’s why these businesses could make a quick rebound after disappointing sentiment readings. Get Ulta Beauty alerts: Sign Up Lululemon's 7-Year Low Valuation: A Dip Investors Can't Ignore Shares of Lululemon are now down to only 59% of their 52-week high prices, sending the company into deep bear market territory. According to Wall Street, a bear market is a 20% or more decline from recent highs. With this in mind, here’s why the stock may not stay down for much longer. Lululemon Athletica Today LULU Lululemon Athletica $312.91 +6.90 (+2.25%) 52-Week Range $293.03 ▼ $516.39 P/E Ratio 25.09 Price Target $433.06 Add to Watchlist Its 24.5x price-to-earnings (P/E) ratio is the lowest valuation the stock has seen since 2017, making it a potentially once-in-a-cycle opportunity for those bullish on the brand. As long as Pilates moms, sorority sisters, and finance bros exist, Lululemon is expected to see predictable demand. And even if U.S. consumers are down and out, Lululemon has strategically expanded into international markets to cushion these domestic cycles. According to the company's latest quarterly earnings report, America's net revenue increased only 3%, while international revenues jumped by 35%. Knowing that economies of scale and market risk diversification could help the brand reach a higher valuation, analysts at Telsey Advisory Group decided to boost their price targets for Lululemon stock to $470 a share. To prove these analysts right, the stock must rally 53.5% from its current level. Lululemon Athletica Inc. (LULU) Price Chart for Monday, June, 17, 2024 How Starbucks' Financials Reinforce Its Status as Social Currency There’s a reason nobody walks into a business meeting holding a Dunkin’ Donuts coffee cup or a Dutch Bros Inc. NYSE: BROS branded coffee either. Those who want to feel confident and be seen as ‘cool’ or respectable will walk in carrying their green medusas. Starbucks Today SBUX Starbucks $81.33 +1.68 (+2.11%) 52-Week Range $71.80 ▼ $107.66 Dividend Yield 2.80% P/E Ratio 22.41 Price Target $95.00 Add to Watchlist When brands become synonymous with objects, investors like Warren Buffett get excited. People don’t say “Internet it”; instead, they refer to “Google it” when trying to find some online information, and the same is true for Starbucks. People don’t set up a study session or a catch-up meeting at a “coffee shop”; they often say that they will meet at a Starbucks, and that’s the type of social currency that keeps the brand in its pricing power status. Starbucks’ financials show an average gross margin of over 27%, allowing the company to pass enough capital down for intelligent allocation. This smart allocation nets investors an average of 20% of return on invested capital (ROIC), which is one of the hidden gems in wealth compounding. That is why analysts at Bank of America felt so comfortable placing a $112 valuation on Starbucks stock, or 40.7% higher than today’s stock price. This should be a welcome sign for the stock’s price action, which has fallen to only 74% of its 52-week high price, giving investors the initial pillar to build a potentially ‘undervalued’ case for Starbucks stock. Starbucks Co. (SBUX) Price Chart for Monday, June, 17, 2024 Ulta's Unique Advantage Lies in Products Not Impacted by Consumer Sentiment or Financial Limitations That’s right; regardless of whether the economy is booming or busting and whether consumer sentiment is at all-time highs or lows, people will always find room in their budgets for make-up and skincare products. This fact isn’t far from coffee economics, which benefits Starbucks, but that’s beside the point. Ulta Beauty Today ULTA Ulta Beauty $389.15 -1.67 (-0.43%) 52-Week Range $368.02 ▼ $574.76 P/E Ratio 15.18 Price Target $507.30 Add to Watchlist Because Ulta’s revenue comes mostly (95%) from loyalty program members, its revenue streams are as predictable as betting on thousands of consumers brewing coffee every morning. This is why management feels comfortable buying back as many as 588,004 shares off the open market for $285.1 million. The company’s financials also showcase gross margins at 42.7%, allowing management to deploy capital into further growth initiatives beyond stock buybacks. These initiatives translate into ROIC rates of up to 28%, boosting sentiment amongst Wall Street analysts, even if consumer sentiment remains depressed. Those at J.P. Morgan Chase & Co. saw it fit to slap a $544 a share price target for Ulta stock, daring it to rally by 39.2% from where it sits today, which also happens to be 68% of the stock’s 52-week high prices. Ulta Beauty, Inc. (ULTA) Price Chart for Monday, June, 17, 2024 Before you consider Ulta Beauty, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Ulta Beauty wasn't on the list. While Ulta Beauty currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here
Is Social Media the New Tobacco? 2024-06-17 12:08:19+00:00 - A call to arms to rethink social media Just in: The U.S. surgeon general, Vivek Murthy, called for a warning label for social media platforms in a Times Guest Essay, advising parents that the technology may be helping fuel a mental health crisis among adolescents. It’s the latest effort by regulators to impose restrictions on social networks — particularly over their effects on children and teens — and is a reminder of the increasing scrutiny of global tech giants. Such a label would be similar to those placed on cigarettes and alcohol products. In his guest essay, Murthy writes that the issue has become an emergency: Why is it that we have failed to respond to the harms of social media when they are no less urgent or widespread than those posed by unsafe cars, planes or food? These harms are not a failure of willpower and parenting; they are the consequence of unleashing powerful technology without adequate safety measures, transparency or accountability. Scrutiny of social media’s effects on teenagers has grown in recent years. The social psychologist Jonathan Haidt describes the 2007 release of the iPhone as an inflection point, with suicidal behavior and reports of despair among adolescents rising sharply since. (Other experts question such a link and point to other factors like economic hardship.) Warning labels have succeeded in changing the public’s behavior before, with smoking in the U.S. declining sharply in the five decades since one was required for cigarette products.
Facing E.V. Tariffs, China Threatens Pork Imports From Europe 2024-06-17 10:35:13+00:00 - China on Monday threatened to impose tariffs on pork imports from Europe, in what appeared to be retaliation for the European Union’s decision last week to impose preliminary tariffs on electric cars imported from China. China’s Ministry of Commerce announced that it had opened an investigation into whether pork from the European Union was being dumped in China at unfairly low prices. The case could result in tariffs on dozens of products, from pork chops to pickled pig intestines. The ministry said it was acting in response to an application from the China Animal Agriculture Association, a government-affiliated group, and released a copy of the request. The association accused the European pork industry of benefiting from inappropriate government subsidies as it suffered from overcapacity — the same accusations that European and American officials have leveled against China’s car industry. Olof Gill, a spokesman for the European Commission, said in a statement that the European Union’s executive arm was analyzing China’s action and would “follow the proceeding very closely in coordination with E.U. industry and member states, and intervene as appropriate to ensure that the investigation fully complies with relevant” World Trade Organization rules.
Can A.I. Answer the Needs of Smaller Businesses? Some Push to Find Out. 2024-06-17 09:03:14+00:00 - The Nashville Area Chamber of Commerce has convened an annual meeting of local business leaders since the 1800s, but the most recent gathering had a decidedly modern theme: artificial intelligence. The goal was to demystify the technology for the chamber’s roughly 2,000 members, especially its small businesses. “My sense is not that people are wary,” said Ralph Schulz, the chamber’s chief executive. “They’re just unclear as to its potential use for them.” When generative A.I. surged into the public consciousness in late 2022, it captured the imagination of businesses and workers with its ability to answer questions, compose paragraphs, write code and create images. Analysts projected that the technology would transform the economy by driving a boom in productivity.
How A.I. Is Revolutionizing Drug Development 2024-06-17 09:03:08+00:00 - The laboratory at Terray Therapeutics is a symphony of miniaturized automation. Robots whir, shuttling tiny tubes of fluids to their stations. Scientists in blue coats, sterile gloves and protective glasses monitor the machines. But the real action is happening at nanoscale: Proteins in solution combine with chemical molecules held in minuscule wells in custom silicon chips that are like microscopic muffin tins. Every interaction is recorded, millions and millions each day, generating 50 terabytes of raw data daily — the equivalent of more than 12,000 movies. The lab, about two-thirds the size of a football field, is a data factory for artificial-intelligence-assisted drug discovery and development in Monrovia, Calif. It’s part of a wave of young companies and start-ups trying to harness A.I. to produce more effective drugs, faster.
For bond traders, data matter more than what the Fed is saying 2024-06-17 05:25:00+00:00 - (Bloomberg) — The US bond market is driving home a lesson about the new world investors are living in: The data matter far more than anything the Federal Reserve might say. Most Read from Bloomberg That was on stark display Wednesday, when a softer-than-expected rise in the consumer price index that morning set off one of the biggest Treasury rallies of the year. Less than six hours later, after the Fed’s latest economic projections penciled in just one rate cut this year, the rally faded a little. But it revived Thursday as an unexpected drop in producer prices and a rise in jobless claims suggested inflation pressures are continuing to ease. The 10-year yield ended Friday near 4.2%, down 21 basis points in the biggest weekly drop since mid-December. In short, the dovish inflation data drowned out any hawkish sounds from the Fed. The movements underscore the diminished significance of the Fed’s guidance at a time when the economy keeps surprising virtually everyone, including central bank policymakers themselves. Fed Chair Jerome Powell at last week’s post-meeting press conference acknowledged as much, saying that the Fed is mindful of going where the data leads. That means the bond market is likely to continue on a rather bumpy path as the interest-rate outlook is reassessed whenever key data arrive. Policymakers “are going to talk, but the market needs to discount more than usually what they say in this environment,” said Jean Boivin, head of the BlackRock Investment Institute. “This environment is one where there is excessive response to incoming macro data.” Those data points recently have been more favorable to bond investors. The core consumer price index rose a less-than-projected 0.2% in May in a welcome shift from earlier this year, when higher-than-expected figures fanned worries about elevated inflation. Although payroll growth remains solid, other data, such as job openings, jobless-benefit claims and unemployment suggest the labor market is cooling. These data boosted investors’ confidence that the Fed will start cutting rates later this year. Traders are pricing in that the Fed is highly likely to enact two quarter-point rate cuts this year, with the first move now seen as soon as September, derivative trading shows. Story continues That’s slightly more aggressive than what Fed officials put down on their so-called dot-plot forecasts. Their median projection was for one cut this year, down from the three telegraphed at the March meeting. For 2025, though, officials now see four cuts, more than the three previously outlined. But Powell signaled that investors should take those forecasts with a grain of salt, saying Fed officials are not “trying to send a strong signal” with them. A data-dependent Fed doesn’t mean each economic figure will alter the policy trajectory, and as volatile as bond prices have been, the market’s expectations are far more in step with the Fed than they were late last year. Then traders were expecting steep series of cuts to start as soon as March. What Strategists Say... The economy appears to be robust enough that the Federal Reserve may not start cutting interest rates until after November’s US elections, which will keep the yield curve inverted until the rate reductions begin. Fed sentiment remains broadly neutral, even though the economy is running well above trend and inflation is lingering above the Fed’s 2% target. —Ira Jersey and Will Hoffman. Read more here. Fed officials have said several good inflation reports are needed before they will have enough confidence to start easing policy. “They are truly not going to overreact to one or two data points,” said Gargi Chaudhuri, head of iShares investment strategy, Americas at BlackRock Inc. Without reliable guidance from the Fed, data-watching, by definition, comes with more volatility. Treasuries staged a powerful rally late last year following a sharp decline in inflation, before sharply reversing course during the first four months of 2024. Then the market did another about face, one that has pulled the 10-year yield down nearly half a percentage point since late April. The market is poised to take a breather this week, with no major data that would rival the jobs and inflation reports from the last two weeks. A slew of Fed officials, including Governors Lisa Cook and Adriana Kugler, are schedule to speak next week, as they often do after the policy-setting meetings. “Markets right now are reacting, sort of overreacting, to a single set of discrete data points,” said Jerome Schneider, head of short-term portfolio management and funding at Pacific Investment Management Co. “These positive signals are just beginning to break at sunrise, though the longer-term situation still remains a little bit cloudy.” What to Watch Economic data: June 17: Empire manufacturing June 18: NY Fed services business activity; retail sales; industrial production; capacity utilization; manufacturing (SIC) production; business inventory, TIC flows June 19: MBA mortgage applications; NAHB housing market index June 20: current account balance; initial jobless claims; housing/building permits; Philadelphia Fed business outlook June 21: S&P Global manufacturing, service PMI (preliminary); Leading index; existing home sales Fed calendar: June 17: Philadelphia Fed President Patrick Harker; Fed Governor Lisa Cook June 18: Richmond Fed President Thomas Barkin; Boston Fed President Susan Collins; Dallas Fed President Lorie Logan; Federal Reserve Governor Adriana Kugler; St. Louis Fed President Alberto Musalem; Chicago Fed President Austan Goolsbee June 20: Minneapolis Fed President Neel Kashkari; Richmond Fed’s Barkin Auction calendar: June 17: 13-, 26-week bills; 42-day cash management bills June 18: 20-year bond reopening June 20: 4-, 8-, 17-week bills; five-year TIPS reopening —With assistance from Cameron Crise. Most Read from Bloomberg Businessweek ©2024 Bloomberg L.P.
The bottom line is the bottom line 2024-06-17 05:18:00+00:00 - A version of this story first appeared on TKer.co Stocks rallied to new all-time highs, with the S&P 500 setting a record intraday high of 5,447.25 on Wednesday and a record closing high of 5,433.74 on Thursday. For the week, the S&P gained 1.6% to end at 5431.60. The index is now up 13.9% year to date and up 51.8% from its October 12, 2022 closing low of 3,577.03. Earlier this month, we talked about how bull markets tend to last much longer and generate much stronger returns than the one we continue to experience. But prices don’t go up for the sake of going up. They go up because earnings are going up. Sure, oftentimes prices may decouple from fundamentals (i.e., a company’s ability to make money) over short-term periods — which is why market-timing is so difficult. But many analysts argue that’s not what’s going on right now. They’ll argue that prices are up because the fundamentals are favorable. Here’s a sampling of what Wall Street’s top stock market pros of pointed out in recent weeks: Cash flow generation is strong One of the more repeated concerns in the stock market is that valuations are elevated above their long-term averages. UBS’s Jonathan Golub argues today’s historically high valuations are justified. “S&P 500 companies have been generating more cash flow over the past 3 decades, justifying higher valuations,” Golub wrote on Monday. Resilient profit margins are amplifying earnings growth With the economy cooling, sales growth isn’t as hot as it used to be. But that hasn’t had too much of an impact on earnings growth. “[W]e think it's important to point out that S&P 500 trailing earnings growth is turning higher (now 4% Y/Y up from -1% to start the year),” Morgan Stanley’s Michael Wilson observed on Monday. “Margin improvement is fueling this rise in earnings growth as top line growth has remained steady throughout the year.” Earnings are driving stock prices Expanding valuations were a large driver of stock market returns over the past year. More recent gains appear to be driven by earnings. “Good news - the baton seems to be being passed from valuation to earnings,” Fidelity’s Jurrien Timmer wrote on Wednesday. “This is exactly what is needed to sustain the cyclical bull market. Per the weekly chart below, the year-over-year change in the trailing P/E ratio has slowed from +30% to +15%, while the year-over-year change in trailing earnings has accelerated from -2% to +6%.” Fundamentals suggest it’s not a tech bubble The megacap tech names have drawn a lot of attention as they’ve been responsible for much of the stock market’s gains in recent years. But their outperformance is supported by outsized earnings growth, which makes the current run up in prices very different from the dotcom bubble. Story continues “As asset bubbles form, a key reason volatility rises is that stocks start trading purely on momentum, decoupling from their fundamental tether (where fundamentals exist),” BofA’s Benjamin Bowler wrote. Increased market concentration isn’t a sign of trouble As we’ve discussed, market concentration in itself is not a reason to be too concerned about the market. Global Financial Data (GFD) has a great post exploring market concentration going all the way back to 1790. High market concentration is not a new phenomenon. “Based upon our analysis of the past 150 years, there seems no reason to believe that the increased concentration of the past ten years is the harbinger of a major bear market,” GFD’s Bryan Taylor wrote. “Increased concentration is the sign of a bull market and bear markets reduce concentration.” Earnings growth is broadening out Yes, it is the case that the megacap tech names have been responsible for much of the earnings growth in the market. But that narrative is shifting. “Perhaps the most important near-term support for the stock market is the ongoing acceleration of corporate earnings,” Richard Bernstein Advisors’ Dan Suzuki wrote on Wednesday. “Earnings growth has been accelerating since the end of 2022, and we forecast further acceleration over the next several quarters. Not only is growth accelerating, but critically, it’s also broadening out.” The bottom line The “bottom line” is an idiom that’s often used as a metaphor to characterize “the essential or salient point.” The term actually comes from accounting. On an income statement, the top line is revenue. As you move down the income statement, you see costs, expenses, interest, taxes, and other items, all of which you subtract from revenue. And what you’re left with is the bottom line: earnings. Analysts agree the prospects for earnings are looking favorable for stocks. And in the stock market, earnings are the most important driver of prices in the long run. That is to say: The bottom line is the bottom line. Goldman Sachs raises its target for the S&P 500 On Friday, Goldman Sachs’ David Kostin raised his year-end target for the S&P 500 to 5,600 from 5,200. This is his third revision from his initial target. “Our 2024 and 2025 earnings estimates remain unchanged but stellar earnings growth by five mega-cap tech stocks have offset the typical pattern of negative revisions to consensus EPS estimates,” Kostin wrote. “We expect roughly unchanged real yields by year-end and strong earnings growth will support a 15x P/E for the equal-weight S&P 500 and a 36% premium multiple for the market-cap index.” Kostin is not alone in tweaking his forecasts. His peers at UBS, Morgan Stanley, Deutsche Bank, BMO, CFRA, Oppenheimer, RBC, Societe Generale, BofA, and Barclays are among those who’ve also raised their targets. Don’t be surprised to see more of these revisions as the S&P 500’s performance, so far, has exceeded many strategists’ expectations. Reviewing the macro crosscurrents There were a few notable data points and macroeconomic developments from last week to consider: The Fed holds steady. The Federal Reserve announced it would keep its benchmark interest rate target high at a range of 5.25% to 5.5%. Federal Reserve Board Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, June 12, 2024. (AP Photo/Susan Walsh) (ASSOCIATED PRESS) From the Fed’s statement (emphasis added): “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee's 2% inflation objective.” The central bank’s new “dot plots” imply fewer rate cuts in 2024 and 2025 than what it previously forecast after the Fed’s March meeting. Basically, the Fed will keep monetary policy tight until inflation rates cool further. That means the odds of a rate cut in the near term will remain low. Inflation cools. The Consumer Price Index (CPI) in May was up 3.3% from a year ago, down from the 3.4% rate in April. Adjusted for food and energy prices, core CPI was up 3.4%, down from the 3.6% rate in the prior month. This was the lowest increase in core CPI since April 2021. On a month-over-month basis, CPI was unchanged as energy prices fell 2%. Core CPI increased by 0.2%. If you annualize the three-month trend in the monthly figures — a reflection of the short-term trend in prices — CPI was rising at a 2.8% rate and core CPI was climbing at a 3.3% rate. Overall, while many broad measures of inflation continue to hover above the Fed’s target rate of 2%, they are way down from peak levels in the summer of 2022. Inflation expectations were mixed. From the New York Fed’s May Survey of Consumer Expectations: “Median inflation expectations at the one-year horizon declined to 3.2% in May from 3.3% in April, were unchanged at the three-year horizon at 2.8%, and increased at the five-year horizon to 3.0% from 2.8%.” Gas prices fall. From AAA: “Another week, another slide in gas prices as the national average for a gallon of gasoline dipped two cents since last Thursday to $3.46. The main reasons for the decline are lackluster gasoline demand and burgeoning supply. … According to new data from the Energy Information Administration (EIA), gas demand crept higher from 8.94 million b/d to 9.04 last week. Meanwhile, total domestic gasoline stocks jumped from 230.9 to 233.5 million barrels as production increased last week, averaging 10.1 million barrels per day. Mediocre gasoline demand, increasing supply, and stable oil costs will likely lead to falling pump prices.” Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.95% from 6.99% the week prior. From Freddie Mac: “Mortgage rates continued to fall back this week as incoming data suggests the economy is cooling to a more sustainable level of growth. Top-line inflation numbers were flat but shelter inflation, which measures rent and homeownership costs, increased showing that housing affordability continues to be an ongoing impediment for buyers on the house hunt.” There are 146 million housing units in the U.S., of which 86 million are owner-occupied. 39% are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates. Unemployment claims tick higher. Initial claims for unemployment benefits rose to 242,000 during the week ending June 8, up from 229,000 the week prior. This was the highest print since August 2023. While this is above the September 2022 low of 187,000, it continues to trend at levels historically associated with economic growth. Sentiment deteriorates. From the University of Michigan’s June Surveys of Consumers: “Consumer sentiment was little changed in June; this month’s reading was a statistically insignificant 3.5 index points below May and within the margin of error. Sentiment is currently about 31% above the trough seen in June 2022 amid the escalation in inflation. Assessments of personal finances dipped, due to modestly rising concerns over high prices as well as weakening incomes. Overall, consumers perceive few changes in the economy from May.” Card spending is holding up. From JPMorgan: “As of 07 Jun 2024, our Chase Consumer Card spending data (unadjusted) was 1.7% below the same day last year. Based on the Chase Consumer Card data through 07 Jun 2024, our estimate of the US Census May control measure of retail sales m/m is 0.67%.” From Bank of America: “Total card spending per HH was up 1.6% y/y in the week ending June 8, according to BAC aggregated credit & debit card data. Retail ex auto spending per HH came in at 0.4% y/y in the week ending Jun 8. Card spending appears to be off to a solid start in June.” Small business optimism improves. The NFIB’s Small Business Optimism Index ticked higher in May. Importantly, the more tangible “hard” components of the index continue to hold up much better than the more sentiment-oriented “soft” components. Keep in mind that during times of perceived stress, soft data tends to be more exaggerated than actual hard data. Near-term GDP growth estimates look good. The Atlanta Fed’s GDPNow model sees real GDP growth climbing at a 3.1% rate in Q2. Putting it all together We continue to get evidence that we are experiencing a bullish “Goldilocks” soft landing scenario where inflation cools to manageable levels without the economy having to sink into recession. This comes as the Federal Reserve continues to employ very tight monetary policy in its ongoing effort to get inflation under control. While it’s true that the Fed has taken a less hawkish tone in 2023 and 2024 than in 2022, and that most economists agree that the final interest rate hike of the cycle has either already happened, inflation still has to stay cool for a little while before the central bank is comfortable with price stability. So we should expect the central bank to keep monetary policy tight, which means we should be prepared for relatively tight financial conditions (e.g., higher interest rates, tighter lending standards, and lower stock valuations) to linger. All this means monetary policy will be unfriendly to markets for the time being, and the risk the economy slips into a recession will be relatively elevated. At the same time, we also know that stocks are discounting mechanisms — meaning that prices will have bottomed before the Fed signals a major dovish turn in monetary policy. Also, it’s important to remember that while recession risks may be elevated, consumers are coming from a very strong financial position. Unemployed people are getting jobs, and those with jobs are getting raises. Similarly, business finances are healthy as many corporations locked in low interest rates on their debt in recent years. Even as the threat of higher debt servicing costs looms, elevated profit margins give corporations room to absorb higher costs. At this point, any downturn is unlikely to turn into economic calamity given that the financial health of consumers and businesses remains very strong. And as always, long-term investors should remember that recessions and bear markets are just part of the deal when you enter the stock market with the aim of generating long-term returns. While markets have recently had some bumpy years, the long-run outlook for stocks remains positive. A version of this story first appeared on TKer.co
Fisher Sells Stake of Up to $3 Billion to Advent, Abu Dhabi Fund 2024-06-17 04:51:00+00:00 - (Bloomberg) -- Private equity firm Advent International and a unit of the Abu Dhabi Investment Authority are buying a minority stake in billionaire Ken Fisher’s Fisher Investments worth as much as $3 billion. Most Read from Bloomberg The transaction, in which the acquirers will invest at least $2.5 billion, values closely held Fisher at $12.75 billion, the money-management firm said Sunday in a statement. The deal is part of Ken Fisher’s estate planning, according to the company, and will let Fisher Investments continue to operate independently. “While my health is excellent, this transaction with an atypically long holding period for a private equity transaction will ensure FI’s long-term private independence and culture should anything untoward happen to me,” Fisher, 73, said in the statement. Bloomberg News and the Journal reported in January that Advent had held talks to acquire Fisher, both citing people with knowledge of the matter. At that time, Fisher issued a statement saying, “Fisher Investments is not being bought by Advent International, or anyone else — plain and simple.” Advent issued a similar denial of the January reports. Fisher Investments oversees $275 billion for more than 150,000 clients including individuals and institutions, the firm said in its statement Sunday. Ken Fisher founded the closely held firm in 1979, and last year moved its headquarters to the Dallas suburb of Plano, Texas, after the highest court in Washington state said a capital gains tax on wealthy residents was constitutional. The San Francisco native has an estimated net worth of $5.2 billion, according to the Bloomberg Billionaires Index. Advent, which has made private equity bets since 1989, counts financial services among its areas of focus and has backed companies including Worldpay and Vantiv, its website shows. The Abu Dhabi Investment Authority, a sovereign wealth fund, was established in 1976 and employs an investment strategy focused on long-term value, according to the Sunday statement. The Wall Street Journal reported earlier Sunday that Advent was nearing a deal to buy a minority stake in Fisher. --With assistance from Lin Cheng and Michelle F. Davis. Most Read from Bloomberg Businessweek ©2024 Bloomberg L.P.
Stocks are in a sweet spot but bears still fear a bubble is near bursting. Here's what 5 forecasters are saying about a potential crash. 2024-06-17 04:31:00+00:00 - bunhill/Getty Images Stocks have been on a tear but there are still bears sounding alarms of a bubble about to pop. Bearish forecasters predict a crash as lofty valuations come back down to earth. S ome big-name investors say stocks are flashing a number of warnings that a sharp pullback is near. Stocks just keep climbing in 2024, but the bears haven't been silenced and some are warning that the market is in a bubble on the verge of bursting. Fears of a painful sell-off have been rising in recent weeks, particularly as stocks continue to break through to record highs. The S&P 500 and the Nasdaq hit four straight all-time closing highs this week, with tech titans like Apple and Nvidia continuing to soar past a $3 trillion market cap. But the bears on Wall Street warn that the enthusiasm for artificial intelligence mirrors the internet bubble of the late 90s — and the recent run-up in stock prices is a bad omen for investors. Here's what five forecasters have to say about the latest rally — and why they think the stock market is headed for a fall. Harry Dent Stocks are in the midst of the "bubble of all bubbles," and equities could lose more than half of their value as inflated asset prices finally burst, according to the economist Harry Dent. When the bubble finally pops, the S&P 500 could drop as much as 86%, while the Nasdaq Composite could drop by around 92%, Dent predicted in a recent interview with Fox Business Network. That bubble, which has formed over years of loose monetary and fiscal policy, is already showing signs of "topping," Dent added. Stocks are "barely" making new highs, and equities have likely been inflated for the past 14 years, he estimated — far longer than most historical bubbles, which typically last for five to six years. "It's been stretched higher for longer, so you have to expect a bigger crash than we got in 2008 and 2009," he warned. Dent has been making the case for a major market crash for years. In 2009, he wrote a book predicting a stock market crash and ensuing economic depression, which he said could last for 10 years or more. Capital Economics Stocks have another 20% to inflate before the bubble bursts, according to Capital Economics. The research firm is predicting the S&P 500 could see a steep correction following a rally to 6,500. That's because there's only so much more the market can gain before prices pull back, according to John Higgins, the firm's chief market economist. Stocks already look like they're in a late-stage bubble, Higgins said, pointing to excessive hype surrounding artificial intelligence on Wall Street. Story continues "Bubbles tend to inflate the most in their final stages as the excitement sort of reaches fever-pitch," Higgins warned. John Hussman Elite investor John Hussman thinks stocks could plunge as much as 70% once the bubble bursts. Hussman has been warning of a steep correction in stocks all year, and said in a recent note to clients that a handful of red flags are signaling pain ahead. According to his firm's most reliable valuation metric, the S&P 500 looks to be at its most overvalued since 1929, right before the stock market plunged and the US economy spiraled into an economic depression. "I continue to view the market advance of recent months as an attempt to 'grasp the suds of yesterday's bubble' rather than a new, durable bull market advance," Hussman said in a recent note. "I also believe that the S&P 500 could lose something on the order of 50-70% over the completion of this cycle, simply to bring long-term expected returns to run-of-the-mill norms that investors associate with stocks." "Put simply, my impression is that the period since early 2022 comprises the extended peak of one of the three great speculative bubbles in US history," he later added. Richard Bernstein Advisors According to RBA's chief investment officer, Richard Bernstein, large-cap stocks are way overvalued and look positioned for a wipeout. In a recent note, Bernstein noted that only a narrow group of stocks are propping up the market and that today's mega-cap leaders are going to give back most of their gains and see dismal returns going forward. At its worst, he predicted the most highly valued stocks could drop 50%, generating losses that rival the dot-com crash. "That's what I think we're looking at," Bernstein warned. "It's multiple years of significant underperformance." Yet, that could end up being an excellent opportunity for investors who are diversified in other areas of the market, Bernstein said. He noted that his firm is bullish in practically every other area of the market except for the top seven mega-cap stocks. UBS The stock market is already flashing signs that it's in a bubble, according to UBS. Typically, there are eight warning signs of a market bubble forming, and six of them have already flashed, the bank said. Strategists pointed to signs like growing corporate profits pressure, falling market breadth, and aggressive stock buying among retail investors. The good news is that the bubble may not immediately burst. Stocks are looking most similar to the bubble that occurred in 1997, rather than 1999, the analysts said. "We only invest for the bubble thesis if we are in 1997 not 1999 (which we think we are)," strategists said in a recent note. Read the original article on Business Insider
Here Is Why Bitcoin Is a Better Investment Opportunity Than Gold 2024-06-17 02:35:00+00:00 - It's been a great time to be an owner of Bitcoin (CRYPTO: BTC). Since the start of 2023, the top digital asset has soared 307%. The approval of spot exchange-traded funds (ETFs), as well as the April halving, were recent catalysts. Investors might be surprised to know that gold is also near record highs thanks to bullish sentiment. Bitcoin and this precious metal are often compared to one another. But the leading cryptocurrency is a better asset to own. How Bitcoin and gold are similar Market participants like to compare Bitcoin and gold. Therefore, it might be worthwhile to first understand some similarities between these two. Scarcity is something investors should be mindful of. Etched in Bitcoin's software is a hard-supply cap of 21 million coins. And in the Earth's crust, there is a certain amount of gold. The prices of assets that have a fixed supply should, in theory, rise as demand also grows. This basic economic principle helps explain why gold has been viewed as a popular store of value over long periods of time. Additionally, there is some utility here as well. Gold is used mainly in jewelry, but it does have a presence in certain industrial settings. Similarly, Bitcoin's value arises in it being a totally decentralized network with no single entity in charge, thus cutting down transaction costs while sending money to someone across the globe. Bitcoin's edge At a high level, it's easy to see how Bitcoin and gold are both scarce. Moreover, they both have utility in different situations. But if we dig deeper, we'll easily see how the top crypto is a superior investment. Let's go back to the topic of scarcity. Investors might think that gold has a fixed-supply cap, but this couldn't be further from the truth. According to the U.S. Geological Survey, 77% of all the gold in the Earth's crust has been mined. Consequently, there is a sizable amount of gold still left to be mined. If, for whatever reason, demand for gold shot up in a short period of time, mining companies would be incentivized to invest aggressively to expand their operations in order to target areas across the globe that might be hard to get to. In other words, gold's supply schedule could be altered based on demand trends. Here's where Bitcoin stands out. It's absolutely finite. That previously mentioned supply cap of 21 million coins is highly unlikely to change unless Bitcoin's stakeholders want to completely undermine the entire network's value proposition. Because Bitcoin's supply schedule can't be tinkered with, its price has typically been volatile. Story continues Compared to gold, which is a physical commodity, Bitcoin is a digital asset. And this means that it is easier to store and transport. Bitcoin can also be divided into much smaller units, while also being acceptable in certain transactions. Try going to a restaurant and slicing off a piece of gold to pay for the bill. Investors also shouldn't ignore the store-of-value debate, which is probably the aspect viewed the most when comparing Bitcoin and gold. Here, Bitcoin shines brighter than the precious metal. At the end of the day, saving and investing is all about raising one's purchasing power over time. In the past five years, Bitcoin's price has skyrocketed 718%. This means that a $1,000 investment in June 2019 would be worth almost $8,200 today. The price of an ounce of gold, on the other hand, has only risen by 73% during the same time period. And this stretch included major disruptive developments, like the pandemic, inflationary pressures, higher interest rates, and general economic uncertainty. Going forward, Bitcoin and gold will likely continue to draw comparisons. But I think over the next five or 10 years, the leading cryptocurrency looks to be the better investment opportunity. Should you invest $1,000 in Bitcoin right now? Before you buy stock in Bitcoin, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $808,105!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. See the 10 stocks » *Stock Advisor returns as of June 10, 2024 Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy. Here Is Why Bitcoin Is a Better Investment Opportunity Than Gold was originally published by The Motley Fool
5 Reasons Nvidia Isn't in an AI-Fueled Bubble 2024-06-17 02:00:00+00:00 - The stock market has a long history of creating bubbles, particularly in the technology sector. However, when it comes to Nvidia (NASDAQ: NVDA), the chip maker's eye-popping valuation may not actually be signs of a bubble. Rather, it might reflect a deeper truth about the rapidly evolving state of artificial intelligence (AI). Nvidia's shares are currently trading at 77.1 times trailing earnings, a lofty valuation by historical standards and rich even for the high-growth tech sector. This has led some investors to question whether it's time to take profits on Nvidia stock. After all, the chipmaker's shares are up by a staggering 206% over the prior 12 months. Image Source: Getty Images. However, several lines of evidence suggest that Nvidia's growth story is still in the early innings and that AI is on track to fundamentally alter the world. Here is a look at five key tailwinds that should power Nvidia's shares even higher over the next several years. Five key themes First, the general population remains largely unaware of the true power of AI. This situation is set to change dramatically later this year as Apple integrates AI into its ecosystem and Amazon strives to make Alexa smarter with AI. As a broad base of consumers begin to experience the benefits of AI in their daily lives, demand for AI-powered products and services will likely skyrocket, driving substantial revenue growth for companies like Nvidia that provide the architecture behind the technology. Second, the pace of AI development is accelerating. The exponential growth of computing power has put humanity on the doorstep of a series of "Gutenberg moments", or events that completely upend the status quo. This quickening pace of innovation implies that rivals probably won't have time to challenge Nvidia's dominant position in the AI-capable graphics processing unit (GPU) space. While competitors like Advanced Micro Devices and Intel are aiming to cut into Nvidia's dominant market share, the window of opportunity is closing. Third, the AI arms race between leading American firms, and the U.S. and China more broadly, won't allow developers time to create alternative ecosystems. The race to achieve artificial general intelligence (AGI) is on, and Nvidia's superchips like Blackwell will likely be the primary drivers of this transformation. As companies and nations scramble to gain a competitive edge in AI, Nvidia's technology will remain in high demand. Fourth, the advent of AI won't follow any rules established by prior transformational technologies like the internet or cars. AI can potentially alter human society at a fundamental level, and it will happen in less than five years. Story continues Traditional valuation metrics and historical precedents, in turn, may not wholly apply to groundbreaking companies like Nvidia. Fifth, the potential applications of AI are virtually limitless, spanning across industries such as healthcare, finance, transportation, and more. As AI becomes more sophisticated and ubiquitous, it will create entirely new markets – many of which are unimaginable today. Nvidia, with its cutting-edge AI technology and growing customer base, is in the catbird seat. Key takeaways Nvidia's current valuation may seem high by historical standards. But it's important to consider the company's unique position in the rapidly evolving AI landscape. With the general population largely unaware of AI's already incredible capabilities, the quickening pace of development, and an ongoing arms race, Nvidia should continue to post record-breaking revenue growth in the coming years. After all, Nvidia's potential is truly unprecedented as the gatekeeper to a $100 trillion AI-based economy. Viewed in this context, the growing bubble talk around the chip maker's shares seems unjustified. Should you invest $1,000 in Nvidia right now? Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $808,105!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. See the 10 stocks » *Stock Advisor returns as of June 10, 2024 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. George Budwell has positions in Apple. The Motley Fool has positions in and recommends Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy. 5 Reasons Nvidia Isn't in an AI-Fueled Bubble was originally published by The Motley Fool
Apple and Oracle Helped Propel These 3 Vanguard ETFs to All-Time Highs. Here's My Favorite to Buy Now. 2024-06-17 01:30:00+00:00 - Apple (NASDAQ: AAPL) and Oracle (NYSE: ORCL) blasted to all-time highs on Wednesday. Apple is up over 14% in the last month -- the recent rally primarily fueled by a positive response to its annual Worldwide Developers Conference. Apple is integrating artificial intelligence (AI) across several key product categories. Meanwhile, Oracle is up 19% in the last month, getting an additional boost from its recent financial results and guidance. Since Oracle is listed on the New York Stock Exchange, you won't find it in the Nasdaq Composite or Nasdaq-focused exchange-traded funds (ETFs). But you will find both Apple and Oracle in the Vanguard Total Stock Market ETF (NYSEMKT: VTI), the Vanguard S&P 500 ETF (NYSEMKT: VOO), and the Vanguard Information Technology ETF (NYSEMKT: VGT). Here's a primer on each fund, why all three funds just hit all-time highs, and the best one to buy now. Image source: Getty Images. Diversified exposure The Total Stock Market ETF and S&P 500 ETF are the two largest Vanguard ETFs -- both featuring over $1 trillion in net assets. Both funds have 0.03% expense ratios -- or $3 in annual fees per $10,000 invested. The low cost and simplicity of these funds make them great choices for folks looking for a passive yet effective way to mirror the broader market's performance. The Vanguard Total Stock Market ETF has 3,719 holdings compared to 504 holdings in the Vanguard S&P 500 ETF. However, the largest companies are so valuable that the S&P 500 represents approximately 80% of the market cap of the U.S. stock market. This dynamic makes the performance of the two ETFs very similar. The Vanguard S&P 500 ETF will generally do better than the Vanguard Total Stock Market ETF if mega-cap and large-cap stocks are outperforming mid-cap and small-cap stocks. The last 18 months or so is a great example of what you can expect when megacaps are leading the market higher. MGK data by YCharts. As you can see in the chart, mega-cap growth has crushed the S&P 500, while mega-cap stocks have done well, while mid and small caps have done poorly. But even under those circumstances, the Vanguard S&P 500 ETF has only outperformed the Vanguard Total Stock Market ETF by a couple of percentage points. So despite the significant difference in quantity of holdings between the two funds, both perform practically the same because the S&P 500 makes up such a large share of the broader market. An inexpensive way to invest in the hottest stock market sector The simplest way to invest in companies like Apple and Oracle without racking up large fees is through the Vanguard Information Technology ETF. It has a higher expense ratio at 0.1% compared to 0.03% for the larger Vanguard funds. But that's only a $7 difference per $10,000 invested. Story continues The tech sector is chock-full of high-octane growth stocks -- including the three most valuable companies in the world -- Apple, Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA). But it also includes more pick-and-shovel plays -- like materials and component suppliers. Still, the fund is basically going to boom or bust according to the performance of its three largest holdings and the two largest industries, semiconductors and software. The semiconductor industry has been a huge winner from the AI-induced run-up in the market. The two best examples are Nvidia, which became the third company valued at over $3 trillion, and Broadcom, which surpassed $800 billion in market cap on Friday after blowing earnings expectations out of the water. With the tech sector contributing 30.6% of the S&P 500 and the semiconductor industry comprising 27.6% of the tech sector, some simple math tells us that the industry now makes up a whopping 8.5% or so of the entire S&P 500. For context, that means the semiconductor industry has about the same weighting as the entire industrial sector or energy, utilities, and materials combined. The tech sector includes companies that provide the computing power needed to run complex AI models, as well as companies that are investing in ways to apply AI for enterprises and consumers. For that reason, it stands out as the best sector to invest in if you want exposure to the growing trend. A well-deserved premium valuation The danger of buying red-hot tech stocks right now is valuation. The Vanguard Information Technology ETF has a 42.6 price-to-earnings (P/E) ratio. Earnings growth has been strong, but many of the gains have been due to a valuation expansion. Apple's P/E ratio is up to 33.2 compared to its three-year median of 28.1. Microsoft has a 38.2 P/E, while its three-year median is 33.3. Oracle's P/E is 37 compared to a three-year median of 30.2. The list goes on and on. Over the long term, tech companies are perfectly positioned to deploy capital toward high-margin opportunities that lead to earnings growth. The sector is admittedly a little overextended at this point from a valuation standpoint, but it still has what it takes to be a good investment. And for that reason, the Vanguard Information Technology ETF is a better buy than the Vanguard S&P 500 ETF or the Vanguard Total Stock Market ETF if you have a high risk tolerance. Should you invest $1,000 in Vanguard World Fund - Vanguard Information Technology ETF right now? Before you buy stock in Vanguard World Fund - Vanguard Information Technology ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund - Vanguard Information Technology ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $808,105!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. See the 10 stocks » *Stock Advisor returns as of June 10, 2024 Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, Oracle, Vanguard Index Funds-Vanguard Small-Cap ETF, Vanguard Index Funds-Vanguard Total Stock Market ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Apple and Oracle Helped Propel These 3 Vanguard ETFs to All-Time Highs. Here's My Favorite to Buy Now. was originally published by The Motley Fool
More parents are taking on debt to pay for Disney vacations as prices soar 2024-06-16 21:28:48+00:00 - Lending Tree surveyed Americans about how vacationing at Disney World impacts their finances. Nearly 50% of parents with children under 18 go into debt for Disney trips. Respondents said in-park food and beverages were the main budget-busters. Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview Thanks for signing up! Access your favorite topics in a personalized feed while you're on the go. download the app Email address Sign up By clicking “Sign Up”, you accept our Terms of Service and Privacy Policy . You can opt-out at any time by visiting our Preferences page or by clicking "unsubscribe" at the bottom of the email. Advertisement As prices soar, some parents are emptying their bank accounts for a trip to Disney. Others are maxing out their credit cards. Disney's expensive prices have been a hot topic among parkgoers recently. They even caused Disney CEO Bob Iger to raise his eyebrows in disbelief. Disneyland raised ticket prices in 2023 and Disney World is expected to increase costs in 2025. This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Have an account? Log in .
Over 35,000 women fled Texas to get abortions in 2023 2024-06-16 21:03:26+00:00 - Tens of thousands of women fled Texas in 2023 to get abortions out of state, data shows. It was the most of any state. Nationally, over 171,000 patients traveled out of state to get care. The state of reproductive and maternal healthcare will only get worse in Texas, one expert said. Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview Thanks for signing up! Access your favorite topics in a personalized feed while you're on the go. download the app Email address Sign up By clicking “Sign Up”, you accept our Terms of Service and Privacy Policy . You can opt-out at any time by visiting our Preferences page or by clicking "unsubscribe" at the bottom of the email. Advertisement They say everything is bigger in Texas. That includes the number of women who had to leave the state to get abortion care, new data shows. In 2023, over 35,000 patients fled Texas to get abortion care in another state, according to data from the Guttmacher Institute, a pro-abortion research and policy organization. Nationwide, over 170,000 patients traveled out of state for abortion care, according to the data, which Guttmacher collected to analyze the impact of the Supreme Court's Dobbs opinion in 2022, which overturned Roe v. Wade.