FXI

China

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Image Source: Mike Behnken Our concerns about China are not new, and neither are your concerns. The potential Treasury Secretary-to-be, Carl Icahn, that is one in a world of a Donald Trump presidency, which has become all-the-more likely now that Ted Cruz and John Kasich have stepped aside, recently brought to light the differences between a capitalist society such as that of the US and a communist nation such as that of China (FXI). Unlike the US government which isn’t necessarily anti-business, even if it isn’t pro-business if existing corporate tax rates are any measure, the Chinese government can make things awfully hard on any company doing business within its borders, if it wants to. What Icahn has been referring … Read more

A Letter from the President

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“We’re Valuentum, not value – and that’s all the difference in the world.” – Brian Nelson, CFA Dear member: We received a few questions on this topic and I wanted to help clarify the Valuentum process. We are the only investment research publishing company that systematically embeds a technical and momentum assessment into a robust valuation methodology, comprised of a discounted cash-flow process and relative valuation overlay. As you can imagine, the output of the combination can be quite confusing for anyone, for the pure technician as well as the pure value investor and everyone in between. First, we should note that our fair value estimates and fair value ranges are not price targets that you may see in brokerage … Read more

Apple: Nowhere To Run, Nowhere To Hide

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By Brian Nelson, CFA Today’s stock market is a difficult one. That Apple (AAPL) is selling off after disappointing fiscal second-quarter results is unfortunately no surprise to us, “Apple Will Go Lower… And It Will Be ‘Forced’ Into Acquisitions (January 2016).” There may be “nowhere to run, nowhere to hide” for market participants seeking full exposure to equities. Unfortunately, it’s no consolation to the reader that missed our profit-taking alert in Apple a few months ago, and our discussion to take even more shares off the table “Looking To Trim Apple… (December 2015).” In August 2015, we removed one third of the position in Apple from the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio at $108.92 for a … Read more

Iron Ore Market Stability Still A Ways Off

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Image Source: Peter Craven After an increase in iron ore prices in early 2016, some iron ore producers have warned that the rally may not be sustained, while others believe the beginning of a prolonged rebound may be in place. The Chinese economy (FXI), the largest consumer of iron ore in the world, remains in a transition phase while iron ore producers continue to increase production, with some producing at record levels. Many major suppliers are currently undertaking large investment projects that will create material production capacity growth in the future as well. Though we cannot deny the slight bounce in iron ore prices, we aren’t sure supply and demand rebalancing is right around the corner. Recent headlines may cause … Read more

We Like the News! Buffett Scoops Up Kinder Morgan; FVE: $20

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It looks like crude oil (USO) overproduction will continue. Dashing hopes that any rational behavior would prevail in the energy resource markets, member nations of OPEC February 16 said not that they would cut output but that they would not increase crude-oil output any further, as if the current pace of production isn’t already drowning the world in the black liquid. It turns out the rumor from last week had some basis to it, “Your Hard-Earned Money,” but it didn’t have much substance, in our view, especially since the deal hinges on cooperation from Iran, which remains dedicated to increased production to reach pre-sanction levels. We’re not reading much into the news, as Saudi Arabia, while included in the parties … Read more

Your Hard-Earned Money

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By Brian Nelson, CFA It was Thursday afternoon, February 11, crude oil prices just hit a 13-year low, and the S&P 500 (SPY) was about to break below key technical support. Then, just as the markets were to fall further, rumors again emerged that OPEC may be scheduling a meeting to curb crude oil output, driving crude oil prices from the depths and the market higher off technical support. A barrel of crude oil continues to trade below the $30 mark, but it was quite the “save.” From where we stand, the market hasn’t been this fragile than at any time during the past decade or so, including during much of the Financial Crisis. Optimists may be whistling past the … Read more

Not Doom and Gloom – But Just Cautious…

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You wouldn’t know it on the basis of the strong US market action January 26, but it wasn’t all quiet in overnight trading. Local markets in China (FXI) took another hit, with Shanghai and Shenzhen exchanges experiencing declines to the magnitude of 6%-7%+ on the session. Though some optimistically dismiss the local China markets as irrelevant, the implications on weakened Chinese banks, other Asian nations via trade, and interconnected financial institutions from Standard Charted to HSBC (HSBC) and even Citigroup (C) are material, in our view, and we’re paying close attention. Some may even say that China stocks represent less than 15% of household financial assets in the country — certainly not enough to cause a global calamity… Or is … Read more

Moody’s Puts Oil & Gas and Mining Sectors on Review

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By Kris Rosemann On January 22, Moody’s placed 120 oil and gas companies (XLE) from across the globe on review for a credit rating downgrade. The list ranges from massive global producers such as Royal Dutch Shell (RDS.A, RDS.B) and Total (TOT) to nearly 70 US exploration and production and services (“E&P”) companies. It also includes 55 mining companies (XLB) that have been punished by the recent rout in commodity prices. Alcoa (AA), Rio Tinto (RIO) and Vale (VALE) are a few notables that made the list for a potential downgrade. The news is not completely unexpected, however, and may likely be a response to several executive teams pointing to legacy (outdated) counterparty/customer ratings as reasons to not be concerned … Read more

Excited About Putting Cash to Work…Eventually

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Investors are fretting over a lot of things as of late. China (FXI) announced January 19 that fourth-quarter GDP fell to 6.8%, with many noting that the measure was a 25-year low. Even if you believe that number, which may be a stretch in light of collapsing local stock markets in Shanghai and Shenzhen, the outlook can’t be much better. Steel mills across the country are reeling, and while published housing numbers don’t look that bad, we have a difficult time believing the Chinese banks are in good shape. HSBC (HSBC), Standard Chartered, and Citigroup (C) remain most exposed to what we would describe to be the growing likelihood of a contagion from weakening commodity-dependent sectors in the country. Intel … Read more

Lots to Like About Intel’s 2016: 3D XPoint and Altera!

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Newsletter portfolio holding Intel (INTC) continues to change with the world around it. An increasingly smart and connected world offers significant opportunities for the company, but those opportunities will not be presented without obstacles to hurdle. It didn’t work out so well for the price of Intel the week of its report, as it released a somewhat cautious outlook on a day of a big market swoon, but we still expect some good things ahead from the chip giant. In fact, we continue to like the holding in the context of achieving the goals of the newsletter portfolios. In the fourth quarter of 2015, results released January 14, Intel reported record revenue of $14.9 billion, though the top line grew … Read more