TSLA

In The News: Record-Low Smoking Rates, China Steel Demand Concerns, and a New Look GM

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US smoking rates are at all-time lows, and the FDA is pushing to restrict sales of menthol products and flavored e-cigarettes. Meanwhile General Motors has announced an accelerated restructuring plan, and concerns have cropped up regarding steel demand in China. By Kris Rosemann The Centers for Disease Control and Prevention (CDC) estimates that 14% of US adults, or roughly 34.3 million people, smoked cigarettes in 2017, a record low, compared to 15.5% in 2016 and 42.4% in 1965, the first year the figure was tracked. Public health initiatives have clearly played a role in the decline, but the CDC also estimates that 47 million people still use some form of tobacco product. The US Food and Drug Administration (FDA) is … Read more

General Motors Overcomes Challenges in Strong Third Quarter; Ford Backs Off 2020 Targets

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Image Source: GM third-quarter earnings presentation Despite challenges in its cost structure and the Chinese market, simulated newsletter portfolio idea General Motors turned in a strong third quarter report, and shares reacted favorably after several months of selling pressure. Rival Ford also reported a solid third quarter report, but it no longer expects to hit its 2020 EBIT margin and ROIC targets. By Kris Rosemann Shares of simulated newsletter portfolio idea General Motors (GM) leapt during the October 31 trading session after the company released a strong earnings report before the open that included record third-quarter adjusted diluted earnings per share and record third-quarter equity performance from GM China. Net revenue in the period advanced 6.4% on a year-over-year basis to … Read more

Wild Ride in the Markets — Nelson

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Image Source: Spencerville Rodeo By Brian Nelson, CFA Market volatility has picked up quite a bit of late, and frankly you shouldn’t be the bit surprised. I’ve been quite active explaining the impact that the proliferation of index investing and quantitative investing has had and will have on the marketplace. The more people index or invest on backward-looking empirical criteria, as in most quant models, regardless of future expectations, the more people that buy everything at any price and hold no matter what, the more people that aren’t making decisions on the basis of underlying valuations, then the more people that can contribute to severe price-to-fair value dislocations. In many ways, when nobody is paying attention to what is going … Read more

In the News: Expensive Energy, China’s Trade Surplus and Auto Market, and Big Tobacco Developments

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The IEA is concerned about the impact of rising energy prices on global economic growth, and both it and OPEC have lowered near-term oil demand growth expectations. The impact of the US-China trade dispute continues to be sized up by a number of industries, including automakers, and big tobacco companies may be looking to the cannabis market for future growth as the space remains sensitive to potentially increasing regulations.  By Kris Rosemann US stocks bounced back early in the October 12 trading session thanks in part to encouraging earnings reports from the likes of JPMorgan Chase (JPM) and Citigroup (C) and a slight reversal of the yield curve’s recent flattening move. Simulated Best Idea Newsletter portfolio idea Visa (V) gained … Read more

In the News: Gold, Auto Sales, General Electric

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We don’t think gold makes much sense outside perhaps a very diversified portfolio. Auto sales weren’t all that great in September, and some are calling for a bottom in General Electric. By Brian Nelson, CFA The price of gold (GLD) will continue to be volatile as many own it as both a global inflation hedge and an asset implying safety from global economic crisis. We think gold may make sense sometimes, but perhaps only as a very low weighting in a very diversified portfolio, if at all. The case that gold has any intrinsic value is rather weak, too, “Gold Is But a Shiny Yellow Metal,” particularly because its industrial and consumer uses are rather limited. Gold holds value largely … Read more

SEC Says Tesla’s Musk Broke Securities Laws, Allows Him to Retain CEO Role

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Image Source: SEC_News via Twitter The SEC may have set a dangerous precedent in settling with Musk and allowing him to remain CEO. Musk and Tesla will also pay a monetary fine and add more independence to the boardroom as a result of the entrepreneur’s alleged market-manipulating behavior conducted through Twitter. We don’t think Tesla, a company with just $50 billion market capitalization and makes no money, is too big to fail. Musk’s settlement with the SEC is a sweetheart deal, and one that now has the stock soaring. By Brian Nelson, CFA In what has been a wild turn of events, first starting with a series of go-private tweets from Tesla (TSLA) CEO Elon Musk and a determination to … Read more

In the News: Tesla’s Musk Charged with Securities Fraud; Facebook’s Security Issue

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We continue to stay as far away from Tesla as possible. The company’s stock could still crater even more. It does not have a firm foundation at all. Facebook, despite being under continuous and tremendous scrutiny, is operating on a firm foundation, however. We continue to like shares of the social media giant, despite a recently-disclosed security problem. The more Facebook beefs up security and augments its platform, the bigger its competitive advantages become, as the entry costs for new entrants become even more insurmountable. By Brian Nelson, CFA On Thursday, market observers were glued to CNBC as the television network broke the story: The SEC has charged Tesla’s (TSLA) Elon Musk with securities fraud. You can read the press … Read more

BMW’s Profit Warning Hits Automakers; General Motors Still Attractive

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Image Source: Ya, saya inBaliTimur BMW became one of the first auto manufacturers to note a tangible negative impact of the US-China trade war, and its reduced expectations have impacted investor confidence in the near-term profit levels of other automakers, including simulated newsletter portfolio idea General Motors. By Kris Rosemann Simulated newsletter portfolio idea General Motors (GM) continues to fight through near-term challenges, but we remain fans of its longer-term outlook thanks to its initiative to expand its North America EBIT-adjusted margin to 10% as well as the positioning of its GM Cruise division, which received a nice injection of capital earlier this year via a partnership with SoftBank’s (SFTBY) Vision Fund. The company’s shares are trading at a miniscule multiple … Read more

Ford Facing Bumpy Road

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Image source: Michael The second-largest US automaker is facing a number of challenges in its business, and Moody’s recently cut its credit rating to one notch above junk status. Let’s take a look at the factors at play behind the downgrade. By Kris Rosemann There are a number of moving parts at Ford (F) these days, and the uncertainty surrounding the uphill climb it is facing has resulted in speculation over a potential dividend cut and a credit downgrade from Moody’s. The company’s plan to cease nearly all production of cars for the US market caught many investors by surprise, and it continues to struggle in multiple international markets. The most recent headline it made was the release of its August … Read more

In the News: Musk, Facebook, and GameStop

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We’re not sure that Tesla has things figured out. Social media entities, including one of our favorites Facebook, have fallen on hard times given negative sentiment. GameStop could sell itself for a significantly higher price than what the market is currently willing to exchange shares. By Brian Nelson, CFA Let’s get one thing straight: we have a tremendous amount of respect for Elon Musk. He is a tremendously successful person and entrepreneur, but some of the things he has done during the past few months have been puzzling. We think we might be able to understand some of the pressures involved in running a business and trying to satisfy a growing list of customers (and skeptics), but what makes Elon … Read more