YANG

Apple iPhone Supply Disruptions Not Likely to Hurt Markets with Overall Holiday Sales Reportedly Strong

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Image: Holiday sales are expected to expand ~2.5% in 2022 over very strong growth in 2021 and 2020. Image Source: Adobe By Brian Nelson, CFA Tesla (TSLA) CEO Elon Musk and Apple (AAPL) CEO Tim Cook seemingly have worked out a plan for Apple to keep advertising on the Twitter platform after what looked to be a temporary pause by the iPhone maker. Though the news is immaterial to our thesis on Apple in any respect, it was good to see the two tech giants work whatever differences they had out. Certainly, a fallout between Musk and Cook would not be a good thing for the tech sector and innovation, more broadly, as the two wield large influences across Silicon … Read more

Coronavirus May Trigger Long-Anticipated Global Recession

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Image: Wuhan New Coronavirus This was the catalyst that nobody was expecting, a novel coronavirus that nobody had in their economic models. We think global economic activity is slowing as we speak, and the spread of the virus may only accelerate in mainland China and elsewhere. Investors should keep a level head and perhaps think about adding protection to their portfolios before it becomes too expensive. By Brian Nelson, CFA How to Use Valuentum’s Investment Research Services >> We’ve walked through a number of scenarios that could trip the global economy into recession–global deflation that tips over the weakest European banks and causes contagion, global military conflict with North Korea or Iran that disrupts economic activity, increased volatility driven by … Read more

Starbucks Reports Earnings, Coronavirus to Hurt China Sales

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Image Shown: How Starbucks Corporation views its competitive strengths. Image Source: Starbucks – December 2019 IR Presentation By Callum Turcan On January 28, Starbucks Corporation (SBUX) reported first-quarter earnings for its fiscal 2020 (period ended December 29, 2019) that modestly beat consensus expectations on the EPS front and matched consensus expectations for its revenues. Shares were broadly flat after-hours and traded down on the January 29 session. Overview Same-store sales in the US were up 6% while rising competitive pressures in China limited same-store sales growth to just 3% year-over-year. Luckin Coffee (LK) has been aggressively growing its store count in China, growing from ~625 stores in mid-2018 to 3,680 stores as of its third quarter earnings report for fiscal … Read more

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

The Chinese Market Is Rigged

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The Chinese equity markets do not reflect reality. The government has made it so. Trading on hundreds of  Chinese-listed stocks has been halted or suspended during the past few weeks, short selling (or even selling by large shareholders) has been banned, and as much as 10% of GDP has been pledged to prop up Chinese shares, and the list of government intervention goes on and on. The Chinese equity markets are “rigged,” and the government holds all the cards. Even so, share prices won’t stop falling. There may be nothing left to stop them. The writing has been on the wall for years that a bubble had been forming in China. As when everyone was on margin and “playing” the … Read more

Alibaba Shares Disappoint

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No need for boo-hooing BABA just yet. We’re aware of the poor performance of Alibaba’s shares, and we’re as disappointed as any. But we haven’t gone sour on the firm.  Chinese stocks (FXI) recently entered a bear market as the Shanghai Composite Index has dropped over 20% from its June 12 peak. The market is now in the midst of what most call a “self-correction,” as Chinese equity valuations have become out of touch with underlying fundamentals, though we maintain our view that both Alibaba and Baidu (BIDU) remain significantly undervalued. The People’s Bank of China, in an attempt to halt the recent slide in share prices, cut both its one-year lending and deposit rates by 0.25%. In addition, the … Read more

Yikes! Investor Expectations

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A few days ago, I received an email from a valued member of ours. He said that our call on Ford (F) was wrong because we removed shares from the Best Ideas portfolio too early. Another member mentioned a couple months ago that we removed Baidu (BIDU) from the Best Ideas portfolio too early, and he was extremely disappointed for this reason. One of our most valued financial advisor clients, whom said that our call on a certain industry had saved him millions in client assets, decided to cancel his subscription due to a structural shift in his business to ETFs. The puzzling part of all of this, however, is that our call on Ford reaped a ~35% gain, the … Read more

Europe and China

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Europe and China are on high alert. European Central Bank President Mario Draghi made it known that the ECB will do everything in its power to “expand its asset purchase programs if inflation fails to show signs of quickly returning to the ECB’s target.” Just a few weeks ago, Draghi had sent shudders through the global equity markets with his view that “without reform, there can be no recovery.” It appears that significant and aggressive monetary action may be the only option for a European continent that could once again be headed into recession and/or deflation. This announcement won’t be the last that we hear regarding moves to aid the European economy. Iron ore prices have been in free fall … Read more

Yum! Brands, McDonald’s: ‘Big Trouble in Little China’

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Source: Dragon TV 00:27 / 08:28 Source: Dragon TV 00:35 / 08:28 Source: Dragon TV 01:19 / 08:28 The pictures above are allegedly from a Chinese plant of Shanghai Husi Food, owned by OSI Group, which is based in Aurora, Illinois. This link source will take you directly to the actual news footage from local Dragon TV (it is not translated to English, but the video is of high quality). Shanghai Husi Food is a key local meat supplier in China to KFC, owned by Yum! Brands (YUM), and McDonald’s (MCD)—as well as Starbucks (SBUX), but to a lesser extent. All three US-based restaurants have since halted buying meat products from the company. What makes this story worse is that … Read more

Iron Ore Prices Plunge

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Worries about the pace of China’s economic expansion are hurting prices for iron ore. According to data from the Steel Index Ltd, benchmark iron ore dropped more than 8% to $104.70 a dry ton March 10, falling the most since August 2009. Over the weekend, news revealed that Chinese exports dropped a surprisingly 18.1% in February, relative to expectations calling for a 7.5% increase. According to customs data released March 8, China’s imports of iron ore were 61.24 million metric tons in February, significantly below the 86.83 million tons registered in January. The news, while not shocking, wasn’t very pleasant. Still, we’re taking the recently-released February numbers with a grain of salt. Scares regarding the pace of China’s economic growth … Read more