FINSUM

FINSUM

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Monday, 02 April 2018 09:41

3 Great Value Stocks

(New York)

Despite the recent falls in the market, stocks still look quite expensive, and are, historically speaking. With that in mind, many investors may be looking for stocks with a strong value proposition. Barron’s has put out a piece choosing three: General Mills, Tractor Supply, and UPS. In the case of General Mills, the panic over grocery wars and pre-packaged food looks overdone, and the company is actually performing well in a number of areas. Tractor Supply has done very well historically, but its growth rate has slowed recently, but this may because of two mild winters, and not a sign of trouble to come. UPS has declined because of an announcement of increased capital spending, but given the health of the underlying business, it seems too cheap to pass up, says Barron’s.


FINSUM: These seem like very knowledgeable picks. We particularly like UPS, which is trading at a historically low P/E ratio right now.

Monday, 02 April 2018 09:40

The Coming Bank Rally is a Myth

(New York)

There is some speculation that bank stocks may be set to go on a tear. Rising rates are usually good for banks. They cause bond volatility, which boosts trading income, and they boost net interest margins, which raises interest income. However, so far this year, things have been weak. Barron’s also adds a solid point—insiders are not buying bank stocks. It has been two years since Jamie Dimon bought his company’s stock, and BAML top brass have been notably absent too. That seems to reflect a lack of conviction on the part of management.


FINSUM: The lack of buying from management is a troubling sign for us, as they certainly have the best insight into the future of the company. It is odd though, as ostensibly things look very positive.

(Washington)

In what could either be a big worry for tech or a pile of unwarranted hot air, there are rumors circulating that President Trump may be obsessed with regulating Amazon. Last week, the president escalated his calls for regulating the company, tweeting “I have stated my concerns with Amazon long before the Election … Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”. Trump has also repeatedly attacked the Washington Post, which is owned by Amazon CEO Jeff Bezos. Trump’s 2020 campaign manager said in a tweet that “Amazon has probably 10x the data on every American that Facebook does. All that data and own a political newspaper, The Washington Post. Hmm.....”.


FINSUM: Our other perspectives aside, we do think governments may need to adopt updated views of when regulation is called for. In Amazon’s case, the company is clearly not a monopoly in any sector, but the data it has does give it heightened importance. The context of monopoly laws, which are essentially modeled on 19th century ideas, don’t seem to have much scope to account for this.

(New York)

While stocks have seen some gains the last couple of days, the reality is that it was a very poor quarter. However, as the second quarter begins, stocks may be about to get a big boost. That boost will come in the form of a $400 bn dividend hike which will be delivered in April and May. “We think it is no coincidence that spring is also a seasonally strong period for equities … April in particular tends to be a strong month for global equity returns”, says Morgan Stanley.


FINSUM: This could be the shot in the arm that stocks need right now.

(Washington)

The back and forth over the fiduciary rule has been long, expensive, confusing, and bureaucratic. However, those opposed to the implementation of the rule should rejoice, as it appears it will die on April 30th. Legally, the DOL has until April 30th to seek a review of the Fifth Circuit Court’s vacating of the rule. If it does not do so by then the court’s ruling will go into effect on May 7th and the rule would dissolve. The DOL also has until June 13th to ask the Supreme Court to hear the case.


FINSUM: The DOL has already dropped a case in Washington D.C. because it was concerned the court there would uphold the rule. There seems to be a very low likelihood that they are going to challenge the Fifth Circuit Court’s ruling. The rule may very well dissolve on May 7th, but expect some drama before then as advocates make a final push.

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