The panic over Trump’s blacklisting of Huawei was reaching a fever pitch. The fall out had gotten so bad that it looks like the President decided to take a step back. Trump has now granted a three-month reprieve on the blacklist to give companies time to adjust. The stay is not a cancellation of the decision, just a window for adjustment. Huawei says it “doesn’t mean much”.
FINSUM: This is smarter than a sudden blanket ban as it will give a little adjustment period which may make it a bit easier for companies and markets to digest.
Make no mistake, the US’ new blacklisting of Huawei is going to have a serious effect on American tech companies. Huawei is deeply integrated with many US suppliers of technology components, so the import and export restrictions will be significant. Here is a lit of US companies with major relationships with Huawei: Qualcomm, Broadcom, Xilinx, Synopsys, Marvell Technology, Seagate Technology, Western Digital, Texas Instruments, and Micron technology.
FINSUM: The impact on the top and bottom lines of all these companies will take some time to figure out, but for now we thought it would be useful to know which ones are at risk.
Stocks woke up to a volatility explosion this morning. President Trump made a surprise announcement that he was considering boosting tariffs on China. Specifically, the president threatened to raise tariffs to 25%. Beijing is reportedly infuriated. The comments come towards the end of what seemed to be a smooth negotiation with Beijing about a new trade package. Therefore, they riled markets to a major extent. Headline indexes shed a couple percent at peak (so far) and sectors like technology and industrials sold off sharply. The trade delegation from Beijing is still expected to attended a planned tariff meeting this week.
FINSUM: It is very hard to know how significant this is (whether Trump actually wants to do this), or whether this is just a negotiating tactic.
In what comes as a really eye-opening turn of events even for someone as outlandish as Masayoshi Son, SoftBank has announced a plan to IPO its $100 bn Vision Fund. The fund is already legendary, having invested $100bn in just two years in some of the world’s biggest startups. It currently holds positions in WeWork and Uber, for instance. Masayoshi Son is now raising for capital for another fund, so wants to access some liquidity from this first one, thus the plan to IPO.
FINSUM: This is a bonkers plan, but honestly, and interesting opportunity for investors to own pieces of some very exclusive private companies. This is like an early stage Berkshire Hathaway.
There has been a lot of anger (and even legal action) about the big declines Lyft has seen since its IPO. The questions around publicly traded companies worth tens of billions of Dollars with annual losses of billions of Dollars are only growing more intense as Uber readies for its IPO. The big question is what investors should do about the stocks—stay away or buy in? TrimTabs Asset Management has some very salient thoughts on the issue. TrimTabs specializes in free cash flow oriented products and lent their expertise to this question. They conducted an in-depth study of how post-IPO companies with negative free cash flow, and negatively trending free cash flow, perform versus those with positive FCF. The results were stark, and in all instances showed major outperformance of FCF positive companies. For instance, over a 12-month horizon following IPO, $1 bn+ companies with positive FCF outperformed those with negative FCF by almost 16%, with the latter averaging losses of 6.41%.
FINSUM: This analysis from TrimTabs could not be more timely or insightful. We think it might be smart to stay away from Uber and Lyft until they at least have a clear path to profitability.
Want to forecast at where Apple’s stock price is headed? There is a good trick for doing so. The method is to look at the earnings and share price moves of Apple’s suppliers. About a third of suppliers report earnings before Apple does, and many of them derive a high portion of their sales from the company. Therefore, one can fairly well predict Apple’s earnings and likely moves. For instance, Apple has been on a tear since its earnings on Tuesday, and it would have been easy to see from the previously released supplier earnings.
FINSUM: This will not always work and some of the value is probably eaten up by algorithmic traders, but still, it seems a good predictive indicator.