Eq: Total Market
(New York)
Restaurants are an area that don’t get much attention in the media, but can be a place where investors can find alpha. With that in mind, we wanted to run some analyst picks that choose the best food stocks. The three names are Dunkin Brands, McDonalds, and Yum! Brands. The case for Dunkin is that though the company has underperformed a little lately, they are poised for a rebound, especially with the new branding of just “Dunkin”.
FINSUM: McDonalds is the most interesting pick for us, as we admire the changes and leadership of the CEO and think updating the menu and the physical restaurants has and will continue to be successful.
(New York)
Hate him or love him, you have definitely heard of him and may respect him. Paul Krugman is one of the most famous economists in the world, and he has just put out a warning we think investors need to hear. Krugman’s big fear is that trouble is building in the economy and the Fed doesn’t have much firepower to help stimulate things if and when growth heads backwards. “There seems to be an accumulation of smaller problems and the underlying backdrop is that we have no good policy response”. Krugman argues that hiking rates was never “grounded in the data” to start with and that “Continuing to raise rates was really looking like a bad idea”.
FINSUM: What we know is that a recession will come at some time, what we don’t know is when. Krugman has given sometime in the next two years as his timeline, which to us wreaks of a lack of confidence.
(San Francisco)
Barron’s has just put out a very timely list. The publication has compiled a list which ranks the 100 top companies according to sustainability. Sustainability, which is a component of and often linked to ESG, has become an increasingly important component of returns, so Barron’s rankings will likely make a difference to portfolios. The top ranked firm is Best Buy, followed by Cisco, Agilent Technologies, Texas Instruments, Voya Financial, and Clorox. The top 25 also includes Salesforce, Cummins, and Kellogg.
FINSUM: ESG is an increasingly important area not only for returns, but also for clients, so this is quite a handy list for what can be a surprisingly difficult to handle issue (i.e. deciding which companies are sustainable and not).
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(New York)
The topic of the next recession has faded a bit from the mainstream media discussion over the last month, and understandably so. Not only has the market jumped, but the Fed seems to have completely backed off the rates gas pedal. That said, we are keeping an eye on primary and secondary data on the economy to see what the future may hold. Here is some data that is worrying us a bit: global freight shipping rates are tumbling. China’s weak spending and a global slowing of growth has sent shipping rates way down, a sign of excess supply and demand weakness across the world.
FINSUM: This kind of info, along with metals demand etc, are great leading indicators of what might happen in the economy. Add this to the warning signs.
(New York)
Stock investors and bond investors are showing a big disconnect right now. That mismatch in sentiment could cause some big losses. Fixed income investors have been buying bonds aggressively, keeping yields pinned at low levels and the curve very flat. However, equity markets have been rallying strongly, which will alleviate some pressure on the Fed, allowing them more margin to raise rates again. However, the bond derivatives market shows the market is betting there is a 98% chance rates are in exactly the same place as now in one year’s time.
FINSUM: Bond investors are too comfortable with the Fed right now. Powell et al have been quite hawkish for awhile now, only very recently backing off. We don’t think it would take much to get them back on track, and the equity market is paving the way.
(New York)
It’s that time of year. Analysts from many banks are putting out their top picks for the year. The picks we are featuring focus mostly on the large cap space. The picks come from a range of different analysts and include: Google, Amazon, American Eagle, Broadcom, Deere, McDonald’s, Microsoft, and Salesforce.
FINSUM: Deere and McDonalds are interesting for us. Deere because farm equipment demand could be quite heavily impacted by US-China trade tensions, which makes this one a risky bet. McDonalds is a stock we are bullish on because of its menu changes and modernization efforts. We think it has a lot of business it can steal back from the likes of Shake Shack and Chipotle if it continues to make its menu fresher and more healthful and its store more appealing.