Displaying items by tag: stocks

Wednesday, 10 January 2018 10:42

What’s Next for ETFs in 2018

(New York)

Despite reaching a much more mature stage of their development, ETFs, overall, are still on a torrid run. But what is next for the all-consuming asset class? Barron’s argues there are a few trends to watch. The first will be an expansion of fixed income ETFs, which have grown considerably, but have much more room to run. Secondly, advisors might have bigger clout in the sector, as RIAs may start converting their own strategies into ETFs. Also, the further hybridizing of passive/active funds may go faster as Vanguard is debuting a new range of very low-cost active ETFs.


FINSUM: Mentally we sort of compare ETFs to the growth of Amazon. The question is where WON’T they head next.

Published in Eq: Large Cap
Tuesday, 09 January 2018 09:33

Euphoria?: Investors Are Abandoning Hedges

(New York)

Call it euphoria, irrational exuberance, or a melt-up, everyone is looking for signs that market valuations are out of control and approaching a downfall. Some signs have finally started to show up in the last few months as stocks have steadily gained. One such sign can be seen across the market—the elimination of hedges. Consistently low volatility has reduced fear in investors’ hearts to the point that many are abandoning puts and other downside protections. They are trying to chase the performance of passives and don’t want to “waste” money on hedging. The chief market strategist at Cantor Fitzgerald comments on the trend that “I haven’t seen hedging activity this light since the end of the financial crisis … It started in late 2016 and accelerated in the second half of the year”.


FINSUM: This is typical late cycle imprudent behavior, but chasing benchmark performance is a good explanation of the trend.

Published in Eq: Large Cap
Tuesday, 09 January 2018 09:33

Time to Dump Your FAANGs

(San Francisco)

There is no doubt about it, the FAANG stocks—Facebook, Apple, Amazon, Netflix, and Google—were a huge force is delivering 2017’s great return. But it might be time to remove them from your portfolio, at least as Barron’s argues it. And if not removing them, then at least reducing exposure. The stocks count for a huge portion of many funds, so investors may have more exposure than they realize. The stocks have seen a massive run-up in valuation, but that makes them look increasingly vulnerable. Barron’s also cites the increasing risk of regulation of the sector, which could prove a weight on values.


FINSUM: The tech industry has grown very large and dominant, and seems to have its own cycle versus the rest of the economy, all of which makes it very hard to call a top. There are some dark clouds gathering on the horizon, but nothing looks like it is imminently going to bring the FAANGs down.

Published in Eq: Large Cap
Monday, 08 January 2018 10:18

Amazon’s Limits

(Seattle)

If you listen to the media, Amazon is a retail juggernaut posed to swallow just about every industry. The company has lived by Bezos’ famous mantra “your margin is my opportunity”, and has thrived by dominating commoditized low-margin businesses. However, the company has some inherent limits and part of what has made it so successful is that not every industry is an Amazon industry. In particular, one area of retail the company may not be able to crack is high-margin uncommoditized business. These are not its forte, and driving down costs and making such goods widely available is not what drives value. That is why many luxury brands, for instance luxury handbag makers, refuse to sell on Amazon.


FINSUM: We will not put anything past Amazon, especially in its home turf of retail, but the company has not done well in moving into luxury. So what.

Published in Eq: Large Cap
Monday, 08 January 2018 10:12

What’s Next for Retail

(New York)

While the economy seems to be innovating faster recently, nothing can match the pace of online retail, whose entire operating model has been completely overturned in about a half decade. Physical retail is being rethought and marketing is now primarily social media driven, two big changes. But what is next? Equity research analysts argue that voice orders through new devices like the Amazon echo will be key, as will better digesting customer data. More digitally-native brands will move into physical retail, which will be more about marketing and client experiences than it will about sales.


FINSUM: It will take some very astute investors to make money in retail at the moment as one has to have a sharp view about the development of the industry to pick winners (perhaps outside of buying Amazon or Walmart/Target).

Published in Eq: Large Cap

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