Displaying items by tag: stocks

(New York)

While the SEC seems to have largely shrank from the limelight surrounding its investigation of Tesla, there is news on that front, and in a big way. The DOJ is now investigating Tesla, and specifically, it has launched a criminal investigation into Elon Musk’s now infamous tweet about taking the company private. The investigation sits alongside a civil inquiry by the SEC. Tesla said it had received a “voluntary request” for documents but that there was no “subpoena, a request for testimony, or any other formal process”.

FINSUM: Hard to see where this may go, but we imagine it could turn into a big headache (and distraction) for Musk and the company, as well as its shareholders.

(Washington)

One of the many factors that has been odd about the market’s rise since the beginning of summer has been how it did so at the same time as global trade tension was building. No better example of this odd pairing can be found than yesterday’s market—Trump imposed tariffs on $200 bn of extra Chinese goods, and the Dow rose over 0.5%. Why is this the case? Barron’s argues that it is because investors fundamentally believe that China and the US won’t let a trade war get out of control because of fears of mutually assured economic destruction. Accordingly, they see almost all negotiations and actions through rose-colored glasses.

FINSUM: We are not as sanguine as the market about the risks of the current trade war. Our biggest worry is not even about trade negotiations, per say, it is more about the ill will that is being built up which may create a future impasse on a seemingly resolvable issue.

(New York)
High dividend yields are almost always a welcome feature for investors. For retirees, they are often an economic lifeline as they help cover everyday expenses. But rising rates pose a risk for such stocks as their value tends to suffer as fixed income becomes more attractive. One way to combat that is with stocks with quick dividend growth. Two such examples are pipeline giants Williams Company (4.8%) and ONEOK (5%). Both have dividend rates double that of the average S&P 500 stock, but they are also expected to grow those dividends (and their cash flow) at double digit annual rates. The two companies expect to grow their dividends by 12.5% and 10% respectively (from already high levels).

FINSUM: Given how high these dividends are already, the growth rate on them should be enough to offset any rate rise-related losses.

(New York)

The market has been doing well lately and movements have been relatively calm. That may all be set to change, however, as a big driver of volatility is set to emerge. That driver is the so-called “blackout” period. The blackout refers to the month before earnings releases where companies are barred from repurchasing their own shares. Company buybacks have been a major tailwind for markets this year, with almost $400 bn of buybacks happening in the first half alone, up almost 50% from the prior year. Volatility has been historically higher in blackout periods.

FINSUM: So we are of two minds on this. On the one hand, blackout periods happen very frequently, so why would this one be special? On the other hand, there could be a lot of political and geopolitical (i.e. trade wars) turbulence in the next month, which means this particular period could prove very volatile.

(New York)

Rising rates are upon us. The economy is red hot and a Fed rate hike is imminent, with another likely coming in December. This puts many sectors and stocks at risk. So what are the best sectors and ETFs to invest in right now? Three sectors that stand to benefit are financials, technology, and consumer discretionary, so buying stocks and ETFs there appears a good bet. For technology, Invesco has a momentum focused fund for tech leaders called the DWA Technology Momentum ETF (PTF) which seems interesting. In consumer discretionary, the SPDR Consumer Discretionary Select Sector Fund (XLY) gives good coverage.

FINSUM: All of these bets are cyclical (meaning the sectors benefit because the economy is strengthening when rates rise, which boost consumer spending). Banks are a little bit more compelling to us though, as they benefit from an improved economy, but they also directly gain from rising rates through a better net interest margin.