This research report has been produced together with Seeking Alpha author Julian Lin.
Strong Environment For Infrastructure In The United States In February, the Trump administration released their long-awaited infrastructure plan.
The document noted:
For too long, lawmakers have invested in infrastructure inefficiently, ignored critical needs, and allowed it to deteriorate. As a result, the United States has fallen further and further behind other countries. It is time to give Americans the working, modern infrastructure they deserve.”
Trump’s infrastructure plan calls for $1.5 trillion to repair and upgrade America’s infrastructure. $200 billion would come from federal spending with the rest coming from state and local governments, who would be expected... more
Editor's note: This article was originally published on April 21, 2018, by Menzie Chinn here.
A recent article on the predictive abilities of yield curves (Shrager/Quartz) includes a nifty interactive which allows you to look at yield curves over time. Below, I do a snapshot comparison, across the world.
Figure 1: Ten year-three month term spread (blue bars), as of 9 July 2016. China observation is Five year-three month term spread. Euro ten year rate is for Germany. Source:Economist, data as of April 18.
It's hard to compare across countries, particularly without knowledge of what is the average term premium in each country. (See Chinn and Kucko (2015) for a cross country assessment of the predictive power of yield curves for economic activity and recessions.)... more
(The weekly S&P 500 earnings update will be out early Sunday morning - the close in the 10-year Treasury yield on Friday, April 20th, could be a game changer and S&P 500 earnings might take a back seat with what is happening in Treasury markets).
The recent move higher in the 10-year Treasury yield was somewhat surprising since the "the yield curve is going to invert" and "the-sky-is-falling" crowd was out in full force the last few weeks, warning about a pending recession and a Treasury yield curve that was likely to see the 10-year Treasury yield trade below the 2-year Treasury in short order.
What accounted for the recent push higher in the 10-year Treasury yield?
In the last year, the CFA Society of Chicago, which runs a Vault Series in downtown... more
Will FAANG Continue to Dominate? The collective market capitalization of FAANG is nearly $3 trillion, and that's fairly impressive considering the total US market cap of publicly traded equities is only around $28 trillion.
And here is a look at the performance of each FAANG stock versus the S&P 500 over the last five years; FAANG has clearly been dominating, especially considering their collective market capitalization makes up a significant portion of the total US public equity market.
However, important to note, the FAANG stocks tend to have higher levels of market risk, as measured by beta.
Note: Beta is a measure of risk related to general market movements as opposed to stock-specific factors. A beta above one generally means a stock is both volatile... more
Actionable Conclusions (1-10): Brokers Estimated 3.75% To 72.4% Net Gains For Ten Tech Dogs To April 2019 Seven of ten top dividend-yielding Techno stocks were among the top ten gainers for the coming year based on analyst 1-year target prices. (They're tinted gray in the chart above). So, this yield-based forecast for Technology, as graded by Wall St. wizards, was 50% accurate.
Projections based on estimated dividend returns from $1,000 invested in the thirty highest yielding stocks and their aggregate one year analyst median target prices, as reported by YCharts, created the 2018-19 data points. Note: One-year target prices by lone analysts were not applied. Ten probable profit-generating trades projected to April 2019 were:
TiVo (TIVO) was projected to net $732.89, based on... more
We went wandering down the back alleyways of MLP land this week and came across another very interesting buyout deal.
Southcross Energy Partners LP (SXE), a smaller midstream LP, is being acquired by American Midstream Partners LP (AMID). The deal is supposed to close in Q2 '18, relatively soon. The buyout already has been approved by SXE's common unitholders.
"Public unitholders of SXE will receive 0.160 AMID common units for each SXE common unit in a unit-for-unit merger, which is anticipated to have minimal, if any, tax recognition for such unitholders." (Source: AMID site)
There's currently a discount available for AMID via buying SXE units, which have a conversion factor of 6.25X into AMID units, post buyout.
At today's price of $1.72 for... more
Tupperware Brands' (NYSE: TUP) stock has tumbled more than 40% since last July on a consistent flow of negative news. Most recently, TUP revised its first-quarter earnings forecast down by 14% to $0.87-0.92 from a previous range of $1.01-1.06. Customer service, supply chain, and tax issues were the main reasons for the revision. With that being said, I see the stock as being significantly undervalued for the following reasons:
Free cash flow is expected to rebound to $170-180 million in 2018, an increase of approximately $30 million over 2017. Free cash flow should further rebound in future years as TUP completes its reengineering program. This yields 51% upside potential in a conservative discounted cash flow model. TUP is performing well in Emerging Markets, especially China and... more
Thesis MedEquities Realty Trust (NYSE: MRT) currently represents an attractive value relative to healthcare REIT peers. The share price of MRT has fallen from $12.79/share on July 3rd, 2017, to $10.11 (as of 04/16/2018). This 21% drop in share price has created an opportunity to capitalize on both the attractive current income from the 8.31% dividend yield as well as the significant upside potential.
As shown in the graph below, MRT currently trades at a significant discount (-23%) to net asset value, which is much steeper than the median healthcare REIT discount (-9%).
Source: Graph by Simon Bowler, Data compiled from SNL.com
MRT certainly appears to be cheap relative to the value of its assets, but it is also important to consider valuation on a relative basis, so I... more
Disclosure: These stocks were recommended to members of Margin of Safety Investing at lower prices.
As the last secular bull market in oil progresses, free cash flow for many shale plays will far exceed estimates. The subdued analyst estimates and public expectations that linger from the oil collapse are about to be massively eclipsed as oil finds a new trading range around $80 per barrel.
It's important to remember that most of the shale companies, of necessity, and pressure from Wall Street and lenders, undertook massive restructurings to be able to survive at $40 oil and be profitable at $50 oil. With oil over $60 per barrel for months and now around $70, these companies are in position to blow past estimates that Rystad Energy discussed in their January Shale... more
When determining whether or not to invest into the stock of a particular company, there are a number of things that are often (or at least should be) taken into consideration. Examples include: the sustainability of the company's business model, the balance sheet, valuation, and historical earnings growth.
Another important consideration for many investors such as myself is the strength and sustainability of the dividend that the company pays out. After all, dividends are quite important, as they accounted for almost 50% of the total return of the S&P 500 over the last 80 years.
I've written several dividend articles here on Seeking Alpha such as "The Dividend Diet: A Guide To Investing On Easy Street" and "Dividend Centenarians: 3 Companies That Have... more