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How are investors buying September’s dip?
In recent weeks, stock markets around the world dropped to new monthly lows. As ever, eagle-eyed investors were keen to buy the dip. Here are some stocks they were keen to snap up.
The September stock market dip: what caught investors’ eye
Market turmoil has been rocking the bourses in the wake of the Evergrande wobble and a general risky asset sell-off.
Although things have since stabilised, with the S&P 500, Nasdaq, and Dow Jones all up 1% this morning and the FTSE making gains, investors were still keen to take advantage of the dip.
In particular, many stocks on the S&P 500 have been subject of retail investor attention. The index experienced its largest drop since May at the start of the week.
A new report from Vanda Research suggests a $3bn spending spree occurred on Monday and Tuesday as stock buyers looked for some perceived bargains.
According to Vanda Senior Strategist Ben Onatibia, retail investor activity contradicts earlier statements that their appetite for stocks may have been waning. With indices down, this gave them a great opportunity to add to their portfolios.
The stocks investors were buying
Vanda Research shows the below individual stocks were retail customers’ favourites during the recent market downturn.
|Stock||Ticker||Retail purchase volume (last 5 days from September 22nd)|
|Advanced Micro Devices||AMD||$154,5300,000|
|Las Vegas Sands||LVS||$55,350,000|
Let’s start with Apple. The California tech giant is coming hot off announcing a fresh wave of iPad, iPhone and Apple Watch models at last week’s California Streaming event. The company continues to dominate in the smartphone field. As of June, sales of the latest iPhone 12 had already exceeded 100 million units, and Apple’s laptops and tablets continue to post similarly strong sales numbers.
No new AirPod headphones were released, despite markets thinking Apple would launch its next-gen EarPods at its most recent big conference. However, with such strong sales from the iPhone, it probably doesn’t need to launch them just yet. Consumer confidence in the brand is already exceptionally high.
We can see from the list a heavy leaning towards tech stocks. Excluding Apple, investors spent a combined $378.38m on companies within the tech sphere, including Microsoft, Verizon, and chip manufacturers AMD and Nvidia.
Computer chipsets are hot property globally right now. A general shortage means prices are up. Chipsets are used in practically all the modern conveniences of modern life. Everything from the aforementioned iPhone to cars and graphics cards needs these tiny pieces of electrical microengineering to work – hence their sky-high demand, and why investors are eyeing up companies like AMD.
Graphics cards in particular are coveted by cryptocurrency miners. Each powerful mining rig requires stuffing computers to the brim with components to solve the complex equations that result in fresh digital tokens like Bitcoin.
Speaking of Bitcoin, AMC Entertainment, the memestock and cinema chain, recently gave itself a boost. CEO Adam Aron has announced the company will soon start accepting Bitcoin and other cryptos as payment.
Aron also mentioned AMC is flirting with the idea of entering the burgeoning non-fungible token (NFT) market – possibly through offering commemorative digital cinema tickets.
AMC was already a popular stock for the younger breed of traders trying to shake up the traditional system. Its embracing of digital currencies may make it a more attractive prospect amongst new, Millennial investors.
But let’s not get too carried away with the tech-related stocks. Retail buyers also snapped up over $100m in travel-related stocks too. As you can see from the table above, the big winners here were Las Vegas Sands and Wynn Resorts.
The holiday firms will no doubt be bracing for a renewed wave in vacations as we approach the US holiday season. Thanksgiving and Christmas are just around the corner. Also, the US has given the green light to inbound travel for vaccinated EU and UK travellers, which could point towards an uptick in bookings for both firms.
As mentioned above, stocks have started to recover with major European and US bourses making ground in trading today. But retail investor activity goes to show that vigilance is required to spot opportunities in periods of volatility.
UK inflation surges, stocks struggle
European markets flat at the open this morning as UK inflation surged to a record high in August and Chinese economic data was soft. China’s retail sales fell to +2.5% in August, down from +8.5% in July, whilst industrial output grew by 5.3%, the weakest in more than a year. Asian stocks were weaker again following another soft session on Wall Street. Macau casino stocks the latest to plummet on a Beijing crackdown – Wynn Macau –27%, Sands China –31%, leaving the Hang Seng down 2%. Evergrande shares fell another 5%. Apple unveiled new products, more spending on content. Shares fell 1%, taking losses over the last 5 days to more than 5%. Stock these days has a look of a safe utility and it always does badly on the September product day.
FTSE 100 this morning is flat around 7,030, with energy and financials leading the way higher, tech and healthcare at the bottom. Restaurant Group shares weaker despite some good momentum since indoor dining reopened allowing it to raise earnings guidance. Darktrace shares +8% as it raised revenue guidance, now seeing growth of 35-37%, vs the prior guidance of 29-32%. Fevertree shares up 2% as direct-to-consumer sales doing well and US growth good.
UK CPI inflation jumped to 3.2% in August, the highest since 2012, and rising from 2% in July reflecting a huge month-on-month jump in prices. Not a heap of reaction in the market – sterling still in the recent range after breaking briefly out of it yesterday. Question is one for the Bank of England – it already expects inflation to rise to 4% this year, so it’s unclear whether this will force the MPC into taking a more hawkish stance. It’s hard to say right now – a lot of the pressure could be due to base effects, but equally the core month-on-month increase stood at 0.7%, which shows inflationary pressures are not easing and can’t just be attributed to what happened last year. There is no doubt that with rising energy prices, VAT for hospitality returning to 12.5% and the forthcoming NI rise, living standards are going to suffer. The readings ought to be proving that the transitory narrative was and is wrong and central banks ought to be getting a handle on it to deliver on their mandate. Meanwhile, our power-crazed government are all too willing to impose restrictions on our liberties again over the winter, something that will hurt sentiment and demand in the economy if it happens.
US inflation slows, slightly
US CPI inflation was a fraction softer than expected. The August CPI jumped 0.3% month-to-month, or 5.3% year-on-year. The all-important core reading excluding food and energy costs was up just 0.1% and below the 0.3% anticipated. Stock futures rallied initially on the news but subsequently gave up gains and ended weaker with little appetite to push higher – selling rallies now seems to be the way, at least in the near-term. Yields fell as 10s plumbed 1.275%, while gold recovered $1,800 and holds this level in early trade this morning.
Indices technical analysis
S&P 500 looking at the 50-day line again where it has found support all through the rally this year. Now we are heading into the options expiry choppiness which this year has seen selling into the 19th of the month before recovering. Could see this 50-day area given a real test – failure to hold it would open up the potential for the 10% type correction that many in the market expect this month or next. Yields came off so growth won over cyclicals – Russell 2000 down 1.44% vs the Nasdaq off by 0.45%, the former now through its 50-day and 100-day SMAs and looking towards the 11,282 level where sits the 200-day – last tested in the middle of August.
Russell 2000 futs sitting on the 200-day line, the small caps have chopped sideways since February.
The dollar lost more ground, sinking to its lowest in a week after the inflation report. Cable rallied to its best since August 6th above 1.3910, but got slapped back down by the 100-day SMA and this morning trades around 1.3820.
Crude oil remains well support and the International Energy Agency (IEA) reported yesterday that vaccinations for Covid-19 are set to deliver a major boost for oil demand as concerns about the passage of the delta variant start to ebb.
“Already signs are emerging of Covid cases abating with demand now expected to rebound by a sharp 1.6 mb/d in October, and continuing to grow until end-year,” the Paris-based organisation said on Tuesday. Global oil demand is now expected to rise by 5.2m bpd this year and by 3.2m bpd in 2022.
Unexpected outages during August forced a decline in supply for the first time in five months, the IEA said, which extended the sharp drawdown in global oil stocks. “The most severe by far was Hurricane Ida, which wreaked havoc on the key US Gulf Coast oil producing region at the end of August, knocking 1.7 mb/d offline.” But concerns over delta and its impact on oil demand has kept prices in check – signs that this is already unwinding. Meanwhile the API reported a hefty draw of 5.4m barrels last week, thanks largely to Hurricane Ida. EIA figs today expected to show a draw of 3.6m barrels.
Crude oil (Oct) firmer again and momentum with bulls, just finding some pause for breath at the 61.8% retracement level.
Investors look to Apple product show as equities struggle for momentum
Weak start for equities this morning, taking the baton from a mixed bag for indices in the US and Asia. FTSE 100 off about 0.5% in early trade heading towards 7,000 again, whilst the DAX is closer to the flat line. US CPI inflation later is the chief attraction as well as Apple’s product show. Shares in China fell, while Tokyo closed at a 5-year high.
US stock markets showed growth-value divergence: the Nasdaq slipped and the Dow and the S&P 500 rallied as the market attempted to consolidate after a run of five straight losses. We saw a bit of a case of futures pumping, cash dumping: i.e. futures rallying but the market selling off on the cash open, which is never a good setup for the market. Futures are weaker today, whilst the US dollar is weaker, sitting in the middle of the recent range, after running into resistance at 92.85 area for the second time in a week.
Large cap growth/tech dragging a bit, cyclicals and energy doing better. So, some rotation away from tech/growth towards the value/cyclical part of the market. Rotation magic still working on the broader market and keeps it steady in the face of a bigger pullback, for now. Apple up a touch as markets continue to digest the impact of the Epic court ruling and look ahead to today’s product event. Expect new models but I don’t believe there is any game-changing tech about to be revealed.
The market has been conditioned to buy the dip since TINA – there is no alternative. But we have not seen this so much so it’s a market that could be unlearning what it was taught because of things like inflation. Persistent supply problems, labour shortages etc will mean it’s not as transitory as people think and since it’s supply-shock, cost-push (bad) inflation not just demand-pull (good) inflation, it is not good for the market. Today’s CPI will be closely watched of course, but will be enough to change anyone’s thinking about whether inflation is stickier than the Fed tells us?
Big trouble in China: Shares in Evergrande plunged again after the company issued a statement saying it was struggling to offload assets to cover its monster debt pile amid a liquidity crunch. Shares fell more than 11% and trading in some of its bonds were halted.
Crypto pump and dump: Litecoin shot higher in a frenzied spike on a press release purporting to be from Walmart, the retailer telling customers it is introducing a pay with Litecoin function in store. Wow, we all thought, Litecoin has been doing nothing for months and then it’s suddenly in with the biggest retailer in the US. The market obviously felt it was legitimate and was even more assured when Litecoin’s Twitter account share the tweet. It didn’t take long for it to be outed as fake news, however, and Litecoin came crashing down again. Litecoin jumped 35% in the space of 10 minutes before it went south. Pure Wild West – clearly a well-orchestrated bid by one or more holders who wanted to drive the price higher for just long enough to get out with the heads above water.
There was a strong read across for other cryptos (note the spikes on the 5-min charts) but they are mainly starting to regain some momentum.
Ocado shares fell after it reported a 10% drop in revenues, caused by the fire at its Erith site on July 16th. Revenues were down before the fire – tough comparisons with last year – but slumped 19% in the period after. More capacity is incoming for the UK but no update on international progress. JD Sports ramped higher again on yet another strong performance with profit before tax and exceptional items rising to £439.5 million. Management forecast outturn headline profit before tax for the full year of at least £750 million.
Can’t make it up: Last week talked a bit about how Coinbase was getting in a twist over the SEC suing it for launching Lend, a product that would let people earn interest (yield) on their Bitcoin holdings. So, it was quite amusing to see them this week tap the bond market, which lets people earn yield on their assets, ie the bonds. Coinbase said it would offer $1.5 billion in senior bond notes. “This capital raise represents an opportunity to bolster our already-strong balance sheet with low-cost capital,” the company said, though they’ll paying up to 4-5% for the privilege.
MicroStrategy is at it again, the company revealed it has purchased an additional 5,050 bitcoins for about $242.9 million in cash at an average price of $48,099 per Bitcoin. Down about $19m on that deal so far, then. “As of 9/12/21 we #hodl ~114,042 bitcoins acquired for ~$3.16 billion at an average price of ~$27,713 per bitcoin,” tweeted the boss Michael Saylor.
Trouble in the energy markets seems to be getting worse and there is going to be a rough winter as prices seem to be going only way. Call it political insanity led by the green agenda or a perfect storm of short-term factors, it’s not looking pretty right now.
European natural gas benchmarks keep hitting new highs. Henry Hub natural gas prices were up another 4% to $5.20, a fresh 8-year high and a 14-year high for this time of year. Demand for natural gas is actually growing but supply is failing to keep pace. Problem is the drillers can’t get the funding and they’re over geared as it stands so there is not the ability to go big on drilling to take advantage of the higher prices. Which means inventories are going to keep being squeezed and prices are going one way.
Oil is well and truly back to the races for a fresh run at the YTD highs after breaking above the Aug range at long last. As anticipated given it had completely backloaded its prior demand forecast for 2021 with all the growth to appear in H2, OPEC has finally had to cut its outlook. The cartel trimmed its world oil demand forecast for the last quarter by 110k bpd due to Delta.
“The increased risk of COVID-19 cases primarily fuelled by the Delta variant is clouding oil demand prospects going into the final quarter of the year,” OPEC said in the report. “As a result, second-half 2021 oil demand has been adjusted slightly lower, partially delaying the oil demand recovery into first-half 2022.” OPEC is sticking with the 6m bpd increase in 2021 vs 2020 though, with Q3 showing resilience despite the ongoing problems with the pandemic. But the outlook for 2022 is bullish, with OPEC raising its oil demand forecast for next year by 900k bpd from last month’s outlook, taking demand growth in 2022 to 4.2m bpd. Meanwhile short-term pressure on supply remains with Hurricane Nicholas making landfall in Texas this morning.
WTI made a 6-week high and now clear of the August range and near-term trend resistance.
Stagflation: Industrial giant 3M yesterday warned that inflation is currently higher than company thought in Q3, seeing broad-based inflation, warns on chip shortages.
And it’s not looking like it’s as transitory as the Fed keeps telling us. The Fed reports that consumer 3-year ahead inflation expectations hit 4%, a series high. One-year-ahead inflation expectations rose for the 10th straight month to a median of 5.2% in August. Food prices are expected to grow by 7.9% annually, up from 7.1% in July. Rent is expected to rise by 10%, and the price of medical care is expected to rise by 9.7% over the next year.
Ok so supply chain problems are not the Fed’s fault, but AIT was always going to let inflation expectations become unanchored since it means the market no longer anticipates the Fed will step in. Previous incarnations of the Fed would have sought to guide the market to expect tighter financial conditions by now.
Risk on to start the week as inflation looms
Stocks are trading a tad firmer in the early part of the session, after a toughish week. US indices fell for a fifth straight day on Friday, weighed down by Apple’s setback, the stock falling over 3% after a court dealt a big blow to its app store payment model. Tesla shares fell 2.5% after Cathie Wood’s Ark group sold down its holdings. More than a whiff of mega cap tech/growth fading – question is whether we get the rotation into cyclicals to keep the market grinding higher. Dip buyers failed to come in last week so looking perhaps to see whether there are further losses to come. Futures are this morning trading in the green. Meanwhile inflation is still a problem, with US producer prices rising 8.3%. China’s regulatory crackdown on big tech continues, with Beijing planning to break up Ant’s mobile platform Alipay, sending Alibaba shares down 5% in Hong Kong and the broader Hang Seng down by 2%.
Nevertheless, there is a mild risk-on feel to the start of the new trading week. The FTSE 100 is up half of one percent after it tested the 7,000 support last week, which has held for now. The index is slap in the middle of the range it’s treaded since April, failing to break out in any meaningful way. Utilities, energy and financials doing the lifting this morning, with Royal Mail and National Grid at the top of the leader board. ABF fell to the bottom despite raising its profit target for the year on improved margins as supply chain problems hurt sales. SThree shares jumped another 6% after it also said profits would be ahead of expectations – staffing shortages playing into the hands of recruiters.
Stagflation: The US PPI reading for August was hot, with prices up 0.7% month-on-month and sending the annual increase to 8.3%, the biggest since records began in 2010. Whilst some may argue that this is transitory, and due to supply chain bottleneck, shortage of vessels etc etc, and therefore ‘nothing the Fed can do about it’, you have to ask yourself whether expansionary monetary policy is actually doing more harm than good right now.
Light day for data so all eyes on the US consumer price index tomorrow. The key inflation reading for the month of August is set to come in at 5.3%, according to consensus. In July, inflation steadied at 1 13-year high of 5.4%. Core inflation rose 4.3%. But there was some moderation in the month-on-month increase, with core at +0.3% vs +0.9% in June. Vehicle prices have been one of the main drivers of the increase, but the pace of price increases slowed almost to a halt in July. A hotter-than-expected reading tomorrow could see the market adjust its view of when the Federal Reserve begins tapering asset purchases. Cooling in inflation pressures would be positive for market sentiment.
Oil prices advance
Crude oil prices are firmer with WTI (spot) nudging its head above $70 again. Supply remains affected by Hurricane Ida. OPEC is due to release its monthly outlook later today. In FX, the dollar is firmer, with the euro dropping to its weakest since the end of August. GBPUSD is just about holding on to 1.38. Hard to talk meaningfully about FX trades right now with everything so range bound and trading sideways. Elsewhere, Bitcoin is lower again around $4k and chart action looks dicey.
Are these tech stocks worth picking up? Jeffries thinks so
Investment bank Jeffries has selected several tech stocks it thinks could energise portfolios across the rest of 2021.
Jeffries tech stocks
As reported by CNBC, analysts at Jeffries have been scouring tech and semiconductor stocks to see which could perform best throughout the year.
Investors are looking for a mixture of growth and value stocks to add to their portfolios. Technology equities, incorporating semiconductors and micro-components manufacturers, could potentially be on their radars.
It should be stressed now, however, that the world is currently experiencing a global chip shortage. The raw materials needed to create chipsets and other nanotechnologies have seen prices skyrocket throughout the year. This has caused long supply chains and even slowed manufacturing output from the likes of Apple and Tesla.
Back to the equities, Jeffries has warned against taking extreme positions on either growth or value stocks. Instead, the tech firms listed below could be used to strike a balance between the two.
The tech stocks
Jeffries has identified an international collection of stocks split over three subsectors as those to watch.
Samsung and its affiliate Samsung SDI are both on Jeffries list. The bank believes these can be snapped up at a reasonable price. Several Taiwanese companies, including Delta Electronics, Unimicron Technologies, and Nan Ya PCB also make it to Jeffries’ shortlist.
As to be expected, a fair number of Chinese stocks have been flagged as potentials by Jeffries. In this category, laptop manufacturer Lenovo and electronic components supplier BOE Technology Group are considered reasonable price stocks.
Away from Asia, Apple makes the list, despite slowing growth warnings the California brand gave during its latest earnings report. Ericcson makes the list too.
Jeffries likes Korean firm SK Hynix, a manufacturer of memory semiconductors, and Taiwan’s TSMC. Both companies have been flagged as growth stocks at a reasonable price. Novatek Microelectronics, another Taiwanese tech firm, makes the list too.
Texas Instruments, Skyworks Solutions, KLA, and Qorvo are the US semiconductor manufacturers that piqued Jeffries analysts’ interest. European manufacturers on the bank’s quality list include STMicroelectronics and BE Semiconductor Industries.
NortonLifeLock, the US IT security specialist, is considered a quality stock by the Jeffries team. China’s Venustech joins NortonLifeLock on the bank’s quality stock screen.
Elsewhere, Indian company Tech Mahindra has been eyeballed as a stock with high growth potential.
Earnings season: Another record-breaking quarter for Apple
Apple smashes yet another quarterly earnings season – but the stock price takes a hit.
Apple’s headline stats
Apple beats Wall Street expectations once again. This was its strongest June quarter report on record, with sales of all major Apple product lines up 12% across the board.
Overall revenues were up 36% year-on-year for a total of $81.41 billion. When broken into key categories, Apple’s latest quarterly revenues look something like this:
- Total Revenue – $81.41 billion – 36% y-o-y growth
- iPhone revenue – $39.57 billion – 49.78% y-o-y growth
- Services revenue – $17.48 billion – 33% y-o-y growth
- Other Products revenue – $8.76 billion – 40% y-o-y growth
- Mac revenue – $8.24 billion – 16% y-o-y growth
- iPad revenue – $7.37 billion – 12% y-o-y growth
- Gross margin – 43.3% y-o-y growth
It’s of course iPhones that represent the largest chunk of Apple’s quarterly revenues. The California brand launched its latest iteration in October last year. Since then, it’s place as the centrepiece in the Apple crown has gone undisputed.
As we can see from the above, other Apple products, including Macs and iPads, also remain extremely popular with consumers.
“Our record June quarter operating performance included new revenue records in each of our geographic segments, double-digit growth in each of our product categories, and a new all-time high for our installed base of active devices,” said Luca Maestri, Apple’s CFO, in a statement released on Tuesday.
“We generated $21 billion of operating cash flow, returned nearly $29 billion to our shareholders during the quarter, and continued to make significant investments across our business to support our long-term growth plans.”
In terms of guidance, Maestri said the company is forecasting double-digit year-on-year growth into the next quarter, although this is expected to slow in September.
Apple stock still takes a knock
Despite these huge gains, Apple shares reacted poorly to Maestri’s September forecasts. The stock fell 2% after the announcement and is currently trading down roughly 0.7%.
This comes even after earnings per share rose from the estimated $1.01 to $1.30.
So, why the dip? It’s the same thing that affected Tesla this year, and indeed most tech companies involved in physical hardware: supply side issues.
There is currently a global chip shortage. A shortage of silicon used to manufacturer chipsets necessary for building Apple products has caused supply and manufacturing issues. The most affect products were Macs and iPads, which use “legacy nodes”, i.e., older chip models, unlike the iPhone which runs on more current chipsets.
“We had predicted the shortages to total $3 to $4 billion,” Apple CEO Tim Cook told CNBC. “But we were actually able to mitigate some of that, and we came in at the lower than the low end part of that range.”
The drop in Apple share price may then have been caused by consternation around the coming quarters’ performance until the end of 2021. Will supply shortages stymie growth? Likely so, but Apple has proven it can mitigate these and still come out on top. However, it’s how much growth slows across the rest of the year, if it does, that may have caused concern for investors.
Apple analyst sentiment
Even with stock down, sentiment appears to be fairly strong. According to the Analyst consensus tool on the Marketsx platform, Apple holds a buy rating according to 25 market observers’ opinions:
Sentiment is also veering towards the bullish:
So, another massive quarter for the world’s foremost tech brand. Now, it’s up to Cook, Maestri and the rest of the team to navigate Apple through a world where commodities and raw materials are in short supply. Can it deliver? Watch this space.
To see which large caps are still due to report on Wall Street this season, make sure you check out our earnings calendar.
La settimana che ci aspetta: La riunione della FED mentre l’inflazione torna a crescere
La FED si riunisce mentre l’inflazione inizia a colpire l’economia statunitense. Powell e colleghi interverranno con importanti cambiamenti? Anche il PIL degli Stati Uniti sarà al centro dell’attenzione, con previsioni di una crescita record per il trimestre. Nel frattempo, Tesla preme sull’acceleratore nella settimana della stagione degli utili statunitensi più intensa finora in questo trimestre.
A parte i rapporti sugli utili, il grande evento della settimana sarà la riunione di luglio del FOMC.
È probabile che l’inflazione e la crescita dell’economia saranno al centro dell’attenzione nei colloqui di luglio. Di recente il presidente Powell ha promesso un “forte sostegno” all’economia statunitense per il periodo post-pandemia, in un contesto di aumento dell’inflazione.
Secondo Powell, l’attuale aumento dei prezzi al consumo è dovuto alla riapertura della nazione e il fenomeno è destinato a sparire. In un intervento alla Camera dei rappresentanti degli Stati Uniti, Powell si è attenuto al copione, evidenziando che mancano ancora 7,5 milioni di posti di lavoro all’economia pre-pandemia degli Stati Uniti.
Secondo Powell una riduzione degli strumenti di stimolo è ancora lontana. Il programma di acquisto di obbligazioni da 120 miliardi di dollari al mese della FED probabilmente non cambierà. Come accennato in precedenza, questo fattore è strettamente collegato al mercato del lavoro. L’acquisto di obbligazioni e il supporto della FED rimarranno probabilmente invariati fino il gap con il mercato del lavoro non sarà colmato.
Non è previsto alcun aumento dei tassi prima del 2023.
Ma nonostante tutti i discorsi della FED relativi al fatto che l’inflazione poggi su una base ampia derivante dall’intensificazione dell’attività economica, molti rimangono poco convinti del piano per ravvivare l’economia.
La lettura dell’IPC principale del mese di giugno, pari al 5,4%, è stata la più alta da quasi 13 anni. Gli osservatori sia dalla parte democratica che da quella repubblicana sperano il fenomeno possa essere tenuto sotto controllo in tempi relativamente brevi.
Powell ha promesso, se l’inflazione crescerà in modo incontrollato, “di utilizzare tutti gli strumenti a disposizione per riportare l’inflazione verso il basso”.
Ma ha anche aggiunto che “sarebbe un errore agire prematuramente”.
Parlando ancora di economia statunitense, giovedì è prevista la prima lettura del PIL del secondo trimestre.
Finora le previsioni sono buone. Deloitte riferisce che i progressi tecnologici potrebbero aiutare a spingere gli Stati Uniti verso un altro trimestre eccezionale, superando i livelli di crescita pre-pandemia.
The Conference Board ha previsto che l’economia statunitense crescerà con un tasso del 9% su base annua nel secondo trimestre del 2021.
“Con la completa riapertura dell’economia e con la continua crescita della fiducia dei consumatori, ci aspettiamo che la spesa dei consumatori aiuti spronare la ripresa, in particolare la spesa per i servizi alla persona”, ha affermato The Conference Board. “Queste spese saranno sostenute dal rafforzamento del mercato del lavoro e dall’ampia mole di risparmi derivanti da tre cicli di stimoli fiscali erogati nell’ultimo anno”.
Abbiamo anche visto nelle precedenti pubblicazioni del PMI che i settori manifatturiero e dei servizi hanno continuato a restare in crescita fino a giugno, dopo un forte incremento ad aprile e maggio. Questi tre mesi di eccellenti prestazioni del PMI dovrebbero aiutare ad alimentare la crescita del PIL degli Stati Uniti in questo trimestre.
Ma nuovamente, tutta la domanda repressa che si sta sviluppando sta portando all’aumento dei prezzi dei principali beni di consumo che gli Stati Uniti stanno attualmente patendo. Abbiamo anche ricevuto segnalazioni di prezzi elevati alla produzione, che iniziano ad influenzare anche il settore manifatturiero. Ad esempio, la lettura dell’indice PMI manifatturiero di giugno è stata in realtà leggermente inferiore a quella di maggio.
Ma, se le previsioni sono corrette, gli Stati Uniti stanno per vivere uno dei migliori periodi di crescita trimestrale dalla seconda guerra mondiale.
A parte questi dati, sarà la settimana finora più intensa per la stagione degli utili in questo trimestre.
Nel corso della settimana circa 40 aziende statunitensi a larga capitalizzazione condivideranno riferiranno riguardo ai loro utili nel secondo trimestre. Tra di esse, la maggior parte delle azioni FAANG. Netflix ha riferito la scorsa settimana, ma questa settimana toccherà al resto dei colossi tecnologici: Alphabet (Google), Amazon, Facebook e Apple.
Ciò nonostante, è Tesla a dare il via ai lavori con il riepilogo degli utili in arrivo lunedì, dopo la chiusura del mercato statunitense.
Sarà un appuntamento interessante, perché il prezzo delle azioni di Tesla è cresciuto del 330% tra maggio 2020 e maggio 2021, e tradizionalmente i prezzi delle azioni tendono ad aumentare prima dei rapporti di Tesla. Questo è avvenuto con una media dell’1,6% in anticipo rispetto a tutti i rilasci trimestrali degli ultimi tre anni.
La casa automobilistica di Elon Musk ha molto da festeggiare in questo trimestre. Per la prima volta ha consegnato 200.000 auto in un trimestre. Tesla ha anche lanciato una gamma di nuovi servizi di automazione, basati su un servizio in abbonamento da 199 USD al mese.
Le previsioni sugli utili sono ottime, ma ne sapremo di più lunedì.
Per ulteriori informazioni su quali aziende a grande capitalizzazione stanno riferendo i loro guadagni, assicurati di dare un’occhiata al nostro calendario degli utili negli USA.
I principali dati economici
|Mon 26-Jul||9.00am||EUR||German ifo Business Climate|
|Tue 27-Jul||3.00pm||USD||US Consumer Confidence|
|Wed 28-Jul||2.30am||AUD||CPI q/q|
|2.30am||AUD||Trimmed Mean CPI q/q|
|3.30pm||OIL||US Crude Oil Inventories|
|7.00pm||USD||Federal Funds Rate|
|7.30pm||USD||FOMC Press Conference|
|Thu 29-Jul||1.30pm||USD||Advanced GDP q/q|
|3.30pm||GAS||US Natural Gas Inventories|
|Fr 30-Jul||9.00am||EUR||Germany Preliminary GDP q/q|
|1.30pm||USD||Core PCE Price Index m/m|
I principali rapporti sugli utili
|Mon 26 Jul||Tue 27 Jul||Wed 28 Jul||Thu 29 Jul||Fri 30 Jul|
|Tesla||3M||Automatic Data Processing||CME||AbbVie|
|General Electric||Boeing||Keurig Dr Pepper||Aon|
|Advanced Micro Devices||McDonald’s||Mastercard||Caterpillar|
|Microsoft||Spotify||Gilead||Procter & Gamble|
|Mondelez||Liberty Global||Takeda Pharmaceutical|
Thematic investing: investing in technology
Our next instalment in the thematic investment series looks at which tech stocks to buy. Investing in technology can pay dividends – but it can also prove tricky too.
Thematic investing: tech stocks
Investing in technology: what you need to know
Technology is an all-encompassing term. It covers an enormous range of sectors. Everything from your smartphone to electric vehicles to productivity, and more besides sits within the technology sphere. Even companies like Disney, with its Disney+ streaming service, or Amazon with its Amazon Web Services offer, are considered tech stocks.
The best tech stocks to buy will be entirely up to you and what your investing or trading goals are. Be aware that, because of the sector’s diversity, there are many different types of company with differing compositions, market caps and characteristics within the technology space.
Some might be multi-billion-dollar behemoths like the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). Others might be market disruptors like Uber or Spotify. Some firms will be well established with vast cash reserves. Others might up-and-comers might be burning through capital but with rapid share appreciation to match.
That said, tech stocks are amongst some of the best performers. Indices dedicated solely to technology and related firms offer some considerable potential returns for instance. The Nasdaq 100, listing the top 100 US tech stocks for example, is up over 43.8% as of May 25th 2021. The Dow Jones US Technology Index is also showing similar numbers, up 47.92% year-to-date.
Remember the risks when searching for tech stocks to buy
Technology is all about innovation. It never stands still. Because of that, even the best tech stocks can be a risky investment. Huge capital investment is needed to ensure a company’s solutions and products remain at the head of the pack. A company can disappear completely if a rival develops a product or service consumers and the market prefer.
Some tech firms’ valuations have been questioned too. We mentioned Uber earlier. That’s a company that has admitted it may never be profitable. Is that worth the risk for investors?
Then there are general economic patterns to consider. When times are tough, luxury items like brand new smartphones may not sell well. Thus, the manufacturer’s share price may fall, along with companies supply components and raw materials needed to build a new smartphone.
When times are good, and consumers have more cash to spend, there might be higher demand.
Inflation woes play a part too. As recently as late May 2021, we’ve seen tech-sell offs generated by fears that inflation may bite into tech manufacturers and providers’ profitability. This was triggered by a spike in bond yields and general uncertainty around the economic picture caused by the global Covid-19 pandemic.
All investing and trading is risky. Investing in technology can prove doubly so. Only invest or trade if you are comfortable with any potential losses. Do your research and understand how to pick stocks before committing any capital.
What are some of the best tech stocks to watch?
Again, what is the best stock will depend entirely on your individual budget and circumstances. Consider a wide range of different sectors and industries covered under the tech umbrella.
Diversification, i.e., getting exposure to several different industries, stocks, and sectors, is used by investors to mitigate risk. If one stock performs badly, the theory goes, the other stocks or assets in your portfolio can help protect against that by performing well.
With that in mind, the below may be tech stocks to buy if they meet your individual criteria.
AMD makes semiconductors and micro-components used to build everyday essentials like phones, laptops and so on. Its main product line covers graphics cards, microprocessors and motherboard chipsets.
As of May 25th, 2021, AMD stock was up just over 47%. It also looks like it has a bright future. Latest quarterly earnings saw AMD revenues expand 93% year-on-year, reaching $3.45 billion. Operating income for the quarter was $662 million while net income was $555 million – a 243% increase from the prior year.
We mentioned earlier how technology companies must invest heavily to keep up with the pace of innovation. In the case of AMD, its investments are a form of protection. Due to intense demand, chipset raw materials are at a premium right now. To avoid shortages, AMD recently inked a $1.6bn wafer supply deal with GlobalFoundaries.
GlobalFoundaries will be supply necessary components between 2022 and 2024 under the terms of the deal. AMD is now developing second and third generation Epyc server chips – a product of high interest to AMD customers.
According to the Analyst Recommendations tool on the Marketsx trading platform AMD is rated as a buy by 52.9% of analysts.
Apple is one of the most recognisable brands on the planet. As tech companies go, they don’t come bigger than the Californian company. Its clean-cut branding combined with a reputation for innovation and useability make its products hot property. Because of that, Apple often makes an appearance amongst the best tech stocks.
Apple’s latest round of earnings, coming in April 2021, saw the company enjoy yet another blowout quarter. Companywide sales were up 54% y-o-y. iPhone sales shot up 65.5% during this period, spurred on by the launch of the new iPhone 12. Mac and iPad sales outperformed even Apple’s flagship product, notching impressive 70.1% and 79% annualised growth.
In monetary terms, total revenues were up 53.7%, totalling $89.58 billion. Earnings per share (EPS) beat expectations at $1.40 vs. the estimated $0.99.
Apple stock is up across the year. It was trading for around $80 in May 2020. Flash forward to May 2021, and AAPL is exchanging hands for about $126. Analyst forecast is bullish with analyst consensus heavily weighted towards buy.
ASX-listed Xero is carving out a position as a global leader in cloud accounting.
In its 2021 financial year, the Wellington, New Zealand-based software supplier, managed to expand its subscriber base by 20% to 2.74 million worldwide. Stand out geographies included:
- 17% growth in UK customers – 720,000 subscribers
- 18% growth in US customers – 285,000 subscribers
- 40% growth in Rest of the World customers – 175,000 subscribers
Growth is carefully pared with stock performance. It’s something to consider when investing in technology stocks. Xero’s average annual 25.1%, which ranks better than 85% of the companies in Software industry, according to analysts GuruFocus.
The 3-year average Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) growth is 86% – better than 97% of software companies profiled by GuruFocus. Taxes, Depreciation, and Amortization
Xero’s future is entirely focussed on expansion. It regularly tells investors it has a preference to re-invest cash generated to drive long-term shareholder value. But because it reinvests so much, Xero may not have major profitability going forward. Something to consider.
Investing in technology: reiterating the risks
When looking at tech stocks to buy or trade, consider the risks. While you can make money, there is a risk of capital loss. Do your research before committing any capital and only invest if you are comfortable with any potential losses.
Fed sticks to its guns, Apple and Facebook earnings blowout
The Federal Reserve remains resolutely firm. Jay Powell reiterated that the central bank is not even close to talking about tapering bond purchases, a move that would begin to unwind some of the extraordinary accommodation delivered in the wake of the pandemic. The Fed chair said the US economy is still a long way from achieving the progress required to dial back stimulus – over 8m jobs are still lost and that means we need several blowout jobs reports to get there. Powell also stressed that policymakers are not worried about inflation and think any price pressures will prove temporary. The Fed is doubling down here and sticking to its guns. Advance GDP numbers due to today should show the US economy roaring back.
All this should be a green light for stocks, but the markets are wary right now as they tread record highs and all this stimulus is priced in and the macro outlook well understood. The US 10-year bond yield moved to test the 1.65% level. US stock markets closed marginally lower, though the small cap Russell 2000 managed to eke out a small gain. Futures point to solid gains for Wall Street later today when the cash equities open. European stock markets are largely higher in early trade today, with the FTSE 100 popping its head above 7,000 again on a raft of largely positive corporate updates.
Apple reported another stunning quarter, with sales soaring from last year and a fresh round of buybacks. The company raised the dividend by 7% to $0.22 per share and announced $90 billion in share buybacks. Apple revenues grew more than 50% year-on-year, with total sales of $89.58bn vs around $77bn expected. EPS came in at $1.40 vs $1.00 expected. At all levels, we can see Apple outperforming even the most bullish expectations. The core iPhone business saw sales up 65% to $47.94 billion vs. $41.43 billion estimated. This was stunning – the iPhone remains the golden goose and way in which consumers become part of the Apple ecosystem. Services – a higher margin business that includes things like the Cloud, App Store, Apple Music – grew revenues by 26.7%. Revenues in China rose 87% – albeit this was in comparison to a quarter last year in which China was most affected by the pandemic. Shares rose 2% in the after-hours market. A really exceptional quarter – it’s not a surprise that it exceeded quite a low bar, but noteworthy just by how much.
Facebook shares advanced 6% in after-hours trading as the company reported posted forecast-beating revenues and earnings. However, the company warned investors that growth could slow as new Apple privacy policies would make it harder to targe ads on social media. I’m fairly used to Facebook using earnings calls to warn that rates of growth could slow in future, and I think investors are too. Earnings per share came in at $3.30 vs $2.37 expected on revenues of $26.17bn, which were about $3bn more than expected and up 48% on a year before. Net income rose 94% to $9.5bn. Average revenues per user came in at $9.27 vs. $8.40 expected.
BT confirmed it is looking to sell its TV business. This has been a long time coming – the vast sums BT paid to secure football rights was always at odds with the core business. In a statement responding to press speculation, the company says “early discussions are being held with a number of select strategic partners, to explore ways to generate investment, strengthen our sports business, and help take it to the next stage in its growth”. Whilst clearly the pandemic has badly hit sport, BT has never set too well in the content space; there are many with deeper pockets who do content. Ballooning costs left BT paying a hefty bill for sports that wasn’t being covered. It’s further evidence of chief executive Philip Jansen ripping up the Gavin Patterson era playbook to focus squarely on the Openreach rollout and modernise BT.
Shell raised its dividend after beating expectations thanks to higher oil prices and improved margins in its chemicals business. Adjusted net income rose 13% from a year before. Net debt fell $4bn. Meanwhile French firm Total said profits are back to pre-pandemic levels as adjusted net income hit $3bn, higher than the pre-crisis first quarter of 2019.
Unilever shares rose over 2% as the company announced it will commence a €3bn share buyback scheme next month after a 5.7% jump in sales in the first quarter. Most (4.7%) came from higher volume, with just 1% from stronger pricing. For 2021 Unilever stuck to its target of underlying sales growth to be within 3-5%, with the first half at around the top of this range. Management also pointed to additional supply chain costs, with rising commodity and freight prices a factor as margins are seen declining a touch in the first half before picking up later in the year. Ongoing covid restrictions in some areas of the world continued to support in-home sales, whilst the slackening of restrictions in some geographies boosted out of home sales. Mayonnaise and ice cream were strong sellers. India and China both posted strong double-digit growth against a backdrop of strict lockdown measures which impacted the prior year.
NatWest reported Q1 2021 operating profit before tax of £946 million and an attributable profit of £620 million. This was boosted by the reversal of provisions for bad loans as government support schemes reduced the amount of loan delinquency banks had anticipated. NatWest booked at net impairment credit of £102m. But shares fell as the total income was a slight miss, coming in at £2.66bn vs £2.7bn expected. Net interest margin fell 2bps to 1.64%. Shares declined more than 3% in early trade. Standard Chartered continued the run of positive news from the large banks as it recorded underlying pre-tax profit rising 18% to $1.4bn as lower impairment charges and strong cyclical recovery in the global economy offsetting lower interest margins. Return on tangible equity rose 220bps to 10.8% and management reaffirmed their view that income will start growing again in the second half of the year and for impairment charges to reduce significantly.
Smith & Nephew shares rose 6% to the top of the FTSE 100 after reporting Q1 revenue up 6.2% on an underlying basis (11.5% reported) to $1.264bn. This included 3.4% from foreign exchange and 1.9% from acquisitions, whilst the quarter also included two more trading days than the equivalent 2020 period.
Apple earnings preview: not crunch time yet
So far it looks very much like profit margins are holding up, earnings are rising fast at most companies and earnings expectations are doing fine. Wednesday sees the big one: Apple.
Shares in Apple are up just 1.5% YTD but the stock has nevertheless enjoyed a stellar run up in the last 12 months and in the last month has rallied from a trough around $116 to $134 by Tuesday to get back close to the all-time high. The pandemic has been good for Apple but the value rotation has crimped gains this year. But this remains a go-to stock with immense potential and expectations are not too high for once, albeit with the stock trading at about 36x trailing 12-month earnings it’s looking pretty rich. Here are a few things to look out for from Wednesday’s Apple earnings.
Apple is seen reporting EPS of $1 on $77.30bn in revenues. Last quarter it blew past expectations posting all-time record revenue of $111.4 billion, up 21% year over year, and quarterly earnings per diluted share of $1.68, up 35%.
Guidance: Apple has declined to offer guidance since the pandemic struck, so investors will be keen for this to change now that the clouds of the coronavirus are lifting. The capital return programme (see below) update is usually made alongside the March quarter and so now would be a reasonable time to star offering some guidance for the coming quarters.
iPhone: Still the golden goose, but there are concerns about a softening in demand as well as lower demand in China. Demand will be decent, with about a third of the iPhone installed base up for renewal, albeit we likely see some moderation from the last quarter. Overall, the Street may underappreciate the resilience in iPhone demand from the delayed launch last year and picks up market share thanks to stimulus cheques.
Mac and iPad: Can very strong demand for home computing products like Macs and iPads hold up the pandemic abates? Whilst vaccinations are driving a lifting of lockdowns, I still see a strong demand from WFH and home education trends globally.
Ecosystem: Revenues from Services remains a central plank of the investment thesis and with a growing installed base this should continue to deliver. Last quarter Services growth reached +24% with the first quarter of Apple One subscription bundles helping to lift the category.
Returns: I think this quarter will underline just how strong the free cash flow is and investors are going to start to see more cash coming their way after a record year for sales. Apple could aggressively add to share buybacks and increase the dividend to as much as $0.90, implying a 10% increase.
Last quarter’s summary: Apple shares fell in the aftermath of its January earnings report covering the holiday quarter. Revenues hit a record $111.4bn, well ahead of forecasts and representing 21% year-on-year growth thanks to broad-based gains across its product suite. The iPhone 12 launch quarter was exceptionally strong, with sales +17% in iPhone, taking the installed base for iPhones to 1bn from 900m. Mac revenues rose 21% yoy, whilst iPad sales jumped 41%. As noted in our preview, growth in personal computer sales driven by pandemic trends such as work from/stay at home was always likely to boost Mac and iPad sales. Growth in Other Products – devices like the Apple Watch and AirPods, climbed to 29% yoy. Services growth reached +24% with the first quarter of Apple One subscription bundles helping to lift the category. The growing installed iPhone user base should further support Services growth in the coming quarters, we noted at the time. We also noted very strong international sales (now 64% of total sales vs 61% a year ago), whilst revenues from Greater China rose 57%. The confidence in Apple fiscal first quarter earnings was well justified and the slight pause in the shares reflects a little profit taking after a strong run in 2020 whilst the lack of guidance for the second quarter was a thorn. A record-breaking quarter but it should not be seen as a high watermark for Apple.