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Recent Articles
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Saudi Arabia Attacked, Oil Prices Shoot Higher
Sep 16, 2019
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Disaster struck this weekend when several drones took out the Abqaiq oil processing facility and the massive onshore Khurais oil field in Saudi Arabia on Saturday, with WTI and Brent both surging on the news once trading resumed at the start of the week. We will be monitoring this situation very closely going forward. The pace at which Saudi Arabia can bring capacity back online will have an outsize impact on global oil markets going forward, as the world no longer has any spare capacity to turn to during times like these (when supply is severely curtailed). Geopolitical tensions are clearly growing and that could spill over into a war directly between Saudi Arabia and Iran, but for now there’s no signs of troops mobilizing for such an endeavor.
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Economic Roundtable: Quant Quake, “Quac-cidental Correlation,” and Economic Moats
Sep 16, 2019
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Image Source: Anders Sandberg.
Last week, the markets may have revealed that internals aren’t all that healthy. Major equity markets experienced a “rotation” that reminded many investors of the “quant quake” from August 2007. As Valuentum’s Brian Nelson wrote in Value Trap, “just a few bad days in the market caused a rapid unwinding of many quant long-short strategies (back then). Goldman’s chief financial officer said at the time that the firm was witnessing ‘25-standard deviation moves, several days in a row.’” On the surface, markets last week seemed relatively calm, but as the episode in 2007 revealed the activity last week may just be the calm before the storm. Many are pointing to overcrowded trades in betting against certain factors, while others are saying that many were forced to deleverage. We’re not so sure, and we think it may be the opposite: after years of suffering from lagging “value” returns, we think several quant shops stepped in to take on leverage, betting on a return to “value.” Let's talk about last week's quant quake, spurious correlations (the “guac-cidental correlation, in fact), economic moats and much more.
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Our Reports on Stocks in the Auto Making Industry
Sep 16, 2019
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Image Source: HRYMX.
Our reports on stocks in the Auto Manufacturers industry can be found in this article. Reports include F, GM, HMC, HOG, TM, TSLA.
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Valuentum's Best Ideas Newsletter Portfolio
Sep 15, 2019
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We disclose the holdings of the portfolio of the Best Ideas Newsletter in this article. This portfolio can always be found in each edition of the monthly Best Ideas Newsletter.
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Oracle’s Cloud Business Solid; CEO Hurd Taking Some Time Off
Sep 15, 2019
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Oracle's strong Dividend Cushion ratio reflects considerable free cash flow generation in excess of cash dividends paid. Fiscal first quarter free cash flow of $5.6 billion covered cash dividends paid of $795 million more than 7 times.
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Semiconductors Broadcom and Cree Push Forward in an Uncertain Environment
Sep 15, 2019
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Image Source: Broadcom Inc -- IR Presentation.
While the free cash flow outlooks for AVGO and CREE are relatively strong, weakening business confidence and investment around the world and mounting geopolitical tensions between the US and China (short-term tariff reprieves aside) create monstrous headwinds that the semiconductor industry can only do so much to mitigate. We don’t include many semiconductors in our portfolios given how notoriously difficult the space is to play. As things stand today, Intel is included in both our Dividend Growth Newsletter and Best Ideas Newsletter portfolios, and we continue to like INTC as our way to gain exposure to secular growth trends within the semiconductor space.
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