Market Update for 4 May 2020: Stocks, Gold, and Bitcoin

This article provides an overview of news that may be relevant to three different markets: equities (mainly U.S. stocks), commodities (mainly gold), and crypto (mainly Bitcoin).

The price information you’ll see in this article was taken around 08:00 UTC on 4 May 2020. The data providers used for pre-market trading data are as follows:

Two pieces of news seem to be on the minds of many investors today.

First, on Saturday (May 2), legendary American investor Warren Buffett, one of the world’s richest men, as well as the chairman and CEO of Berkshire Hathaway, made some worrisome comments at his company’s 2020 Annual Shareholders Meeting in Omaha, Nebraska, which was broadcast on Yahoo Finance.

According to a report by CNBC, during the meeting, Buffett explained why Berkshire Hathaway had not made any major investments recently despite the drop in U.S. stock prices as the result of the COVID-19 pandemic and despite the fact that his company is sitting on a mountain of cash (to be more precise, $137 billion in cash and equivalent instruments, according to Berkshire Hathaway’s latest 10-Q filing):

“We have not done anything, because we don’t see anything that attractive to do… Now that could change very quickly or it may not change…”

“We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion. And if we really like what we are seeing, we would do it.”

As Anthony Pompliano (aka “Pomp”), Co-founder and Partner at Morgan Creek Digital, pointed out yesterday in a Q&A session (on the economy and financial markets) broadcast live on YouTube yesterday, Buffett’s hesitancy to pull the trigger could mean that he expects further falls in the prices of U.S. stocks.

Second, on Sunday (May 3), U.S. Secretary of State Mike Pompeo said during an interview with ABC’s “This Week” program that the Trump administration believed that the Chinese government “did all it could to make the sure the world didn’t learn in a timely fashion about what was taking place” in China in the early days of the COVID-19 outbreak. Furthermore, according to ABC, there are U.S. intelligence reports that say the coronavirus may have come from a lab in Wuhan and that China quietly stockpiled medical supplies (such as masks) in the early January.

Pompeo then went on to say that China’s mishandling of the COVID-19 crisis had resulted in the loss of hundreds of thousands of lives around the world and that President Trump intends to “hold those responsible accountable.”

CNN says that “multiple sources inside the administration say that there is an appetite to use various tools, including sanctions, canceling US debt obligations and drawing up new trade policies, to make clear to China, and to everyone else, where they feel the responsibility lies.”

Equities

Here is how various stock markets around the world are doing on Monday morning (London time):

  • Hong Kong’s Hang Seng: -4.18%
  • Japan’s Nikkei 225: -2.84%
  • France’s CAC 40: -3.70%
  • Germany’s DAX: -32.%
  • UK’s FTSE 100: -0.14%

Commodities

Spot gold is trading at $1,705.49, up $16.75 (or +1%).

In the year-to-date period, gold is up 17.50%.

Source: Market Update for 4 May 2020: Stocks, Gold, and Bitcoin | CryptoGlobe

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Top stocks to buy in May 2020 (high growth stocks) – hope this helps! This was a very brief explanation of the 4 stocks so please make sure to do your own research always! I am not a financial advisor, all the information I share is my own opinion. *** Join my Discord group chat: https://discord.gg/EyCYcxS *** Check out Taylor Price’s channel, she’s a day trader based in the USA. She’ll also teach you the basics of personal finance: https://www.youtube.com/channel/UCUqp… Here are some blue chip stocks you can look into (for entertainment purposes only, not advice): Apple (AAPL) Facebook (FB) Microsoft (MSFT) Royal Bank of Canada (RY) Tesla (TSLA) Toronto-Dominion Bank (TD) Pepsi (PEP) Nike (NKE) IBM (IBM) Johnson & Johnson (JNJ) Disney (DIS) Visa (V) Starbucks (SBUX) McDonalds (MCD) Amazon (AMZN) Google (GOOGL) Get free $5 to trade with Wealth Simple Trade – https://my.wealthsimple.com/app/publi… My Instagram and Snapchat: Sarfinance Music is by Lakey Inspired, here is his channel: https://bit.ly/2OIb6Kl #Stockstobuyinmay2020 #topstockstobuynow #stockmarketcrash2020

Stocks Rally, Dow Rises 700 Points On News Of Gilead’s Possible Coronavirus Treatment

Despite dismal economic data earlier this week, the stock market jumped on Friday as investors became more optimistic about the coronavirus outlook, amid news overnight that Gilead Sciences’ Covid-19 treatment was showing signs of success in clinical trials with patients.

KEY FACTS

The Dow Jones Industrial Average was up 3%, nearly 700 points, while the S&P 500 gained 2.7% and the Nasdaq Composite rose 1.4%.

Stocks got a boost thanks to news overnight that biotech company Gilead Sciences has made a breakthrough in its clinical trial of antiviral drug Remdesivir, which showed promising results in treating coronavirus.

The phase 3 trial, conducted at the University of Chicago, found that most patients treated with the drug had “rapid recoveries in fever and respiratory symptoms,” according to the original report from STAT News.

Adding to Wall Street’s optimism about the virus outlook was a White House press conference on Thursday night, in which President Trump outlined his plans for getting the U.S. economy back up and running.

Trump said some states that met criteria for testing and a low number of new cases would be able to reopen “literally tomorrow,” though he made it clear that the onus remains on state governors, who would be calling their own shots on when to reopen.

The market also got a boost from the news that embattled airline carrier Boeing, which saw its stock plunge by as much as 75% during the coronavirus sell-off, would resume production in the Seattle area later this month.

Crucial statistics

Gilead’s stock jumped on the news Friday, rising almost 10%, while Boeing BA stock rebounded by more than 13%. Shares of several big-name stocks led the market higher this week, despite falling slightly on Friday: Amazon AMZN and Netflix NFLX both hit new record highs, up 14% and 16%, respectively, while shares of Walmart WMT rose nearly 9%.

KEY BACKGROUND

With Friday’s rally sending stocks higher, the S&P 500 notched its first back-to-back weekly gains since early February. The index rose over 2% this week, while the Nasdaq NDAQ gained over 5% and the Dow is up around 1%.

Crucial quotes

“Markets are responding to an outlook that is a far cry from the doomsday scenario projected in the latter days of March and early days of April,” says Peter Essele, head of portfolio management for Commonwealth Financial Network. “We’ve moved from depression to recession, with a glimmer of light at the end of the tunnel.”

“While there has never been any doubt that the U.S. economy would come back online at some point, these three events, taken together, raised optimism (although doesn’t guarantee) that the comeback will be sooner rather than later,” according to a note from Bespoke Investment Group.

What to watch for

“The true litmus test over the next month will be whether payroll cuts have spilled over into additional sectors of the economy beyond leisure and hospitality,” predicts Essele. “If that ends up being the case, it’s quite possible that markets will retest lows, as the economy will require more than a simple shot of adrenaline to put things back on course.”

Further reading

Here Are 29 ‘Get Out And Go’ Stocks For The End Of The Coronavirus Quarantine (Forbes)

Trump Says Some States Will Be Able To Open ‘Literally Tomorrow’ If They Want To (Forbes)

Stocks Fall, Dow Tumbles 400 Points After Retail Collapse And Weak Bank Earnings (Forbes)

This Week’s Economic Data Is Concerning: Here Are The Latest Reports Showing The Impact Of Coronavirus (Forbes)

Full coverage and live updates on the Coronavirus

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I am a New York—based reporter for Forbes covering breaking news, with a focus on financial topics. Previously, I wrote about investing for Money Magazine and was an intern at Forbes in 2015 and 2016. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com

Source: Stocks Rally, Dow Rises 700 Points On News Of Gilead’s Possible Coronavirus Treatment

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Morgan Stanley’s Record Results Boosted By Massive Private Equity Coup In China

Morgan Stanley sign in New York

With Trump’s Phase 1 trade deal with China now complete after a lengthy signing ceremony on Wednesday cheered on by Wall Street luminaries such as Blackstone cofounder Stephen Schwarzman, hedge funders Ken Griffin and Nelson Peltz, and Mary Callahan Erdoes of JPMorgan, investors now have a new reason to try and play growth in the country. Record earnings released by investment bank Morgan Stanley the morning after trade negotiations wrapped up reveal the profits that can be made by smartly investing in the world’s second-largest economy.

Morgan Stanley’s fourth-quarter earnings revealed strength across the firm. Revenues surged 27%, propelled by growth across important divisions such as trading, underwriting and wealth management. Overall, Morgan Stanley posted $10.8 billion in revenues for the quarter and $2.2 billion in profits, and for the full year, the investment bank generated a record $41.4 billion in revenue and a $9 billion profit, underscoring the success CEO James Gorman has had in managing its vaunted investment bank, building up its wealth management operations and refitting its trading desks to boost profits.

One line item in the results, however, uncovered a new story for Wall Street watchers to follow. Morgan Stanley’s investment management division booked an almost unprecedented investment windfall in Asia, which reflects the potential China and the rest of the region holds to both the firm and its Wall Street peers in banking and private equity.

Related image

In 2013, Morgan Stanley’s Asian private equity division helped take Chinese baby-milk producer Feihe International private, working with the company’s controlling family, led by CEO Leng Youbin. The company, founded in 1962, had listed American Depositary receipt shares on the New York Stock Exchange in 2008. After generally languishing in the wake of the listing, shareholders like Youbin and his family trusts looked to privatize the business, working Morgan Stanley’s Asian private equity arm on a $147 million deal to buy out the public shares listed on the NYSE. Morgan Stanley contributed $28.1 million of equity on behalf of its limited partners, Feihe’s CEO ponied up a further $8 million, and the consortium raised $50 million in debt financing from Wing Lung Bank Limited and Cathay United Bank to get the deal done.

This past fall, they re-listed Feihe, now the leading baby-milk seller in China, by selling 893 million shares in Hong Kong and raising about $900 million to pay down debt and make acquisitions. Since the listing, China Feihe’s shares have skyrocketed from about HK$7.5 to KK$10.98, per Sentieo data, as investors gained interest in its 15% market baby formula share and revenues and profits of $1.5 billion and $317 million, respectively.

For the participants, the 2013 deal has turned into one of the big windfalls of this era. The Leng family’s shares are now worth $5.2 billion according to Forbes calculations and Morgan Stanley’s shares are worth some $2.3 billion. When Morgan Stanley released full-year earnings, the deal even moved the needle for the 60,000 worker investment bank.

The firm’s investment management division saw revenues more than double to $1.4 billion, led by $670 million in quarterly investment revenue versus $82 million in the year prior. Of the windfall, Morgan Stanley said its investment revenues “increased from a year ago on accrued carried interest related to an underlying investment’s initial public offering, subject to sales restrictions, within an Asia private equity fund managed on behalf of clients.” The carry and gains appear have boosted the firm’s overall earnings by at least 15% for the quarter. Typically half of private equity investment fee revenue will go back to employees in the form of earned carried interest.

On a conference call with analysts, CFO Jonathan Pruzan elaborated about China Feihe, “The company has been quite successful and grown quite nicely. … To give you some sort of context around the round numbers, the investment that we made was less than $50 million, and the current investment value is approximately $2 billion.” (Morgan Stanley declined to comment further.)

China is the preeminent driver of wealth in the world. When Forbes released its 2019 list of China’s wealthiest people, reporters uncovered 60 new billionaires in the country, many of whom are building businesses domestically that may one day resemble companies like Procter & Gamble, Starbucks, Pfizer and Nike. Wall Street has to pay attention, especially with domestic markets richly valued after a decade-long bull run.

For years, dealmakers like Blackstone’s Schwarzman, JPMorgan’s Jamie Dimon and Blackrock’s Larry Fink have been studying ways to build their presence in the region and either bank, partner or invest on behalf of the country’s growing business elite. While groundwork is mostly still just being laid, deals like Morgan Stanley’s recent coup underscore the potential remaining in China.

The Phase 1 trade deal signed on Wednesday signaled China’s intention to continue opening its financial system to foreign banks and investors. Vice premier Liu He, carrying a note from premier Xi Jinping, said at the Phase 1 signing China is transitioning from a high-growth economy to one more focused on quality increases. Presumably, that pertains to consumption, financial products and markets, and the capitalization of corporation. Some new developments reached in the deal appeared to make headway for U.S. firms excited about this potential.

The deal further opened Chinese markets to U.S. credit rating agencies, distressed debt investors and foreign financial firms seeking to fully own and manage subsidiaries in the region. Bankers have long wanted to own subsidiaries in the region and mostly unwound joint ventures that helped build China’s state-owned banking giants like ICBC.

In fact, a good way to gauge whether the Phase 1 trade agreement did in fact make substantial inroads, will be to watch how the largest U.S. financial firms respond. New action from the likes of JPMorgan’s Jamie Dimon and Blackstone’s Schwarzman would signal the effectiveness of Wednesday’s deal.

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I’m a staff writer at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, M&A and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a part of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to agara@forbes.com. Follow me on Twitter at @antoinegara

Source: Morgan Stanley’s Record Results Boosted By Massive Private Equity Coup In China

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20 Great Stock Ideas For 2020, From The Best Fund Managers

The stock market went on a tear in 2019. Major indexes hit numerous record highs in the second half of the year with the S&P 500 rising more than 29%. This puts it on track to be the best yearly return since at least 2013.

As stocks continued to rise, Wall Street put recession fears on the back burner: The market has been boosted by the fact that the U.S. economy’s moderate expansions holds steady. Solid consumer spending, a robust labor market and now an apparent recovery in the housing market have all allayed investor fears. There has been renewed trade optimism on Wall Street as well, thanks to the signing of several new trade agreements—a revised North American trade agreement and the long-awaited phase one trade deal with China—in the closing months of 2019. Going into 2020, the market is optimistic that economic growth can continue, especially with diminishing tariff pressures and a Federal Reserve on hold.

We queried Morningstar to identify some of the best performing fund managers, all of whom beat their benchmarks both in 2019 as well as on a longer-term basis over either a three-year, five-year or ten-year period. Below are the portfolio managers and their best ideas for the coming year.

Chris Retzler

Needham Small-Cap Growth Fund: A blend of growth and value small companies.

YTD: 53.5%, 5-year average annual return: 14.7%

Saxonburg, Pennsylvania-based II-VI is a global manufacturer of high-performance, high-tech specialty materials that go into a whole host of different industries and end markets, from consumer and communications to aerospace and defense. “It’s a broad economic play to the end markets that utilize their technologies,”  says Retzler, who highlights the “stellar management team” and its recent acquisition of optical communications manufacturer, Finisar.

While topline growth has been in the double-digits, that will accelerate thanks to cost savings and revenue synergies from integrating Finisar. While $1.4 billion revenue II-VI has exposure to trade relations with China, which weighed on the stock’s performance in the last few years, a thawing in those relations will brighten its outlook. Retzler expects growth to generate free cash that will ultimately “provide the opportunity to de-lever the balance sheet.”

Navigator Holdings (NVGS)

Reitzler calls $303 million (revenues) Navigator Holdings, an energy shipping business that delivers liquid propane gas (LPG), “a play on resurgence in global economic growth.” He expects it to be a beneficiary of thawing trade tensions and subsequent increased commodity sales: “If you see a recovery in emerging markets, which we think will begin to happen globally, LPG is key to energy usage in a great part of the world.” While Navigator Holdings has been under pressure for the last four years, investments the company has made in infrastructure and partnerships should begin to payout, Reitzler predicts, adding that the company has also expanded to new terminals that will allow it to export more products globally. Another catalyst is the “continued production of sizable energy byproducts within the U.S. that will need to be delivered to global markets.” As a heavy shipping company, there is debt on the business—but it’s manageable, says Reitzler.

Neal Rosenberg

Baron Growth Fund: Small-cap U.S. growth companies

YTD: 40.7%, 3-year average annual return: 19.8%

 

Vail Resorts (MTN)

This operator of  world-class mountain and ski resorts is divided into separate divisions for its resorts, hospitality and real estate. The company has seen continued growth in full season pass sales as well as early benefits from its mid-2019 acquisition of Peak Resorts, which helped integrate millions more people into its network. Rosenberg expects good earnings growth with robust free cash flow going forward. This could lead to opportunistic mergers, debt reduction and dividend growth. Vail, which had $2 billion in revenues in fiscal 2019, is very digitally focused and is increasing the number of skiers on season or day passes, using more data to do enhanced targeted marketing and increasing the skier experience to enable continued same store pricing increases.

CoStar Group (CSGP)

CoStar, is a $1.2 billion (revenues) provider of info analytics and online marketing services for commercial and multifamily real estate offices. Rosenberg expects organic revenue growth to accelerate toward 20% in 2020 and beyond, as the company continues to significantly expand its salesforce and enter new markets—selling to owners and investors rather than just brokers and property managers. Growth will also come from its Apartments.com division, which matches renters with landlords.  CoStar is also expanding internationally, moving beyond the U.S. and Canada to places like Western Europe. The company also has a pristine balance sheet and a huge amount of free cash flow.

Jeffrey James

Driehaus Small-Cap Growth Fund: Fast-growing small companies.

YTD: 40.4%, Average annual return since inception (2017): 26%

Everbridge (EVBG)

This cloud software company works with corporations, governments and their agencies to provide tools for mass notifications and population alerts. Its software helps alert employees or citizens of whatever is happening—from natural disasters to cyberattacks. According to James the $147 million (revs) company, which has yet to turn a profit, is growing at 30% per year, and is increasingly winning contracts with big companies and the Federal government. “It’s the next generation amber alert,” he describes. While Amber alerts, for example, are a homegrown custom government solution, Everbridge is far more sophisticated in its software, James says, since they are able to use various technologies—like location services—to notify people in a specific geographic area. He also highlights that the European Union’s mandate to select a mass notification system for all their member countries—where several have picked Everbridge thus far.

MyoKardia (MYOK)

This $3.5 billion market cap clinical-stage biotech company focuses on precision medicine targeting genetic cardiovascular disease—the number one cause of death in the world. “Virtually all drugs that treat this do so indirectly by lowering cholesterol or treating symptoms,” James describes, “but MyoKardia is one of the first to target the source of the disease—the underlying genetic defects of the cardiac function.” One disease it’s targeting, for instance, is hypertrophic cardiomyopathy (widening of heart valves). Going into next year, James highlights a phase three study that is expected to read out well, as the previous phases have. “For a biotech company of this size and this pipeline, its balance sheet is quite strong,” he says (Myokardia has no revenues or profits yet). “That should be sufficient for the company to fund studies and develop its pipeline for the foreseeable future.”

Joe Dennison 

Zevenbergen Growth Fund: Large-cap consumer and tech companies.

YTD return: 38.4%, 3-year average annual return: 24.3%

Exact Sciences (EXAS)

Madison, Wisconsin’s Exact Science’s core product, Cologuard, has seen “strong organic growth” thanks to an 80% increase in revenue this year—and is expected to hit that again next year, according to Dennison. Cologuard allows for at-home stool screening as an alternative to getting a colonoscopy. Company’s partnership with Pfizer—a co-promotional sales agreement—has been beneficial, since it helps give Exact Sciences access to the pharma giant’s salespeople, marketing expertise and relationships. Exact Sciences has continued to grow its network of doctors, adding new primary care and GI specialists. Dennison says there’s much to look forward to next year: The company plans to test Cologuard 2.0—a more accurate and economical version of its signature product—and is reportedly planning on coming out with a diagnostic for liver cancer. “It’s making the right investments to drive growth for the next decade,” says Dennison. “The competitive chatter has been misunderstood and weighed on the stock, but we think that could clear up.”

Wayfair (W)

A market leader in online home furnishings, Wayfair has been popular among young consumers as they move out and buy homes. He emphasizes that the company has revenue growth in the mid-20% range, though losses are higher since its still in investment mode—but profitability is expected in the next five years.

Wayfair is further boosted by international investments, primarily in Western Europe, “where they’re following the same playbook that’s been successful domestically,” according to Dennison. Competition comes from brick-and-mortar players and larger players like Amazon, he says.

Stephen DeNichilo

Federated Kaufmann Large Cap Fund: Large-cap growth companies.

YTD: 37.7%, 10-year average annual return: 14.9%

Vulcan Materials (VMC)

DeNichilo likes this $4.8 billion (revenues) materials company, the largest producer of construction aggregates in the U.S., because it is entering “an exciting period of both increasing volume and pricing.” The business is growing thanks to a strong focus on infrastructure spending at the state level—driven by increased gas taxes, says DeNichilo. What’s more, “solid federal support” for infrastructure on both sides of the aisle on Capitol Hill will be an added boost going into next year.

Ingersoll-Rand (IR)

This 149-year old company is a leading producer of heating, ventilation and air-conditioning (HVAC) equipment globally. It will spin off its more cyclical compressor business to Gardner Denver in the first quarter of 2020. That would leave $16 billion (revenues) Ingersoll-Rand as a “pure play HVAC company,” not to mention one with high market share, powerful recurring revenue—from installing, replacing and servicing parts, strong pricing power and “a balance sheet prepared to participate in further HVAC industry consolidation.”

Kimberly Scott

Ivy Mid-Cap Growth Fund: Fast-growing mid-cap companies.

YTD return: 37.6%, 3-year average annual return: 20.1%

National Vision Holdings (EYE)

This $1.7 billion (sales) optical retailer sells eyeglasses, contact lenses and other products, as well as offering comprehensive eye exams. The company has seen continued growth as it serves an important medical need at good value, according to Scott. “It’s a compelling story in that it has a unique position as a growth retailer outside of e-commerce,” she points out. As the company brings in more customers and gains market share, comparable store sales have increased.

Overall revenue is growing by just over 10%, and the company continues to deleverage, Scott says. While risks include tariff headwinds and concerns that Walmart may not renew a strategic partnership to operate its Vision Centers, she believes that these are priced into the stock. The company is also starting to leverage its new investments in areas like cybersecurity and lab research for making new eyewear.

CoStar Group (CSGP)

A leading provider of commercial real estate data and marketplace listing services, Washington, D.C.-based CoStar has “high-caliber growth and great cash flow,” according to Scott. She highlights the company’s founder-led management team and pristine balance sheet—with no debt. CoStar’s revenue has been growing at a 20% clip and Scott expects continued innovation in new areas including a recent acquisition of Smith Travel Research, which will allow CoStar to begin expanding into data and analytics for the hospitality sector. The market usually backs off from the stock when the company announces new investment cycles, as it just has, she points out, but while this hurts near-term margins it actually sets CoStar up for its next phase of growth. The company’s expectation is that the business will have $3 billion in revenue by the end of 2023.

Scott Klimo

Amana Growth Fund: Low-debt, high-growth large companies; Run according to Islamic principles.

YTD: 31.7%, 3-year average annual return: 19.9%

Sextant Growth Fund: Low-turnover portfolio of large growth companies.

YTD: 35.3%, 3-year average annual return: 17.9%

Lowe’s Companies (LOW)

Klimo calls Lowe’s “a compelling self-help story” that will benefit from a strong housing market next year, supported by low interest rates. Lowe’s new CEO Marvin Ellison has improved operating efficiencies and Klimo highlights new investments in tech, like migrating systems to the cloud and improving online experience, as another boost for the company. What’s more, while “nothing is bulletproof,” and recession and housing market risks are somewhat mitigated by the cost cutting and other internal improvements, which should protect margins,” according to Klimo.

Ally Financial (ALLY)

Financial service firm Ally dabbles in everything from car loans and online banking to mortgages and loans. It is a leader in auto lending, particularly in used car financing: “An area that takes some skill.” Klimo points out that “even if you think about potential disruptions like new car prices increasing, the secondhand market is still attractive.” Ally has good prospects for growth, he says, with the general consensus for the economy looking pretty good and the housing market expected to be solid. The stock has a low PE of under 8 time trailing 12 month earnings,  a 2.2% dividend yield and earnings are growing at 10% annually. Says Klimo, “What’s really remarkable is the valuation that its trading at, despite the fact that the stock is up 37% this year.”

Tom Slater

Baillie Gifford U.S. Equity Growth Fund: Concentrated portfolio of growth companies.

YTD Return: 29.4%, Average annual return since inception (2017): 20.7%

 

Yext (YEXT)

New York City’s Yext is a small-cap technology company that allows businesses to use its cloud-based network of search engines, maps and other software to boost awareness and build their brand. As more companies integrate digital components into their business strategies, Yext gives them the tools to do so, as well as share information with publishers in a way that becomes accessible to end users. Yext Answers, which is aimed at streamlining consumer questions about different companies or products.

“While Yext is still a loss making business—and path to profitability has become the buzzword in the aftermath of WeWork—we’re happy to tolerate that if we can see the trajectory of growth going forward,” according to Slater. “We see them having a really big addressable market in the long term.”

MarketAxess (MKTX)

This fintech company operates an electronic trading platform for institutional credit markets, bringing digital tools to bond trading. “What’s interesting here is that we’ve seen equity markets move to digital trading, but that’s been a much harder problem to solve for bonds—as they’re generally much less liquid,” Slater points out. Digitizing these markets is a big win for asset owners because it takes out the cost aspect of intermediation that’s associated with traditional bond trading. MarketAxess has topline growth of at least 15% going into next year, accompanied by very high margins of around 50%, both of which are likely to grow in the future, Slater forecasts.

Chase Sheridan and Greg Steinmetz

Sequoia Fund: Run by RCG investment committee since 2016; Focus on undervalued companies.

YTD return: 29.3%, 10-year average annual return: 11.5%

Credit Acceptance (CACC)

Credit Acceptance Corp. is a subprime auto loan lender that the Sequoia fund likes to think of as “the best house in a tough neighborhood.” The company is countercyclical, as it doubled its profits during the financial crisis according to Sheridan and Steinmetz. They emphasize that Credit Acceptance doesn’t face the same set of risks as a typical subprime lender, thanks to a “portfolio program” with its dealers where it shares both the costs and payouts of loan underwriting. That means that in a downturn, Credit Acceptance will suffer less than its peers, and it can use those periods of stress to gain more market share. The company has been growing—earnings were up 22% in 2019—and it has room to continue to do so without M&A. While some bad actors in the car loan industry prey on the working poor, “Credit Acceptance Corp plays by the rules and plays fairly,” Sheridan and Steinmetz describe. “They have excellent computer systems that keep their collection agents within the bounds of what the government allows them to do.”

Alphabet (GOOGL)

“Sometimes a good idea is right in front of your nose,” says Sheridan and Steinmetz. “Alphabet’s balance sheet ( with $130 billion in cash) is like Fort Knox, and the resilience and quality of the business is extraordinary.”The company has averaged near 20% growth, and its “search revenue is driven by mobile and Youtube in terms of its fastest growing segments.” With $25 billion spent on research and development per year—second in the world behind Amazon—”that’s basically Dell Labs and Xerox Park on steroids,” according to Sheridan and Steinmetz. “Google’s competitive strengths are nearly insurmountable in its core business of advertising,” they point out. The tech giant also has ambitions to move up the ladder in the burgeoning business of cloud computing, where it currently ranks behind Amazon and Microsoft.

Chris Mack

Harding Loevner Global Equity Fund: High-quality growth companies.

YTD: 28.5%, 5-year average annual return: 10.2%

PayPal (PYPL)

PayPal is a “household name,” but the general opportunity here is the “under penetration of digital transformation in financial services,” according to Mack. It’s a “long tail opportunity,” especially given that some 85% of the world’s transactions are still settled in cash. What’s different, he points out, is that PayPal is crucially partnering with more financial institutions and increasing its number of merchant accounts.

Partnerships with Bank of America and HSBC, for example, have started to pay off as they make PayPal an option in their digital wallet offerings. Mack emphasizes that PayPal’s large user base and the scale of transactions its processes, which are both growing near 20%, is another positive. While the company is up against some other big tech players, like Apple, “there’s room for more than one winner here,” Mack says.

Vertex Pharmaceuticals (VRTX)

Vertex is a $56 billion market cap biotech company focused on drugs to treat cystic fibrosis. Mack sees it as an overlooked growth opportunity, “it’s overlooked because of its small addressable population—of 100,000 our so globally—in the scheme of things.” But when thinking about pharmaceuticals and drug pricing, “this is a company that is delivering value,” he says. It has taken an existing set of approved drugs on the market and added a new one: While they can reach about 56% of existing cystic fibrosis, Vertex’s new “triple combination” drug combination to treat the disease will see that number rise to around 90%, according to Mack. Although the drug is expensive and patients are on them for life, a rising life expectancy and number of treatable cases bode well for Vertex. The company is profitable, with good margins and is growing by over 25%.

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I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com

Source: 20 Great Stock Ideas For 2020, From The Best Fund Managers

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To get our 5 top stocks for 2019, head to http://www.Fool.com/YT 2019 has been a pretty darn good year for the stock market. The S&P 500 is up over 25% year-to-date, and I bet you noticed the bump in your retirement and brokerage accounts. While those returns are good, investors that scooped up shares of some of the year’s hottest stocks did even better. Maybe you were one of the folks who saw their portfolios soar thanks to: – Docusign (up 80% YTD) – MercadoLibre (up 95% YTD) – The Trade Desk (up 115% YTD) These stocks are some of the best performers in the market this year, they’re also stocks our analysts recommended in one of our premium services before 2019. Our team is happy to see their picks do well, but they also have some new companies they think could break out in 2020. In this video they’re going to break down: – How the stock market did in 2019 – The major stories investors need to know about 2020 – The best stocks to buy for 2020 ———————————————————————— Subscribe to The Motley Fool’s YouTube Channel: http://www.youtube.com/TheMotleyFool Join our Facebook community: https://www.facebook.com/themotleyfool Follow The Motley Fool on Twitter: https://twitter.com/themotleyfool

The Fear Fund: Nancy Davis’ ETF Aims To Protect Investors From Scary Stuff, Like Recession And Inflation

Stocks have recovered from last fall’s crash, low interest rates stretch out to the horizon and the VIX volatility index is half what it was at Christmas. Sit back and coast to a comfortable retirement.

No, don’t, says Nancy Davis. This veteran derivatives trader runs Quadratic Capital Management, where her somewhat contrarian view is that investors, all too complacent, are in particular need of insurance against financial trouble.

The Quadratic Interest Rate Volatility & Inflation Hedge ETF, ticker IVOL, is designed to provide shelter from both inflation and recession. Its actively managed portfolio mixes inflation-protected Treasury bonds with bets, in the form of call options, on the steepness of the yield curve.

Those options are cheap, for two reasons. One is that, at the moment, there is no steepness: Yields on ten-year bonds are scarcely higher than yields on two-year bonds. The other is that the bond market is strangely quiet. Low volatility makes for low option prices.

                                   

“Volatility has been squashed by central bank money printing,” Davis says, before delving deep into the thicket of option mathematics. If volatility in interest rates rebounds to a normal level, her calls will become more valuable. Alternatively, she would get a payoff if the yield curve tilts upward, which it has a habit of doing when inflation surges, stocks crash or real estate is weak.

If IVOL is all about peace of mind for the investor, it’s all about risk for its inventor. Davis, 43, has poured her heart, soul and net worth into Quadratic, of which she is the founder and 60% owner. If the three-month-old exchange-traded fund takes off, she could become wealthy. If it doesn’t, Quadratic will struggle.

The fund showed its worth in the first week of August, climbing 2% as the stock market sank 3%. But it needs a much bigger shock to stock or bond prices in order to get big. It has gathered only $58 million so far. A crash had better arrive soon; IVOL’s call options expire next summer. Quadratic, moreover, needs to somehow scale up without inspiring knockoff products from ETF giants like BlackRock.

Davis was a precocious trader. As an undergraduate at George Washington University, she took grad courses in financial markets while earning money doing economic research for a consulting firm. She put some of her paychecks into a brokerage account. “Some women love to buy shoes,” she says. “I love to buy options.”

This was in the 1990s, a good time to indulge a taste for calls. Davis made out-of-the-money bets on technology stocks, which paid off well enough to cover the down payment, in 1999, on a New York City apartment. Nice timing.

There may be a sour grape, but there’s also truth in her current philosophy that hedge funds are not such a great deal for investors. ETFs, she says, are more liquid, more transparent and cheaper.

Davis spent a decade at Goldman Sachs, most of it on the firm’s proprietary trading desk, then did a stint at a hedge fund. At 31 she quit to actively manage two kids. Returning to Wall Street after a three-year hiatus, she worked for AllianceBernstein and then did what few women do, especially women with children: She started a hedge fund.

Quadratic, whose assets once topped $400 million, used a hedge fund platform at Cowen & Co. When Cowen ended the partnership last year, Davis set about reinventing her firm. There may be a sour grape, but there’s also truth in her current philosophy that hedge funds are not such a great deal for investors. ETFs, she says, are more liquid, more transparent and cheaper.

IVOL’s 1% annual fee is stiff, but Davis says it’s justified for a fund that is not only actively managed but also invested in things that ordinary folk cannot buy. If you want to duplicate her position in the Constant Maturity Swap 2-10 call due July 17, you’d need to know what banker to ring for a quote, because this beast is not traded on any exchange. Each of these calls, recently worth $7.71, gives the holder the right to collect a dollar for every 0.01% beyond 0.37% in the spread between ten-year interest rates and two-year interest rates. The spread has to move a long way up before the option is even in the money. But at various times in the past the spread has hit 2%. Could it do that again? Maybe, at which point the option pays $163.

Starting a firm like Quadratic is like buying an out-of-the-money call: long odds, big payoff. Davis is doing what she was doing in college. You can’t stop a trader from trading.

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Source: The Fear Fund: Nancy Davis’ ETF Aims To Protect Investors From Scary Stuff, Like Recession And Inflation

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Nancy Davis, founder and CIO of Quadratic Capital Management, introduces her new ETF that takes advantage of interest volatility and inflation expectations: IVOL. In this interview with Real Vision’s co-founder & CEO Raoul Pal, Davis deconstructs the structure of the ETF, highlights the cost of carry associated with the strategy, and discusses her macro outlook and where she thinks the yield curve is headed next. Filmed on May 29, 2019. Watch more Real Vision™ videos: http://po.st/RealVisionVideos Subscribe to Real Vision™ on YouTube: http://po.st/RealVisionSubscribe Watch more by starting your 14-day free trial here: https://rvtv.io/2KHDkoc About Trade Ideas: Top traders unveil their specific plans for cashing in on the market’s next move. In these short videos, our traders cut straight to the point and lay out their thoughts on the best risk-reward trades of the moment. Each episode concludes with a visual recap of trade details including profit-loss potential and trade duration. About Real Vision™: Real Vision™ is the destination for the world’s most successful investors to share their thoughts about what’s happening in today’s markets. Think: TED Talks for Finance. On Real Vision™ you get exclusive access to watch the most successful investors, hedge fund managers and traders who share their frank and in-depth investment insights with no agenda, hype or bias. Make smart investment decisions and grow your portfolio with original content brought to you by the biggest names in finance, who get to say what they really think on Real Vision™. Connect with Real Vision™ Online: Twitter: https://rvtv.io/2p5PrhJ Instagram: https://rvtv.io/2J7Ddlw Facebook: https://rvtv.io/2NNOlmu Linkedin: https://rvtv.io/2xbskqx The ETF Play on Interest Rate Volatility (w/ Nancy Davis) https://www.youtube.com/c/RealVisionT… Transcript: For the full transcript visit: https://rvtv.io/2KHDkoc NANCY DAVIS: So we invest with options with a directional bias on everything. So our new product that we recently launched, IVOL, is the first inflation expectations and interest rate volatility fund out there. It’s a exchange traded product. RAOUL PAL: Does anybody even know what that means? NANCY DAVIS: So what we do is for an investor, if you’re an equity investor, you want to have tail protection, for instance. It’s hard to own equity volatility as an asset allocation trade because it decays so aggressively. So it’s a more benign way to carry volatility as an asset class from the long side using fixed income vol. It’s not as sensitive as equity vol, but it’s a lot lower level. Like, the vol we’re buying is 2, 2 basis points a day in normal space. So it’s very, very cheap, in my opinion, and it gives you a way to have an asset allocation to the factor risk of volatility without having as much decay as you would in the equity space. And then for a fixed income investor, the big risk there is obviously Central Bank policy, fiscal spending, trade wars, as well as inflation expectations. And we saw a need to really give a fixed income investor a way to capitalize on the deflation that’s been priced into the market for the next decade. I mean, so current US inflation is around 2%. The five-year break-even is 1.59%. So that’s an opportunity in an option space. And so it’s long options with TIPS. And so that gives investors exposure. It gives you inflation-protected income, but also options that are sensitive to inflation expectations. And we think it’s pretty– you know, you’re never going to time these macro calls perfectly. But given the Central Bank in the US is so focused right now on increasing inflation expectations, and there’s been so much talk about the yield curve inverting– and that’s kind of crazy. If you step back and you’re like, all right, we have a $3.9 trillion balance sheet. We have a fiscal budget deficit. We have unclear or radically changing monetary policy. If you look where we are now with so many cuts priced into the interest rate markets in the US versus where we were four months ago, it’s wildly different. And at the same time, interest rate volatility is literally at generational lows. Equity, while people talk about equity vol, I think VIX today is 17. It’s low, I guess, in the context. But when you look at a percentile, like one-year vol over the last decade in equities, it’s about the 70th percentile. So it might be low, but it doesn’t mean it’s cheap. Interest rate volatility is literally at, like, 2, 1, you know, 0.
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