Stock Market thread

Lampwick

Woodpecker
Gold Member
white22 said:
$54 with a PE of 12 is a gift and with this market sentiment and the coronavirus I believe it will head lower yet. I would love to hear others thoughts especially contradictory to mine.
I think you may be missing the fad, which may turn into a secular trend, of millennials and possibly younger generations abstaining from alcohol. There are a handful of companies entering this market now and trying to create nonalcoholic mocktails and things like that. Millennials are more health conscious, and this could trend could develop further. Personally, I quit drinking alcohol a year ago as part of the wagon on this forum. I don't really miss it that much when considering the downsides as I approach middle age.

Drinking piss beer is largely a boomer (and college) phenomenon.
 

jbkunt2

Woodpecker
^ That's not true at all and you are letting your own experiences cloud your judgement.

Alcohol is never going out of style.
 

Lampwick

Woodpecker
Gold Member
jbkunt2 said:
^ That's not true at all and you are letting your own experiences cloud your judgement.

Alcohol is never going out of style.
Alcohol consumption in the U.S. is projected to grow annually by 2% for the next several years. This is based on a report from 2019.

Going nonalcoholic is a recent fad, and my observations are anecdotal, yes. I think it's too early to see if it will develop into a secular trend that may alter the above projections. But remember, the Impossible Burger was a sideshow a few years ago, and now it is everywhere. It is definitely a fad, but I don't see the concept going away over the long term. It's part of a broader health trend, and I think alcohol consumption in general is vulnerable to that trend. Alcohol products themselves are being adapted to this health trend (Whiteclaw seltzer).

Alcohol is also now subject to economic substitution from cannabis in a big way that wasn't a threat years ago. Cannabis also happens to be much healthier, at least physically. Cannabis use has also been increasing with boomers.

I like to place bets with potential trends instead of against them. For example, I think Altria is a similar play to Bud, and vaping is incredibly popular with Gen Z. They own 35% of Juul and it's possible they will buy the rest. Juul is the strongest brand by far in vaping, nothing else comes close. Plus Altria is diversifying into cannabis and the Juul technology/brand/distribution would be a natural fit. Bud is trying to diversify into cannabis drinks. That may take off, but it seems like much more of a long shot to me. It's much easier to dose properly and get the desired effects by vaping.

Altria has similar problems as Bud. They loaded up on debt, and paid way too much for their acquisitions. Their capital allocation has been terrible. There are also the problems of vaping regulation and declining cigarette sales. I expect a lot more layoffs at Juul, and more bad news on regulation for them. It's mainly a question of getting this stock at a price where they're able to comfortably cover their dividend and debt load with the cash flow from declining cigarette sales. Cheap enough, and the dividend yield will be massive in this interest rate environment. A similar, but much better play than Bud in my opinion.
 

Tail Gunner

Hummingbird
Gold Member
NoMoreTO said:
Tesla is one of those hype stocks. Granted the hype could be true, but it is priced up very high with little earnings.

Stocks like this are very hard to understand. There are likely lots of buyers still holding the price, but lots of naysayers shorting it.
One disturbing explanation.

This Tuesday we vented the theory that the Federal Reserve has been sneakily — and illegally — purchasing stocks.

Citing Graham Summers, senior market strategist at Phoenix Capital Research:

For years now, I’ve noted that anytime stocks began to break down, “someone” has suddenly intervened to stop the market from cratering…

[And] a year ago, I noticed that the market was behaving in very strange ways.

The markets would open sharply DOWN. Seeing this, I would begin buying puts (options trades that profit when something falls) on various securities, particularly those that had been experiencing pronounced weakness the day before.

Then, suddenly and without any warning, ALL of those securities would suddenly ERUPT higher.


Mr. Summers theorized that the Federal Reserve was purchasing Microsoft, Apple, Alphabet (Google) and Amazon stock.

Because these behemoths wield such vast heft, they can haul the overall market higher.

Did the Federal Reserve possibly resort to the same skullduggery today?

The Smoking Gun?

At 3:08 we noticed the Dow Jones flashing 25,268 — another whaling to conclude the week.

We next looked in shortly after 4 to tally the final damage.

Yet we were astonished to discover the index had surged to 25,938 in that hour.

For emphasis: That is a 670-point spree in the span of one hour.

It settled down to 25, 864 by closing whistle. But the index closed the day only 256 points in red — a victory of sorts.

What happened?

A quick look at Apple revealed it began rising around 3 o’clock… as if by an invisible hand.

Microsoft displayed a nearly identical pattern. And Amazon. And Google.

All mysteriously jumped at 3 p.m.

We leave you to your own conclusions.

A Record of Mischief

It’s long been argued that the Fed shouldn’t and doesn’t buy stocks.

However, the fact is that the Fed does a lot of things it’s not supposed to do. According to the Fed’s own mandates, it should never monetize the debt by printing money to buy debt securities.

The Fed’s already done that to the tune of over $3.5 TRILLION.

Moreover, we know from Fed minutes that as far back as 2012, the Fed was shorting the Volatility Index (VIX) via futures, or options. Here again, this runs completely contrary to the Fed’s official mandate. And if you think this is conspiracy theory, consider that it was current Fed Chair Jerome Powell who admitted the Fed was doing this!

Simply put, the Fed has been skirting its mandate for years in the name of “maintaining financial stability.” In fact, what usually happens is the Fed does things it shouldn’t, denies it for years and then finally admits the truth years later, by which point no one is outraged.

I believe the Fed is currently engaging in precisely such a practice when it comes to the outright rigging of the stock market today.

The Laws Fall Silent

The Federal Reserve Act does not authorize the central bank to purchase equities.

But financial emergency is akin to wartime emergency.

And as noted, the Federal Reserve took... extreme liberties with the law during the last crisis.

It may be taking additional liberties at present. And it will again if necessary.

“Inter arma enim silent lēgēs,” said Cicero — "In times of war, the law falls silent."

Regards,

Brian Maher

Managing editor, The Daily Reckoning
[From email, so not web link]
 

Emancipator

Hummingbird
Gold Member
Lampwick said:
jbkunt2 said:
^ That's not true at all and you are letting your own experiences cloud your judgement.

Alcohol is never going out of style.
Alcohol consumption in the U.S. is projected to grow annually by 2% for the next several years. This is based on a report from 2019.

Going nonalcoholic is a recent fad, and my observations are anecdotal, yes. I think it's too early to see if it will develop into a secular trend that may alter the above projections. But remember, the Impossible Burger was a sideshow a few years ago, and now it is everywhere. It is definitely a fad, but I don't see the concept going away over the long term. It's part of a broader health trend, and I think alcohol consumption in general is vulnerable to that trend. Alcohol products themselves are being adapted to this health trend (Whiteclaw seltzer).

Alcohol is also now subject to economic substitution from cannabis in a big way that wasn't a threat years ago. Cannabis also happens to be much healthier, at least physically. Cannabis use has also been increasing with boomers.

I like to place bets with potential trends instead of against them. For example, I think Altria is a similar play to Bud, and vaping is incredibly popular with Gen Z. They own 35% of Juul and it's possible they will buy the rest. Juul is the strongest brand by far in vaping, nothing else comes close. Plus Altria is diversifying into cannabis and the Juul technology/brand/distribution would be a natural fit. Bud is trying to diversify into cannabis drinks. That may take off, but it seems like much more of a long shot to me. It's much easier to dose properly and get the desired effects by vaping.

Altria has similar problems as Bud. They loaded up on debt, and paid way too much for their acquisitions. Their capital allocation has been terrible. There are also the problems of vaping regulation and declining cigarette sales. I expect a lot more layoffs at Juul, and more bad news on regulation for them. It's mainly a question of getting this stock at a price where they're able to comfortably cover their dividend and debt load with the cash flow from declining cigarette sales. Cheap enough, and the dividend yield will be massive in this interest rate environment. A similar, but much better play than Bud in my opinion.
If you play Altria $MO you're also sort of playing BUD (10% ownership via SABMiller purchase)

Personally keep waiting for MO to drop below $40

I see beer as becoming a commodity after all these large cap mergers.

You want cheap piss beer you buy the big brands who'll compete on price, micro breweries and local tap scene for higher quality/price.

BUD does have the benefit of being international (which doesn't show that same trend), but in western countries like NA the growth only comes via immigrants for these brands. BUD lost out on having to sell Corona/Modelo, which due to demographics benefits with growth in NA
 

bacon

Ostrich
Gold Member
Lampwick said:
jbkunt2 said:
^ That's not true at all and you are letting your own experiences cloud your judgement.

Alcohol is never going out of style.
Alcohol consumption in the U.S. is projected to grow annually by 2% for the next several years. This is based on a report from 2019.

Going nonalcoholic is a recent fad, and my observations are anecdotal, yes. I think it's too early to see if it will develop into a secular trend that may alter the above projections. But remember, the Impossible Burger was a sideshow a few years ago, and now it is everywhere. It is definitely a fad, but I don't see the concept going away over the long term. It's part of a broader health trend, and I think alcohol consumption in general is vulnerable to that trend. Alcohol products themselves are being adapted to this health trend (Whiteclaw seltzer).

Alcohol is also now subject to economic substitution from cannabis in a big way that wasn't a threat years ago. Cannabis also happens to be much healthier, at least physically. Cannabis use has also been increasing with boomers.

I like to place bets with potential trends instead of against them. For example, I think Altria is a similar play to Bud, and vaping is incredibly popular with Gen Z. They own 35% of Juul and it's possible they will buy the rest. Juul is the strongest brand by far in vaping, nothing else comes close. Plus Altria is diversifying into cannabis and the Juul technology/brand/distribution would be a natural fit. Bud is trying to diversify into cannabis drinks. That may take off, but it seems like much more of a long shot to me. It's much easier to dose properly and get the desired effects by vaping.

Altria has similar problems as Bud. They loaded up on debt, and paid way too much for their acquisitions. Their capital allocation has been terrible. There are also the problems of vaping regulation and declining cigarette sales. I expect a lot more layoffs at Juul, and more bad news on regulation for them. It's mainly a question of getting this stock at a price where they're able to comfortably cover their dividend and debt load with the cash flow from declining cigarette sales. Cheap enough, and the dividend yield will be massive in this interest rate environment. A similar, but much better play than Bud in my opinion.
I think the beer companies are dealing with some headwinds now, in part because consumers are moving more into craft beers, hard seltzers or wine. Unlike Cigarette companies in the US, they have to deal with new competition as market entrants constantly are trying to take market share from them. I think it is generally unwise to write off beer companies if they get undervalued which BUD and TAP are as they still generate a lot of cash flow, have predictable sales, an addictive product, and good margins. They also have a great deal of scale and consumer loyalty which has been generated via decades of advertising. Funny enough beer companies like BUD and TAP are one of the few areas of consumer staples stocks that have not done well recently. Historically, Beer stocks are the second best industry in terms of investment returns. http://www.philosophicaleconomics.com/2015/09/industry/

Am I the only one buying the financials at these levels (PRU, WFC, BAC)? Many oil stocks are at multi year lows (OXY, XOM, CVX) and hotel reits are very cheap (PEB, HST) also.

VIX spikes like we saw in the last couple weeks are usually characteristic of a bottom being close, but the level of "unknows" about Coronavirus makes it impossible to quantify how long the bears will be in control. However, the stocks I mentioned above, along with many others, are trading at recession levels. It may get cheaper I suppose, but its hard to pass up buying quality companies at these levels.
 

Lampwick

Woodpecker
Gold Member
Substitute goods (other alcohol products and cannabis) seem like a permanent headwind for beer companies to me. I think Emancipator makes a great point, which is a lot of these alcohol products are commodities.

Look at a brand like LaCroix. It's got good brand name recognition and their product caught on to fill a niche. But is their brand that defensible? Every grocery store now has their own generic version of the same product. Are consumers going to stay loyal to the brand and pay a premium, or are the knockoffs going to steal marketshare?

In general, millenials are notorious for buying generic brands if they can save a buck. I think the same exact thing will happen to Whiteclaw. How hard is it to put some seltzer water, flavoring, and alcohol together? I see other alcohol products the same way.

A brand like Juul on the other hand is more analogous to Apple. Not nearly in the same league obviously, but it's basically a consumer electronics brand, which denotes quality, safety, and consistency. That's much harder to displace. And the onerous regulations around ecigarettes actually work to Altria's benefit in many ways because it creates a barrier to entry for smaller competitors.

The financials, oil stocks, and hotel REITs look like falling knives to me. With financials, we're heading to 0% fed funds rate again, so it's hard for these companies to make money on credit spread.

Oil stocks had horrible news today. They are looking at a bear market in oil prices. Lots of US shale producers are overleveraged and I expect credit spreads for their corporate bonds to start widening soon. In fact, that may signal the beginning of an implosion in corporate bonds in general. After these US producers go under and oil prices show signs of rising again on reduced supply, maybe that would be the time to get in.

For hotels, the economy was already slipping into recession before the virus. Not only are travel and tourism businesses are getting slammed right now due to panic, they were already heading in that direction any way. Plus, think about how much excess capacity in AirBNBs there will be on the market now with travel spending pulling back. The one positive they have going for them is cheap oil, which means plane tickets are affordable.

Personally in this environment, I like a company like Disney better. Their theme parks are getting hit hard due to the virus as well, and will also suffer due to the recession. But think about it, when have there ever been discounted Disneyland tickets? They go up in price at roughly 3x the rate of inflation. Plus they have the box office, Disney+, all the franchises and content they've bought up. It's a diverse business that would be nice to pick up at a discount after it comes down a bit more.
 

Emancipator

Hummingbird
Gold Member
The way I see La Croix is that they can't defend from the likes of Pepsi (Bubly) and Coca Cola company.
As you mentioned while they were ahead of the trend (creating the demand or perhaps just right timing and initial good marketing) the space gets crowded by store brands under cutting pricing and then you see Pepsi or Coke attacking on brand pricing power and marketshare.
Pepsi and Coke are able to strong arm distributors for favorable store placement while they maintain pricing via demand created with the best ad men. Go into the grocery store, take note of which brand is front and centre, for me here it's bubly that gets store displays, aisle end placement. La Croix ends up placed next to store brand and other cheap offerings. Which brand gets an ad blitz? Bubly with Michael Buble.

National Beverage (La Croix) is Nick Caporella's personal baby and that actually hurts them.
Ideally if he was okay giving up some control, you'd see a deal with Coca Cola, akin to Monster Energy's relationship with Coca Cola.

RedBull does disprove this somewhat (product defining the market) but they maintain pricing power and market share with a unique branding strategy and heavy ad budget (extreme sports, red bull gives you wings)
 

Emancipator

Hummingbird
Gold Member
Lampwick said:
Substitute goods (other alcohol products and cannabis) seem like a permanent headwind for beer companies to me. I think Emancipator makes a great point, which is a lot of these alcohol products are commodities.

In general, millenials are notorious for buying generic brands if they can save a buck. I think the same exact thing will happen to Whiteclaw. How hard is it to put some seltzer water, flavoring, and alcohol together? I see other alcohol products the same way.

A brand like Juul on the other hand is more analogous to Apple. Not nearly in the same league obviously, but it's basically a consumer electronics brand, which denotes quality, safety, and consistency. That's much harder to displace. And the onerous regulations around ecigarettes actually work to Altria's benefit in many ways because it creates a barrier to entry for smaller competitors.
It's interesting you brought up WhiteClaw.
The owner/founder of it is local to my area, he also developed Mike's Hard Liquor. If he continues to develop the brand as he did for Mike's Hard and good marketing, I think he will maintain the pricing power of the brand.

Bacon mentioned cash flow, which is huge for BUD, TAP.
It lets them acquire upstarts and other brands without much effort or concern. I don't think it's a wise strategy when applied to larger small cap and midcap craft breweries. (Constellation had to write off $1B from a San Diego craft brewery purchase)
But it is when used to purchase other alcohol related items.

BUD owns Labatt, 42% of the Canadian beer market.
They used their cash flow to purchase the Canadian assets of the White Claw owner, which gave them leading RTD brands that have great growth (Mike's, Palm's) and they bought Nutrl, which IMO will see great growth in the US. It's low calorie vodka soda (no sugar, no preservatives)

I'm not sure what the Ready to drink alcohol market is like down in the states, but they've had a great growth rate the past two decades here.

I'm actually surprised they don't use their extremely talented executives from Canada (Labatt) to the big show down in the states. Extremely well run.

Fucking Juul might be one of the greatest inventions this past decade, absolutely wicked.
Nicotine sold with a printer model of sales.
 

bacon

Ostrich
Gold Member
@Lampwick

I agree Disney is a good buy at these levels. They recently replaced their CEO when Eisner stepped down which had hurt the stock, then the impact of corona virus on the Park sales caused the stock to go down a lot.

I think the lower interest rates will just be temporary and not impact the long term profitability of banks or insurance. I guess it depends on the time horizon for an investor, but 5 years from now, I will probably be glad I bought bank or insurance at these levels. With Oil companies it really depends on the quality of the company, if such a bear market unfolds that you discuss, then then larger firms like XOM or CVX will buy them up the smaller, bankrupt companies for pennies on the dollar.

I also like Berkshire at these levels, I will be curious to see what Warren ended up buying during the past couple weeks.
 

Tail Gunner

Hummingbird
Gold Member
Lampwick said:
But think about it, when have there ever been discounted Disneyland tickets?
I bought half price single-day Disney tickets last year in an August special.

What makes you believe that Disney never discounts its tickets?
 

Lampwick

Woodpecker
Gold Member
I bought half price single-day Disney tickets last year in an August special.

What makes you believe that Disney never discounts its tickets?
I talk out of my ass sometimes, haha. Fair enough. I mean, when have there ever been "cheap" Disney tickets. It's a strong brand with incredible pricing power and tickets have gotten ridiculously expensive over the years. They will take a beating due to slowdown and ticket prices will likely go down in the short term. But they are not in the position of something like Six Flags, or hotels, etc. which don't have that brand power and diversified business to weather the storm that's coming.

To be clear, I think all these businesses are falling knives. But if I were looking to buy something, I would be looking at Disney after some more punishment happens.
 

Tail Gunner

Hummingbird
Gold Member
There are already high-quality stocks whose prices have fallen enough to put dividends in the 7% range. A US 10-year bond below 1% vs. 7% in a company that has increased its dividend every year for decades? I know which I would want.
https://www.mauldineconomics.com/frontlinethoughts/chinese-coronavirus-changeup


Out of curiosity, does anyone know of a web site that calculates (or estimates) stock dividends based on the current price of each share?

Maybe even something as simple as a list of the Stock Dividend Aristocrats with current real-time dividend rates.
 

NoMoreTO

Pelican
Oil Down 20%

Oil Price War + Clovid 19 .



Oil plunges 20% and investors brace for a race to the bottom, as an all-out OPEC ‘price war’ erupts between Saudi Arabia and Russia
In electronic trade on Sunday oil was again being hammered with WTI down a stunning 21.4%, or $8.84 at 32.42 a barrel, while Brent was off 22% at $35.35.
Oil Wars
 

Tail Gunner

Hummingbird
Gold Member
It will be a wild ride tomorrow. U.S. Stock Futures show both the S&P and the Dow down nearly five percent. Right now the Dow is down 1,255. Wow!

Circuit breakers triggered limits on a harrowing plunge in U.S. stock futures, but they’re also leaving traders in the dark as to how big losses may eventually get.

In the midst of financial-market spasms as the day began in Asia Monday, trading in some of the world’s most popular equity contracts went quiet when declines reached 5%, setting off Chicago Mercantile Exchange limits that keep prices from falling further.

“These things are all designed to stop a market panic and cause a bit of a pause in trading,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors. “It can have the perverse effect of increasing the downward pressure on other markets, particularly until the U.S. market opens.”

E-mini futures on the S&P 500 Index sank 5% to 2,819 as of 8:05 p.m. in New York. After briefly rallying, they slipped back to the limit-down level and held there about two hours later. The curb means the contract can’t trade at a lower price for the remainder of the overnight session, although transactions at or above the threshold are allowed.
https://finance.yahoo.com/news/rout-u-stock-futures-trigger-221631295.html
 
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