Buzz on the Street: Last Day of Quiet?
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Here is a small sampling of the 120+ posts seen on the Buzz & Banter this week:
Monday, December 30, 2013
Fixed-income funds have been on a weird ride the past two weeks.
Most agency mortgage REITs went ex-dividend on Friday and took an additional beating outside of that. If you're looking for a beat-up sector to grab a long flier in, this is a good target. Ellington Residential Mortgage (NYSE:EARN) is and remains my favorite from a fundamental perspective; it is thin from a liquidity standpoint, though. Notably, Annaly (NYSE:NLY) and American Capital Agency (NASDAQ:AGNC) are going to continue to have some earnings problems going forward, and they can't get their stock prices back above book value, so they can't issue another secondary to fund some of the gaps with their dividend payments. As a result, they're stuck in a not-so-virtuous cycle -- to a certain extent -- of not garnering any new funds and having to take the pain from mismanaging their portfolios this year (not that it's been easy for anyone, including me). I still wonder if the market is going to assign them a lower dividend yield because they haven't been able to earn 13%-15% on their assets for essentially the entire year.
Muni closed-end funds have had a nice roller coaster ride; hopefully everyone kept all of their hands and feet inside the moving vehicle. Using BlackRock MuniVest Fund (NYSEMKT:MVF) as an example, the gap between its NAV (which was a record) closed nicely with its recent 6% rally. The price of the underlying assets has flatlined, so it was purely a product of investor flows. The rally ran out of gas, and we've retraced part of the parabola.
I still like the muni sector headed into the new year. For closed-end funds in particular, I'm going to watch and see if the recent dividend cut was purely due to capital losses and not because the funds have been investing in lower-yielding assets. Lastly, a long-term headwind for these funds should start creeping up in late 2014 and into 2015 in terms of the ways they obtain leverage. They are only ~1.6x leveraged, so it's not a major problem, but funding costs should start creeping up and hit their net earnings, and subsequently the dividend payments.
Portfolio Add: AT&T
I just added AT&T (NYSE:T) to the portfolio. It's a beautiful setup on the chart, in my opinion: golden cross, and then it is riding the 50-day moving average afterwards. This usually sets up for a multi-month-and-year move. While you wait for the move, you get to collect a 5% dividend. The fundamentals look great for this setup too.
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Tuesday, December 31, 2013
The next big industry event in tech is CES from January 7-10. Intel (NASDAQ:INTC) CEO Brian Krzanich will be delivering the opening (and his first) keynote on January 6, followed by Yahoo's (NASDAQ:YHOO) Marissa Mayer and Cisco's (NASDAQ:CSCO) John Chambers on January 7.
What are these CEOs going to talk about? I assume Krzanich will focus on Intel's positioning in mobile, Chambers will talk about Cisco's new initiative called "internet of everything," and I assume Marissa is going to highlight Yahoo's addition of Katie Couric and its attempts to make Yahoo more relevant.
I suspect this year's standouts at CES to be companies that are focused on 3-D printing, Internet of things, gaming, and wearable tech. Tablets are boring, and the bigger iPhone is coming mid-to-late 2014. I imagine in 2014 that we will see bigger phones, tablets, and some kind of wearable product from every consumer-related tech company. Is a prototype of a Microsoft (NASDAQ:MSFT) watch coming out?
Are there any new phones coming out that could mix things up as related to form factor and pricing? How about an Amazon (NASDAQ:AMZN) AWS phone that is inexpensive, yet as good as anything out there, leveraging the Kindle App store while providing a ton of cloud storage? I would imagine that it would do well.
In 2014, there will not be any big thematic shifts or changes, just a continuation and advancement of the trends that were so dominant in 2013. Cloud computing will continue to gain corporate mind share, wearable computers will become more mainstream, 3-D printing adoption should continue, and the monetizing of mobile advertising will increase, a bunch of fast-growing, sub-$150-million-run-rate companies will go public (e.g. Five9), tech M&A will accelerate, and legacy tech companies will continue to adapt. A potential wildcard trend may be the increase in hybrid cloud adoption, which will benefit some of the legacy types.
Will 2014 see a recovery in some of the big enterprise darlings of yesteryear? We expected some year-end strength in underperforming enterprise stocks based on the belief that the reactions to the onslaught of negative pre-announcements and subpar Q3 results were overdone, resulting in a recovery into year-end. If Red Hat (NYSE:RHT), Adobe (NASDAQ:ADBE), and Oracle (NYSE:ORCL) are any indication of what to expect when companies report in January, results could be solid (not like TIBCO Software (NASDAQ:TIBX) results and guidance). For the most part, December 2013 has been a solid month for a handful of these laggards, with Red Hat up 20%, VMWare (NYSE:VMW) up 10%, Solar Winds (NYSE:SWI) up 10%, Teradata (NYSE:TDC) flat, Oracle up 10%, and Citrix (NASDAQ:CTXS) up 3%.
A basket of these and related stocks (TechLag basket) would have generated a loss of -20% for 2013. I can make long-trade cases for several of these based upon where they are now, such as Solar Winds, Fortinet (NASDAQ:FTNT), TIBCO Software, and even Nuance (NASDAQ:NUAN). The fact is that a lot of these have unique sets of issues and seem to be priced accordingly for now. However, who would have thought that Microsoft would be up over 40% or Hewlett-Packard (NYSE:HPQ) up over 102% in 2013? Sometimes the dogs provide fertile grounds for long ideas, as long as one doesn't hold a grudge based on earlier losses in a name.
On the short side, there are plenty of names to think about, such as those trading at extreme multiples who are up north of 100% YTD or some of the obvious legacy-share losers. While good stories just don't get worse when the calendar changes, profit taking usually occurs early in the year with the top performers.
On January 1, we will introduce our list of top short ideas for 2014. Stay tuned for the date of the Fusion Private Security Technology Symposium in San Francisco in Q1.
Thursday, January 2, 2014
2014 Starting Well for the Hunger Games Trade: Part 3
2014 is looking okay for the third annual "Hunger Games Trade."
Lions Gate (NYSE:LGF) is about exactly two things in 2014: the third Hunger Games movie, due out in November, and Divergent, which will arrive in March.
As it stands now, things are moving in the right direction. The Hunger Games: Mockingjay Part 1 is at the top of virtually every list of most anticipated movies of 2014 -- not exactly a shocker given the box office success and critical acclaim given to 2013's The Hunger Games: Catching Fire. In fact, movie ticket sales site Fandango put it at number one.
But I also think expectations for Divergent can trend up into its release. It looks far more appealing than 2013's Ender's Game; Divergent book sales remain strong, and like THGMJP1, it's on just about every most-anticipated list, like those from Variety and Forbes. It also actually made #5 on the Fandango list.
As a reminder, this trade is built on the idea of other people thinking these movies will be huge. Because regardless of how well they ultimately do, the stock is going to peak before the Hunger Games release in November. The goal is simply to get in before the crowd bids the stock and to get out before the last marginal buyer is in.
While the stock has a long way to go in terms of tracking its mid-2013 pop, I think the prospects for The Hunger Games and Divergent are solid catalysts, the latter being unknown to most investors.
Risk-On Support Holds
After five straight years of gains (2009-2013) on the first trading day of the year, the S&P 500 (INDEXSP:.INX) finally broke the streak and experienced a decline of 0.89% in yesterday's trading. While many are jumping on the bearish bandwagon, this may be premature after looking underneath the broad indices. We saw continued relative strength in the more cyclical groups, with the Consumer Discretionary Sector (NYSEARCA:XLY) outperforming the Consumer Staples Sector (NYSEARCA:XLP) by 0.78% (see top panel of chart below). We also saw continued strength in US credit, with High Yield Issues (NYSEARCA:HYG) hitting a new multi-year high (see bottom panel of chart below). For now, these factors continue to favor the risk-on trade.
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