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Poor Man's Gold Shines The Brightest

Posted on December 7, 2022December 5, 2022 by Aibek Burabayev

Please take a look at the graph below. These futures left their competitors far behind with a tremendous gain of almost twenty percent in only one month.

Chart courtesy of finviz.com

On a one-month horizon, silver's meteoric price increase is undeniable. None of the metals can even come close. Copper is lagging eight percent behind as gold futures show only half the performance of silver. By the way, I am about to show you the relative dynamics of these top metals in the chart below.

Source: TradingView

The chart above visualizes the comparative superiority of silver futures over gold futures that we revealed in the first graph. The white metal has been reversing its nine-year losses since the bottom of 2011 at 30 oz up to the all-time high at 127 oz in 2020, where the large age long cycle has been completed. Continue reading "Poor Man's Gold Shines The Brightest" →

Teachers' Pension Debacle In FTX - Know What You Own

Posted on December 6, 2022December 2, 2022 by Matt Thalman

When FTX, the cryptocurrency exchange founded and run by Sam Bankman-Fried, filed for bankruptcy, big and small investors experienced significant losses.

Some of these investors had money in FTX and, to some extent, knew they were taking on risk by doing so. Other investors simply were invested in funds or even pensions and honestly had no clue of their exposure to such a toxic business.

One large group of investors who likely had no clue they were invested in FTX, or even cryptocurrencies of any kind, where those who are beneficiaries of the Ontario Teachers' Pension Plan.

After FTX filed for bankruptcy, the Ontario Teachers' Pension Plan announced that it would write down its entry stake in FTX to zero. The pension fund had $95 million invested in FTX, which is now essentially gone.

Furthermore, what makes this situation even slightly more painful, is that the Teacher's Pension manager just started investing in FTX in October of 2021 with an initial investment of $75 million and then added another $20 million in January 2022.

The date of the investments is important for two reasons. The first reason is that the whole investment has been lost just over a year from the initial investment. The second reason, and probably more important, is that the teachers who are part of the Pension fund didn't have much time to even realize they were invested in FTX.

I know what you are thinking, "they had a year to figure out their pension fund was invested in FTX." Yes, I understand the investment was a year old. However, funds don't have to disclose their holdings right when the purchases are made.

Furthermore, while most funds disclose their holdings quarterly, they are only required to do so yearly. I don't know how often the Ontario Teachers' Pension Fund announces its holdings, but if they disclose yearly, investors may have only been told about the initial $75 million invested in October 2021 and had not even been informed of the additional $20 million invested in January 2022.

None of that matters because I'm just using the Ontario Teachers' Pension Fund as an example. There are tons of private and publicly traded funds that you as an investor could have money tied up in, which may be investing in businesses that you wouldn't touch with a 10-foot, sorry, 100-foot pole. Continue reading "Teachers' Pension Debacle In FTX - Know What You Own" →

3 Stocks That Won't Go Out Of Style

Posted on December 5, 2022December 2, 2022 by The MarketClub Team

The global economic recovery may be in potential jeopardy with China caught in an unenviable dilemma between strong politics and good economics with respect to covid lockdowns.

In the world’s second-largest economy and a nation not used to dealing with widespread dissent, economic hardship may seamlessly turn into political instability, thereby risking yet another disruption in the global supply chain. Markets have also reflected the nervousness with a decline in stock futures and Brent crude at the lowest level since January.

Amid such uncertainty, consumption-driven businesses that enjoy inelastic demand and resilient margins for the essential products and services they offer can act as ideal ballast for the choppy waters we can’t find a way out of.

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Hence, it could be wise to add Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and Archer-Daniels-Midland Company (ADM) as some technical indicators point to sustained upsides with adequate downside protection.

Johnson & Johnson (JNJ)

JNJ is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.

Over the last three years, JNJ’s revenues have grown at a 5.5% CAGR, while its EBITDA has grown at 4.6%. During the same period, the company’s net income has grown at 10.6% CAGR.

JNJ’s sales increased 1.9% year-over-year to $23.79 billion in the fiscal 2022 third quarter ended October 2, 2022. The company’s gross profit stood at $15.98 billion during the same period.

Analysts expect JNJ’s revenue for the fiscal year 2022 to increase by 1.4% year-over-year to $95.04 billion. The company’s EPS for the current year is expected to increase 2.5% year-over-year to $10.04. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing four quarters. Continue reading "3 Stocks That Won't Go Out Of Style" →

Two Value Stocks To Buy On Dips

Posted on December 4, 2022December 1, 2022 by Taylor Dart

It’s been a volatile year for the major market averages, and the Nasdaq Composite (COMPQ) remains down 28% for the year and on track for its worst annual decline since 2008.

The difference this time is that it’s coming off a multi-year win streak and a more than decade-long bull market, making the current sell-off look more similar to 2000 than the 2008/2009 lows.

That said, for investors willing to look outside of the traditional FAANG names that have massively outperformed for years, there are always opportunities to hunt down alpha. This update will look at two general market names trading at deep discounts to fair value.

Builders FirstSource (BLDR)

Builders FirstSource (BLDR) is the largest supplier of structural building products, value-added components, and services to the professional market for the single-family and multi-family construction/repair/remodeling market in the United States.

The company has ~560 distribution/manufacturing locations across 42 states and boasts a market cap of $9.7BB.

Unfortunately, though, with the housing market teetering on a recession with new and existing home sales down sharply, investors have become worried about buildings products name, and Builders FirstSource hasn’t been immune from this anxiety despite continuing to put up phenomenal results.

In fact, the company just recently reported revenue of $5.8BB (+ 5% year-over-year) and adjusted annual EPS of $5.20, a 53% increase from the year-ago period.

Notably, these results were lapping already difficult comparisons from the year-ago period, with Q3 2021 annual EPS up 308% in the year-ago period. The strong growth in earnings was driven by ~20% growth in its higher-margin value-added products combined with aggressive share repurchases, repurchasing $2.0BB in shares to date (~30% of common shares).

Normally, I would be skeptical of a company growing annual EPS through share buybacks and buying back shares to this degree, given that many companies have a bad habit of buying back shares to prop up earnings vs. doing it opportunistically.

However, Builders FirstSource’s core business is strong with growth in its key segments (core organic sales in Value-Added Products up 20%, Repair, Remodel & Other up over 30%), and the stock is significantly undervalued. Continue reading "Two Value Stocks To Buy On Dips" →

3 Stocks To Watch This Holiday Season

Posted on December 3, 2022December 1, 2022 by The MarketClub Team

With the moderation of inflation in October and indications of the Fed following suit with a slower interest rate hike next month, the festive season promises to be merrier than expected for consumers and businesses alike.

Retail and consumer businesses whose demand and margins are resilient enough to make them relatively immune to macroeconomic headwinds stand to gain from the increased consumer spending during the holiday season.

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Hence, it would be opportune to add Walmart Inc. (WMT), Flowers Foods, Inc. (FLO), and The Simply Good Foods Company (SMPL) as some technical indicators point to sustained upsides that could leave you thankful this season.

Walmart Inc. (WMT)

The retail giant WMT offers opportunities to shop an assortment of merchandise and services at everyday low prices (EDLP) in retail stores and through e-commerce platforms.

The company operates through three segments: Walmart U.S.; Walmart International; and Sam’s Club. Over the last three years, WMT’s revenues have grown at a 4.8% CAGR.

For the third quarter of the fiscal year 2023 ended October 31, 2022, WMT’s total revenues increased 8.7% year-over-year to $152.81 billion, with strength in Walmart U.S., Sam’s Club U.S., Flipkart, and Walmex.

During the same period, the company’s adjusted operating income increased 4.6% year-over-year to $6.06 billion, while its adjusted EPS increased 3.4% year-over-year to $1.50.

WMT’s revenue and EPS for the fiscal year ending January 2024 are expected to increase 2.9% and 8.7% year-over-year to $619.49 billion and $6.60, respectively. The company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in three of the trailing four quarters. Continue reading "3 Stocks To Watch This Holiday Season" →

Johnson & Johnson (JNJ)

Builders FirstSource (BLDR)

Walmart Inc. (WMT)

It’s not goodbye, it’s hello Magnifi!