Eq: Large Cap

(New York)

The Dow has not been doing so well lately. Last week it dropped to its lowest level of the year, declining further than in its worst bout of volatility in February. The reasons why are becoming harder to explain with every day of losses. While isolated flare ups used to be explained away, the situation is growing more complicated for investors. A growing risk of tech regulation, a looming trade war, higher interest rates—all are weighing on stocks. That makes the markets much more complicated and hazardous for investors, and it has become commensurately harder to make good decisions.


FINSUM: The market seems to be in a very treacherous period. Its failure to regain momentum after the fall in February seems ominous to us, and we do not see a clear end in sight.

(San Francisco)

Facebook has been going through a lot of turmoil lately. CEO Mark Zuckerberg is under fire, and the company is currently embattled over data leaks, especially related the Cambridge Analytica debacle. A majority of Facebook users now say they don’t trust Facebook with their data. Because of all this turmoil, however, Facebook’s shares now look like a bargain, says Barron’s. Three year ago the company’s p/e ratio traded at a 140% premium to the S&P 500. Now it down to just 30%, even though its revenues are growing 5x as fast as the market and its profit margins are 3x average. Barron’s argues that if you view Facebook as a “sin stock”, more like a cigarette company than a tech titan, then its return profile could prove very strong.


FINSUM: A lot of sin stocks, such as tobacco companies, have done very well despite public scorn. We think this current bout of anger will likely blow over and the company will return to delivering excellent earnings.

(New York)

So the stock market is just about back where it was a month and a half ago at the bottom of its correction. This time the flare up has been driven by worries over a looming trade war being set off by the US and China. However, this recent rise in volatility has given insight into which stocks appear to be winners if a trade war does ensue. The answer is stocks that act like bonds, or yield stocks (alongside Treasuries and gold, the old safe haven standbys). Utilities and REITs have performed well, as have tobacco stocks, given that all three have strong yields to offer.


FINSUM: It is funny that just a few weeks ago everyone was worried about a bond bear market, and now everyone is pouring into fixed income and yield stocks.

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