Morning News: November 23, 2022
Posted by Eddy Elfenbein on November 23rd, 2022 at 7:07 am

Global Economy Slows, but Seems Set to Avoid Recession

Western Allies Aim to Agree on Russian Oil Price Cap Wednesday

A $300 Billion Bond Market Holds the Key to Solving the Climate Crisis

ECB Must Narrow Interest-Rate Gap With Fed, OECD Says

Spanish Banks Set to Sign Up to Mortgage Relief Package

US Mortgage Rates Plunge for a Second Week, Hit Two-Month Low

Billions of Dollars at Stake in a Puzzling Holiday Shopping Season

FTX Flipped One Trading Firm’s Risk Obsession. Disaster Followed

Inside Sam Bankman-Fried’s Quest to Win Friends and Influence People

Tesla’s Stock Slump Has Gone Too Far, Morgan Stanley Says

After Swift Return, Iger Faces Disney’s Long-Term Challenges

Videogame Companies Brace for Lackluster Holiday Season

Big Shareholder Signals Opposition to News-Fox Combination

Dubuque? We Don’t Fly There Anymore. Airlines Say Goodbye to Regional Airports.

Printer of King Charles III Banknotes Plunges on Profit Warning

Sam Bankman-Fried Ran FTX Like ‘Personal Fiefdom’ As Firm Spent $300 Million on Luxury Real Estate

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CWS Market Review – November 22, 2022
Posted by Eddy Elfenbein on November 22nd, 2022 at 7:08 pm

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

Bob Iger Returns to Disney

The big story on Wall Street, at least not involving the letters FT or X, is that Bob Chapek has been fired as the top mouse at Disney (DIS). The company said that Bob Iger would be returning. So they’re changing Bobs. This is especially interesting news to us because Disney had been a Buy List stock.

We ditched Disney at the end of last year and that appeared to be a shrewd move on our part. The stock was down about 40% for the year until last week. After the news of Iger returning, shares of Disney rose as much as 9.99% in Monday’s trading.

Pro-tip: If the news of you leaving your job causes the value of the company to increase instantly by $16 billion, perhaps it wasn’t meant to be.

Disney was a tough purchase for us because we got many of the big things right. We thought that Disney’s streaming service would be a hit, and in the initial months, it proved to be much better than expected.

We added Disney at the end of 2018 at $109.65 per share. The earnings reports were quite good. By April, shares of Disney got to $142 and by November, the stock was over $153. I felt vindicated. I was suddenly a genius!

Then came Covid and the game completely changed. Within a few days, shares of Disney plunged to $80. Sadly, I was no longer a genius. Our entire profit had been wiped out in a few weeks. The whole world got locked down and that included Disney World.

I remember that in an interview, I described Disney as a company that seemed to be tailor-made to be harmed by Covid. It’s actually rather remarkable. Disney’s business is movies, sports and theme parks. If that’s not enough, they also have a cruise line. Everything Covid wrecked is where Disney stood. This is also when Bob Chapek took over.

But then it appeared that Covid would be a big help for Disney. Everyone cooped up in their homes could just stream their way to Disney’s catalog. On top of that, the government and the Fed were throwing tons of money Wall Street’s way, so of course Disney would benefit.

Shares of Disney soared. Less than a year after hitting $80, Disney got to $200! Once again, I was a genius.

Oddly, Chapek seems to have improved in recent months. Over the summer, the company had a solid earnings report. Profits were up and Disney was becoming a major rival to Netflix. The board even extended his contract. Everything seemed great at the Mouse House.

That is, until Disney’s last earnings report which was a disaster. The theme park business was ugly. The streaming business was ugly. ESPN was ugly. Everything everywhere all at once turned ugly.

The streaming service lost $1.5 billion. In one day, Disney’s stock fell 13%. That was its worst day since 9/11. It seemed like Wall Street got blindsided.

Despite the losses, Chapek was very optimistic for the business. So much so that it damaged his credibility. (Lesson: people dislike spin more than the actual bad news being spun.) This was especially tough on Disney because the theme park business has gotten much better. Also, activist hedge funds have been putting pressure on the company.

I didn’t realize it at the time, but the earnings report appears to have been the catalyst that set the board in motion. Now Iger has been hired to be Disney’s CEO through the end of 2024. Bear in mind that Chapek was Iger’s handpicked choice to follow him.

Chapek made several missteps and his relationship with Iger turned cold. Disney also found itself in the middle of several high-profile political arguments. I wonder how much of this was an Iger-led coup. His prints may be near the dagger.

Chapek’s major business decision was to put Disney’s streaming business front and center. The business also includes Hulu and ESPN+. Chapek named his protégé, Kareem Daniel, head of a Disney’s Media and Entertainment Division. Iger didn’t waste any time firing Mr. Daniel on Monday.

In this case, we were ahead of the game. We decided to get rid of Disney at the end of last year when the stock was at $154.89. While that was down from Disney’s high, it turned out to be a very good exit price. The stock was recently as low as $86 per share.

Now I’m not sure if I was a genius or not. In three years, we made 45% in our Disney investment. We got in at a bad time and then waited too long to get out. Still, we got out.

Overall, I’m not sure if changing the person at the top is enough to help Disney. The problems are deep and the entertainment landscape is changing quickly. That’s a common myth, that a change in leadership can revive a company. Sometimes it can, but the problems are often very complex.

The broader lesson on Disney is that we did our homework, and we were vindicated. Still, the story changed, and we were smart enough to cut ties. It wasn’t a massive win or a massive failure. We made money and we moved on. On Wall Street, that’s good enough.

In the near-term, Iger’s re-installation at the top will be a morale boost; but for now, I’m going watch Disney’s stock as a spectator.

Stock Focus: IDEX Corp.

This week, I want to focus on IDEX Corp. (IEX) which is another one of those boring mid-cap industrial stocks that seem to get little attention. The corporate name is derived from “innovation, diversity and excellence.” IDEX is based near Chicago, and it currently has a market cap of about $18 billion.

IDEX is not to be confused with Ideanomics which has IDEX as its ticker, or IDEXX Laboratories.

IDEX is a highly decentralized organization. The company owns 45 largely unconnected businesses. It might be more convenient to list what businesses they’re not in. IDEX makes things like fluidic systems and optics systems and also fire and rescue equipment. Not so sexy, is it?

Still, IDEX’s performance is worthy of respect. Since 1990, the stock is up 120-fold. IDEX now has 8,000 employees and manufacturing operations in more than 20 countries. The company is divided into three main units: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety / Diversified Products.

The company is having a very good year. Last month, IDEX reported Q3 earnings of $2.14 per share. That beat the Street by 14 cents per share, and it was up 20% over last year. The CEO said, “In the third quarter, we achieved record sales, double digit organic growth across all three of our segments and solid operating margin performance driving record EPS and strong free cash flow generation.”

The company also raised its guidance. IDEX said it expects to make between $1.92 and $1.97 for Q4. That implies full-year earnings of $8.04 to $8.09. If that’s right, it would be an increase of 17% to 18% over last year.

As a conservative estimate, I’d say IDEX can make $8.50 per share next year and $9 per share in 2024. That would give the stock a forward P/E of around 26. That’s high but not unreasonably. Unfortunately, the shares have gained 33% over the last five months. Alas, we can’t invest in a rearview mirror.

CWS Earns Its Fifth Star

We had very good news this week. Morningstar awarded CWS, our exchange-traded fund, its fifth star. This is a big deal.

We got it for our three-year and five-year performance, plus our three-year risk-adjusted performance. The ETF is based on our Buy List.

Here’s the press release from AdvisorShares:

BETHESDA, Md., Nov. 22, 2022 /PRNewswire/ — AdvisorShares announced that the AdvisorShares Focused Equity ETF (Ticker: CWS) has received a Five-Star Morningstar Rating™. CWS earned five stars for its overall (out of 535 funds), five stars for its three-year (out of 535 funds) and five stars for its five-year (out of 494 funds) risk-adjusted returns in Morningstar’s Mid-Cap Growth category, as of October 31, 2022.

The AdvisorShares Focused Equity ETF bases its investment strategy on Eddy Elfenbein’s popular Crossing Wall Street “Buy List.” Elfenbein’s Buy List has published annually since 2006 and carries a wide following. The ETF applies a buy-and-hold strategy: it invests in the stocks of well-run companies that have a history of marketplace dominance, rising sales and earnings, reasonable value, and a record of rising dividends.

Elfenbein believes that a disciplined buy-and-hold strategy is ideal for riding out market storms. CWS strives to buy the highest-quality stocks at the lowest possible prices. By focusing on value, CWS aims to reduce its risk to broad-based market drops. A commitment to value also aids long-term capital appreciation.

CWS also has an innovative fulcrum fee structure where the management fee is directly tied to the ETF’s performance.

Past performance is not indicative of future results. For standardized and month-end performance and more information about CWS, please visit advisorshares.com/etfs/cws.

AdvisorShares regularly hosts live webinars featuring portfolio managers and strategists, including Mr. Elfenbein and other leading industry experts. You may learn more and register at the AdvisorShares Event Center for upcoming event sessions and educational insights.

Here’s our recent performance. We’re the black line. The S&P 500 ETF is the blue line.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want to learn more about the stocks on our Buy List, please sign up for our premium service. It’s $20 per month, or $200 per an entire year.

Morning News: November 22, 2022
Posted by Eddy Elfenbein on November 22nd, 2022 at 7:05 am

Ukraine War Continues to Slow Global Growth, New Report Says

Europe’s Wind Industry Is Stumbling When It’s Needed Most

OPEC+ Eyes Output Increase Ahead of Restrictions on Russian Oil

World’s Most-Crucial Fuel Heads for Shortage Touching Everything

How Bad Will Housing Get? The Chill Gripping a Once-Hot Market Offers a Test

Investor Home Purchases Drop 30% as Rising Rates, High Prices Cool Housing Market

Inflation Won’t Win Thanksgiving: Here’s NPR’s Plan to Help You Save on a Meal

Key Freight Rail Union Rejects Deal, Increasing Strike Risk

ECB Must Narrow Interest-Rate Gap With Fed, OECD Says

US Is Focused on Regulating Private Equity Like Never Before

Credit Suisse’s Future Hinges on Overcoming a Fraught Past

FTX Crypto Customers Worry They Will Never See Their Money Again

Crypto Lender Sued for Blocking 2021 Withdrawals by Wealthy Investors

A Huge Merger’s Collapse Breaks a Pattern of Consolidation in Publishing

What Elon Musk Is Doing to Twitter Is What He Did at Tesla and SpaceX

Elon Musk’s 2022 Wealth Loss Exceeds $100 Billion for First Time

Walt Disney CFO, Others Brought Concerns to Board Over Bob Chapek

How One of the Country’s Most Storied C.E.O.s Destroyed His Legacy

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Bob Iger Returns to Disney
Posted by Eddy Elfenbein on November 21st, 2022 at 11:39 am

This is a fairly slow day on Wall Street and the start of a week that should also be pretty slow. The market is down a little bit; so far, not too much. For such a tepid day, there’s a big gap between high beta and low vol. In other words, the riskier stocks are down big today while many of the conservative stocks are holding up well. Our Buy List is also having a good day. Many of the big energy stocks are down by 3% or more.

The big news is that Bob Iger is coming back to Disney to replace Bob Chapek. Disney has been run by Chapek since February 2020, and the stock has not done well. Over that time, the S&P 500 is up 28% and Disney is down 25%. Disney is up 9% today.

Morning News: November 21, 2022
Posted by Eddy Elfenbein on November 21st, 2022 at 7:04 am

Younger Chinese Are Spurning Factory Jobs that Power the Economy

U.S.-Europe Trade Booms as Old Allies Draw Closer

Stressed-Out Americans Plan to Buy Fewer Christmas Gifts, Donate Less to Charity

Goldman Sachs Strategists Say Bear Market Will Last in 2023

Fund Managers Are Turning Ever More Pessimistic on the US Dollar

Inside a Crypto Nemesis’ Campaign to Rein In the Industry

The Federal Reserve Is Surely Not the Cause of Silicon Valley’s Swinging Ax

Tech Layoffs Send H-1B Visa Holders Scrambling for New Jobs

Can Big Tech Get Bigger? Microsoft Presses Governments to Say Yes

Disney Shares Soar on Iger Return as CEO After Shock Ouster

Merck to Buy Imago for $1.35 Billion to Gain Bone Marrow Drugs

Elon Musk Is Running Twitter Like A Failing Newspaper Business

How Colleges and Sports-Betting Companies ‘Caesarized’ Campus Life

Carvana Faces Cash Crunch From High Debt, Rising Interest Rates

Beyond Meat Is Struggling, and the Plant-Based Meat Industry Worries

Shein’s Cotton Tied to Chinese Region Accused of Forced Labor

Jewelry Counterfeits: The Age-Old Problem Just Keeps Growing

Shaking Off the World’s Worries, Jewelry Focuses on Growth

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Morning News: November 18, 2022
Posted by Eddy Elfenbein on November 18th, 2022 at 7:03 am

Will Taxing the Windfall Profits of Oil Giants Fix Countries’ Economies?

A Nation in the Crosshairs of Climate Change Is Ready to Get Rich on Oil

What Is ‘Friendshoring’?

What If Deglobalization Is Good for Emerging Markets?

‘Do You Really Want to Rebuild at 80?’ Rethinking Where to Retire.

Qatar Bans Alcohol Sales at World Cup Stadiums in Abrupt U-Turn

ECB May Have to Restrict Growth to Control Inflation, Lagarde Says

Inflation and Unemployment Both Make You Miserable, but Maybe Not Equally

BofA Sees Bear Rally Fizzling Out Even as Equity Inflows Surge

Musk’s ‘Hardcore’ Ultimatum Sparks Exodus, Leaving Twitter at Risk

Tech Companies Were Thriving, Now They’re Laying Off Thousands. Here’s Why.

New Chief Calls FTX’s Corporate Control a ‘Complete Failure’

Is This the End Game for Crypto?

An iPhone Factory Needs Workers. The Chinese Government Wants to Help.

GM Has a New Business: Fixing Tesla EVs

Masayoshi Son Now Owes SoftBank $4.7 Billion on Side Deals

Elizabeth Holmes’s Fraud Sentence Will Send a Message One Way or Another

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Morning News: November 17, 2022
Posted by Eddy Elfenbein on November 17th, 2022 at 7:04 am

EU Wrestles with Payment for Order Flow Share Trading Rules

Egypt Dims the Lights in Cairo to Free Up More Gas for Europe

Hunt Outlines £55 Billion Squeeze on UK as Recession Starts

A New Source of Economic Anxiety in Britain: Soaring Mortgage Rates

France Urges U.S. to Change ‘Made in America’ Electric Car Policy

U.S. Banks to Pounce on Fintech Deals as Valuations Plunge

Fed Official Warns Against Prematurely Concluding Inflation Has Peaked

A Recession Could Hit White-Collar Workers the Hardest. Here’s Why

2022 Midterm Results Disappointed GOP — But Were Good for Stocks

Fading Supply-Chain Problems Signal Season of Plenty for Holiday Shoppers

U.S. Shoppers Are Still Spending, as Long as Retailers Give Them a Reasons To

Here’s Why Home Depot and Lowe’s Are Booming In a Housing Market Bust

Why Office Buildings Are Still in Trouble

Bankman-Fried Tells His Side of the Story of FTX Collapse in Tweets

Binance CEO Changpeng Zhao A ‘Walking Time Bomb’ After FTX Collapse, ‘Dr. Doom’ Warns

How to Prepare for Life After Twitter

Elon Musk Tells a Court He Had Little Say in His Giant Tesla Pay

Qatar’s World Cup Is a $300 Billion Splurge to Rebrand Its Global Reputation

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Barron’s on Zoetis
Posted by Eddy Elfenbein on November 16th, 2022 at 3:35 pm

Barron’s mentions some healthcare stocks including Zoetis.

They include the animal-health firm Zoetis (ZTS), down 40% this year, which trades at a 45% discount to its mean target price of $212.80. Zoetis ZTS –1.27% shares climbed sharply throughout the pandemic, jumping more than 80% between the end of 2019 and the end of 2021. This year, the stock has given away a good chunk of those gains.

In a note out early in November, William Blair analyst Brandon Vazquez wrote that the company sees a strong demand for pets, despite the broader economic environment.

“Despite noise in the quarter, management was clear that there has not been a slowdown in companion animal demand, and it expects this segment can remain resilient even in difficult macroeconomic conditions,” Vazquez wrote.

Retail Sales and Industrial Production
Posted by Eddy Elfenbein on November 16th, 2022 at 2:23 pm

We had two economic reports this morning. The first said that retail sales increased by 1.3% in October. Maybe folks are getting an early start on their Christmas shopping. Over the last year, retail sales are up 8.3%. Excluding gasoline, retail sales increased by 1.0%.

There are weak spots out there. Target just bombed its earnings report. The stock is getting punished today.

The other report said that industrial production fell by 0.1% last month. Economists had been expecting an increase of 0.2%. The figure for September was also revised lower. Industrial production is just barely above its pre-Covid level.

Morning News: November 16, 2022
Posted by Eddy Elfenbein on November 16th, 2022 at 7:03 am

Dalio Warns of Consequences of ‘More Intense’ China-US Friction

Engineers From Taiwan Bolstered China’s Chip Industry. Now They’re Leaving.

Why Berkshire Hathaway’s Latest Big Bet Is on a Taiwanese Chip Maker

Apple Prepares to Get Made-in-US Chips in Pivot From Asia

A Parade of Tankers Has Eased Europe’s Energy Crisis

Inflation in Britain Reaches 11.1 Percent, Led by Energy Costs

ECB’s Visco Says Case Growing for Less Aggressive Rate Hikes

Investors Warn of More Pain Ahead as Valuations Slide: NEF Wrap

Lowering Inflation Without a Recession Might Not Be Feasible, Fed Official Says

Fed’s Michael Barr Says Crypto Turmoil Highlights Potential Risks to Financial System

FTX Came Dangerously Close to Upending Futures Markets

FTX’s In-House Performance Coach Is Just as Surprised as You Are

Facebook Parent Meta Sees Executive Exodus in India

Target Earnings, Sales Sapped as Consumers Pull Back

Lowe’s Reports Revenue Increase, Beating Wall Street’s Expectations

Disney Sets Higher Price for Magic Kingdom in First for Company

Estée Lauder Agrees to Buy Tom Ford Brand in $2.8 Billion Deal

Tesla Projections Take Center Stage on Day Two of Elon Musk Compensation Trial

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