Financial Briefing - Tuesday, January 9th 2024
From All Articles on Seeking Alpha
AEL.PR.A And Other 20%+ Yield To Call Preferred Stock Opportunities
This podcast episode discusses the potential for a reignition of inflation similar to the 1970s due to potential interest rate cuts by the Federal Reserve. The author believes that the Fed may be under pressure from the Biden Administration to cut rates in 2024, but notes that there are factors that may prevent them from making the same mistake as Fed Chairman Arthur Burns in the 1970s. These factors include the fact that the current Fed Chairman is not up for renomination until 2026 and that the Fed should be aware of the consequences of reigniting inflation. Additionally, the author suggests that the international community's loss of faith in the US dollar as a store of value could also be inflationary. The author provides an analysis of fixed-to-floating preferred stock as a potential investment opportunity in the event of rate cuts, highlighting specific companies and their key attributes.
UiPath's Bots Make Generative AI Apps Work Better
UiPath, the leading company in Robotic Process Automation (RPA), appears to be experiencing accelerating growth. Despite initial concerns that the rise of generative AI would reduce the need for process automation bots, the opposite seems to be true; AI and automation work better together. UiPath's recent introduction of a sales tool called NorthStar has greatly improved sales efficiency, providing users with a road map to demonstrate return on investment. Additionally, partnerships with SAP and Deloitte are generating significant transactions for UiPath. The company's net new Annual Recurring Revenue (ARR) is showing strong gains, indicating a growing demand for its automation solutions. While macroeconomic concerns and market conditions may impact UiPath's performance, the company's growth expectations are likely to increase throughout the year. In summary, the operational performance and valuation of UiPath suggest a positive outlook for the coming months, reaffirming its position as a recommended investment.
Universal Electronics: A High-Risk/High-Reward Turnaround Play
Universal Electronics (UEIC), a global manufacturer of control and sensor technology solutions, has been experiencing a decline in demand for its remote control products for video-service customers. The COVID-19 pandemic, high inflation rates, increased production costs, and unabsorbed labor have all contributed to negative income and collapsing profit margins for the company. As a result, UEIC's share price has plunged by 89% from its all-time highs in 2016. However, UEIC is now focusing on expanding its footprint in the HVAC industry and partnering with emerging streaming services to offset the decline in sales in the video services industry. The global HVAC market is expected to grow rapidly in the coming years, presenting an opportunity for UEIC to generate revenue growth. Additionally, the company is rightsizing its production capacity to operate more efficiently and is launching new products for the connected home industry, particularly in HVAC. While sales are expected to continue declining in the near term, the market pessimism surrounding UEIC may present a buying opportunity for investors with a higher risk tolerance, given the potential upside in the long term.
YYY: Too Many Factors Working Against This Income ETF
The Amplify High Income ETF (YYY) warrants a sell rating due to several negative factors. While the ETF offers a high dividend yield as part of its income strategy, it has seen a consistent decline in its share price. The very high expense ratio and negative dividend growth rate are also undesirable for income investors. Additionally, the ETF has holdings, such as Oxford Lane Capital and PIMCO Dynamic Income Fund, which have experienced significant share price decline and have high expense ratios. The Nuveen Preferred & Income Opportunities Fund has also shown warning signs with declining dividend growth and capital depreciation. As an alternative, the JPMorgan Equity Premium Income ETF (JEPI) is suggested as a more favorable fixed-income fund, with stable holdings, a lower expense ratio, and a history of increasing share price. Overall, YYY's red flags and underperformance make it a less appealing option for income-seeking investors.
UWM Holdings: Poised For Continued Dominance In 2024 Despite Cyclical Economics
In 2023, UWM Holdings (UWMC) showed remarkable resilience, doubling its share price despite facing challenges from Federal Reserve rate hikes. The company's offensive stance with substantial loan volumes, new services, and operational efficiency gains fueled its performance. However, new challenges arise in 2024, including anticipated rate cuts and maintaining a dividend. Despite these challenges, UWM is positioned favorably for continued outperformance based on its financial strength, operational excellence, and cash reserves. The company's strong production and purchase volume, along with an increase in gain margin, reflect powerful client and broker relationships and operational efficiency. Though the company's loan volumes decreased slightly, UWM demonstrated resilience during a time of record-high interest rates. However, concerns remain about the macro environment, such as rate cuts and the potential impact of a recession. Additionally, the high dividend payout ratio and the sustainability of the dividend are areas of concern. Overall, UWM is expected to outperform in the competitive 2024 market, with its financial strength and resilient business model. The stock is rated as a Buy below $7/share.
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From Business & Finance Archives | Reuters News Agency
OMV, ADNOC close to agreeing deal for chemicals company tie up 
Abu Dhabi National Oil Co (ADNOC) is reportedly finalizing a deal with Austria's OMV to merge two entities owned by the companies and create a chemicals giant. The merger would involve combining OMV's petrochemicals group, Borealis, which is jointly owned by ADNOC and OMV in a 75:25 split, with Borouge, which is primarily owned by ADNOC and Borealis in a 54:36 split. The talks for the merger began in July, and this potential deal would further strengthen the partnership between ADNOC and OMV. ADNOC has been focusing on expanding its petrochemicals business as part of its growth strategy, and this merger would potentially create a major player in the global chemicals industry. While further details of the deal have not been disclosed, it could have significant implications for both companies and the chemicals sector as a whole.
Boeing signals two-month delay to 737 production ramp-up 
In a series of exclusive reports by Reuters on Thursday, two major stories emerged in the aerospace sector concerning Boeing. The first was that Boeing was on the verge of finalizing a plane order with Thai Airways. The details of the order have not been made public, but it is seen as a positive development for Boeing as it aims to recover from the setbacks caused by the COVID-19 pandemic. The second story revealed that there would be a delay in the production ramp-up of Boeing's 737 aircraft. The company is now projecting a two-month delay in the process due to various issues, including supply chain problems and ongoing inspections. This delay comes as a blow to Boeing, which has been working to increase production of its popular 737 model after a long pause caused by the grounding of the aircraft following two fatal crashes. These developments highlight the challenges faced by Boeing as it strives to navigate a turbulent industry and regain its position in the market.