Financial Briefing - Thursday, December 28th 2023
From All Articles on Seeking Alpha
LKQ Corporation: Undervalued, Stable Business With A Great Potential Upside
Value Voyage, a new contributor to Seeking Alpha, has initiated coverage of LKQ Corporation (NASDAQ: LKQ) with a buy rating and a price target of $57.50, representing a 25% upside. LKQ Corporation is a leading provider in the alternative and specialty parts industry for automobiles and other vehicles. The company's core business revolves around distributing vehicle parts and components needed for the repair and maintenance of vehicles. LKQ's business model focuses on providing high-quality, cost-effective alternatives to new OEM parts. The company has a diverse customer base and has established a strong distribution network to meet customer demand. In its recent Q3 2023 report, LKQ showcased notable financial and operational achievements, including organic growth in parts and services and strong EBITDA margins. LKQ has also expanded its global presence through strategic acquisitions and partnerships. The auto parts wholesaling industry in the United States has experienced steady growth, and LKQ's positioning in the industry reinforces its status as a strong performer. The industry is undergoing a transformative shift with the rise of electric vehicles, and LKQ's acquisition of Uni-Select strategically expands its footprint in the distribution of automotive refinish and industrial paint products, reinforcing its ability to serve the evolving needs of the industry.
The Pfizer Advantage: High Dividend Yield, JN.1 Variant, And Therapeutic Innovations
Pfizer, a leading pharmaceutical company, has faced a decline in its share price due to a drop in demand for its COVID-19 vaccine, concerns about losing exclusivity on some of its blockbusters, and modest guidance for 2024. However, there are several investment theses that make Pfizer an attractive asset in the healthcare sector. Firstly, the company has a strong support level, with the $27-$28 price range serving as a zone of investor interest. Additionally, Pfizer has a high dividend yield of about 6%, a robust pipeline of experimental drugs for cancer and immuno-inflammatory diseases, and the recent acquisition of Seagen, which will expand its presence in the cancer drugs market. Furthermore, the increase in COVID-19 hospitalizations due to the Omicron variant is expected to drive demand for Pfizer's antiviral medication, Paxlovid. Despite the risks associated with the expiration of key patents and competition in the obesity treatment market, Pfizer's financial stability and ongoing development of drugs and vaccines position it well for long-term growth. Overall, the podcast recommends a "buy" rating for Pfizer.
The Reasons We Prefer Netstreit Over Realty Income
Real estate investment trusts (REITs) Realty Income and NETSTREIT are both considered lower-than-average risk REITs, with resilient and diversified tenants and strong balance sheets, according to Seeking Alpha. While Realty Income has a longer track record, NETSTREIT offers a bigger margin of safety to fair value, the report noted. Realty Income recently announced the acquisition of Spirit Realty Capital, which we believe could lead to 2024 earnings growth in line with the company's historical average. However, the report noted that the accretion from the acquisition is only expected to be over 2.5% to Realty Income's adjusted funds from operations per share. Meanwhile, NETSTREIT has been trending in the right direction and at a rapid pace, with opportunities for significant earnings growth as it closes the gap with competitors. The report concludes that while Realty Income is fairly valued, NETSTREIT appears to be undervalued by around 15% and is the top REIT pick for 2024.
Verizon: Top Dog Of The Dow Candidate For 2024
Verizon Communications (VZ) provides a range of communication, technology, information, and entertainment products and services globally. The company operates through two segments: Verizon Consumer Group and Verizon Business Group. Despite little return for shareholders in recent years, the tide could be turning and the current price level is attractive. Going into 2024, VZ will be classified as a "Dog Of The Dow," an investment strategy that has historically produced strong returns. Verizon's free cash flow is expected to surpass $18 billion, and its financials remain strong, with consistent dividend growth over 19 years. The growing smartphone market presents an opportunity for Verizon to thrive and the company's infrastructure and network coverage position it well for future growth. However, challenges remain, including revenue stagnation and the need for investment in network improvements. Despite these risks, Verizon's stability, financial strength, and position in the mobile market make it an intriguing prospect for investors.
XSHQ: Weed Out Junk From Small Cap Investing
The S&P SmallCap 600 Index tracks the performance of 600 U.S. companies with market capitalizations between $850 million and $5.2 billion. To be included in the index, companies must meet criteria such as having a minimum float-adjusted market value of $425 million, positive earnings in the most recent quarter and cumulatively over the past four quarters, and a minimum of 10% of outstanding shares considered freely tradable. The index is rebalanced quarterly and was formed in December 2014. The S&P SmallCap 600 Quality Index is made up of around 120 of the top companies from the SmallCap index, based on rankings of return on equity, accruals ratio, and financial leverage ratio. The Quality Index has outperformed its benchmark in most timeframes and is rebalanced every June and December. The Invesco S&P SmallCap Quality ETF (XSHQ) is an ETF that tracks the Quality index. XSHQ is a passive fund that seeks to replicate the index's performance, with the portfolio typically including all equities from the index on a proportionate basis. The fund has expenses of 0.30% annually and currently holds 121 securities in its portfolio. The fund has outperformed its peers, Royce Value Trust Inc (RVT) and iShares Russell 2000 ETF (IWM), over a five-year period. XSHQ's sector allocations include industrials, consumer discretionary, financials, energy, and information technology. The fund's performance during 2022 was affected by market volatility, but it has shown a reversal of fortunes in 2023. While the fund is currently overbought, it may be a good long-term option for investing in quality small cap companies.
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 nearing a deal with Austria's OMV to merge two entities they have stakes in, in order to form a chemicals giant. The companies are looking to combine petrochemicals group Borealis, which is owned by ADNOC and OMV in a 75:25 split, and Borouge, which is 54:36 owned by ADNOC and Borealis. The talks between the parties have been ongoing, with OMV revealing in July that it was in discussions for the merger. The proposed deal would create a prominent chemicals player in the market, leveraging the strengths and assets of both ADNOC and OMV. No further details about the potential deal have been disclosed at this time.
Austria stalls Russian sanctions over Raiffeisen blacklisting 
Austria is reportedly attempting to have Raiffeisen Bank International removed from a Ukrainian blacklist in exchange for supporting new European Union (EU) sanctions on Russia. Reuters has exclusively reported that Austrian officials are seeking to strike a deal that would remove Raiffeisen, the largest Western bank in Russia, from the Ukrainian blacklist. According to two anonymous sources, Austria is pursuing this move as a precondition for their approval of proposed EU sanctions against Russia. The details of the proposed fresh EU sanctions are unclear, but this development speaks to the dynamics between Austria and Ukraine in relation to their respective positions on Russia. Austria’s push to remove Raiffeisen from the blacklist highlights their desire to safeguard their economic interests in Russia, while at the same time seeking to satisfy the EU’s objectives in imposing stronger sanctions on Russia.
US regulator probes banks’ climate risk planning
The U.S. Treasury Department's Office of the Comptroller of the Currency (OCC) has conducted its first climate risk assessment of over two dozen banks in recent months, marking a significant step towards increased scrutiny of Wall Street's handling of climate risks. The exams provide insights into how the OCC intends to implement guidance on climate risk for banks with more than $100 billion in assets. This guidance was issued in October by the OCC, the Federal Reserve, and the Federal Deposit Insurance Corporation. Currently, over 30 banks meet this asset threshold. The move reflects growing recognition of the financial risks associated with climate change, as regulators seek to ensure that banks are effectively accounting for these risks in their operations. The results of the climate risk assessments are expected to influence future regulatory actions and requirements for banks in the United States.