Financial Briefing - Tuesday, February 6th 2024
From All Articles on Seeking Alpha
Which Trend Method Works Best For The S&P And Nasdaq?
In this episode, the host discusses three trending methods used in trading: the moving average, the breakout, and linear regression. The moving average calculates the average price over a set number of days and is used to identify trends in the market. The breakout method involves buying when there is a new high and selling when there is a new low. Linear regression is a way of recognizing trends using a straight line on a chart. The host examines the pros and cons of each method and looks at their performance using the S&P ETF (SPY) and the Nasdaq ETF (QQQ). The breakout method proves to be the most profitable with the smallest drawdown, while the moving average method tends to have more small losses. The host emphasizes the importance of finding a balance between risk and returns when choosing a trending method.
Gladstone Land: Recent Real Estate Transaction Validates Portfolio Value
Gladstone Land Corporation (NASDAQ: LAND), a real estate investment trust (REIT) specializing in farmland, is experiencing weak stock performance despite a bullish outlook for owning farmland. The company focuses on acquiring and owning farmland for annual fresh produce and permanent crop farms, which tend to have higher profitability and lower price volatility. With 169 farms spanning 116,000 total acres across 15 states and ample banked water in California, Gladstone Land is well-positioned in the fragmented farmland market. Farmland historically exhibits low volatility and correlations with other asset classes, making it an ideal asset class for portfolio diversification. Furthermore, owning a diversified portfolio of farmland could serve as an effective hedge against the impacts of climate change, which may lead to higher crop prices and food shortages. Despite the weak stock performance, the recent sale of a farm in Florida for a 60% return on equity validates the valuation of Gladstone's real estate holdings. While upcoming quarterly earnings may be messy due to tenant issues, the stock remains a hedge against climate change.
The Rally In Japanese Stocks
Japanese stocks have experienced a significant rally in recent months, nearly reaching the record levels seen in December 1989. The Nikkei 225 gained 31.7% over the past year, compared to the S&P 500's 18.35% gain. Several factors have contributed to this outperformance. Japan's economy grew at 1.9% in 2023, benefiting from a depreciated yen and pent-up demand following the pandemic. The IMF projects global economic growth to continue, which bodes well for Japan's exports. However, there are concerns that the recent weakening of the manufacturing sector could indicate a slowdown in the economy. Government policies, such as tax-free savings accounts and governance reforms, have helped support the recovery of Japanese stocks. Additionally, the decline of Chinese stocks has led international investors to view the Japanese market as more attractive. While risks remain, such as the impact of a stronger yen on exports, there are reasons to expect the rally in Japanese stocks to continue.
Market Pulse: Skeptically Optimistic
Last week, the 10-year Treasury Note yield experienced significant volatility, with a 34 basis point decline followed by a 21 basis point increase in one day. The cause of this volatility was the Federal Reserve Open Market Committee (FOMC) meeting, where Chairman Jerome Powell unexpectedly stated that a rate cut in March was not anticipated. This statement led to a sell-off in the stock market and increased demand for bonds, as investors believed that not cutting rates in March could lead to an economic slowdown. However, the impact of a 0.25% rate cut on economic growth is debatable. Powell also acknowledged that the Fed does not have more information about the economy than the private sector and that predicting the future is uncertain. Despite the market's focus on the Fed's statements, it is important for investors to think for themselves and not rely solely on central bank pronouncements. The outlook for the economy and markets depends on a range of factors, and investors should consider all available information to form their own opinions.
Post Holdings: Stable Prospects, Fair Valuation
Post Holdings, a consumer packaged food company, has the potential for improved profitability due to cost-saving initiatives and cost synergies from its acquisition of a pet food business. The company operates in various food categories, including ready-to-eat cereals, peanut butter, potato and egg products, sausage, cheese, and pet food. Its biggest segment is Post Consumer Brands, accounting for over 50% of revenues and profits, followed by foodservice, refrigerated retail, and Weetabix (the smallest segment). The inclusion of Pet Food sales and the recent acquisition of Perfection Pet Foods contributed to a 26% YoY increase in net sales for the quarter ending December 2023. Profitability also improved, with gross profit and operating profit both rising. Looking ahead, the company's growth strategy focuses on acquisitions, but the pace may slow due to high debt. However, the newly acquired pet food business could support growth, as the U.S. pet food market is projected to expand more rapidly than Post Holdings' core markets. Efforts to cut costs and revitalize underperforming pet food brands are expected to further improve profitability. While competition is fierce in all of Post Holdings' markets, the company's valuation is fair, and it has a buy analyst consensus rating.
From Business & Finance Archives | Reuters News Agency
Two key UBS investors worry about bank’s size, regulatory friction 
UBS is facing concerns from two key investors about its size and potential regulatory friction. The bank is currently integrating Credit Suisse into its operations, but these investors worry that UBS's large size could lead to trouble with regulators. UBS holds a dominant position in certain areas of the Swiss banking market, particularly in commercial lending, which could pose a risk to the economy if the bank faces difficulties. The takeover of Credit Suisse has sparked a debate about whether the regulatory framework designed to prevent "too-big-to-fail" banks, which emerged after the 2008 financial crisis, is still effective. These concerns highlight the potential risks associated with large banks and their ability to handle adverse situations without posing a threat to the financial system.
Japan’s Inpex selling stake in Russian oil project to Itochu, sources say 
Inpex Corp, Japan's leading oil and gas explorer, is selling its minority stake in a Russian oil project in Siberia to Japanese trading house Itochu Corp, according to sources. The sale comes as Japan has drastically cut its oil imports from Russia, with a 95% drop in imports last year compared to the previous year. In addition, liquefied natural gas imports from Russia were down 11%. Inpex Corp's decision to sell its stake in the Russian oil project reflects Japan's reduced reliance on Russian oil and gas imports. The deal between Inpex and Itochu is a strategic move that allows Inpex to focus on other ventures while Itochu expands its presence in the energy sector.
Sony scrapped $10 bln India merger as Zee failed to meet financial terms
Sony has decided to cancel the proposed $10 billion merger of its Indian arm with Zee Entertainment due to Zee's failure to meet certain financial terms outlined in the deal. According to an exclusive Reuters report, Zee was unable to meet these terms and did not provide a plan to address the issues. The merger was intended to create a media powerhouse in India, combining Sony's extensive network and Zee's vast library of content. However, the failure to meet financial requirements has led Sony to abandon the deal. The cancellation comes as a setback for both companies, as they had hoped to benefit from the merger in the highly competitive Indian media market. Zee Entertainment is now searching for alternative options to address its financial challenges.