Topley’s Top Ten – Septemter 27, 2019

Author

Matt Topley
September 27, 2019

1.Chart of the Century

AEIdeasMark J. Perry@Mark_J_Perry

July 12,2019

2.IPO Market on Watch as Peloton Closes Down on Opening Day.

EndeavorPulls IPO After Peloton’s Poor Debut

Entertainmentcompany was expected to begin trading Friday; Peloton slides in first day oftrading

By 

Maureen Farrell, Corrie Driebusch, Miriam Gottfried and Allison Prang

Updated Sept. 26, 2019 7:01 pm ET

TheIPO market took another hit Thursday as Endeavor Group Holdings Inc. yanked itsplanned offering, and Peloton Interactive Inc.’s shares skidded on their firstday of trading.

IPO ETF-14% off highs

3.The Highest Valued Startups in the World.

4.Insiders Are Buying Energy Stocks on the Cheap

By 

Wall Street has rarelybeen this bearish onenergy stocks. The sector makes up its smallest percentage ofthe S&P 500 index in at least 40 years, atless than 5%. J.P. Morgan analyst Dubravko Lakos-Bujas calls the situation“extreme,” noting that “small-cap E&Ps [are] trading below book value andat price levels seen almost 25 years ago,” as “institutional investors haveabandoned the sector.”

Atthe same time, insiders—sometimes called “the smart money”—and the companiesthemselves are loading up on the shares, a bullish sign.

“Incontrast, corporate sentiment is bullish with insider purchases rising to cyclehighs and shareholder return at about 6% with stronger buyback announcementsand higher dividends,” Lakos-Bujas wrote.

“We believe favorabletechnicals, improving fundamentals with stabilizing business cycle, andongoing geopoliticaltensions in the Middle East could help redirect flows into thisuniversally hated and cheap sector,” he wrote.

Oilinvestors have been particularly concerned about global demand, which isexpected to stagnate next year as economies around the world slump. But J.P.Morgan is more bullish on the global economy, given low interest rates andother factors.

“Withrenewed synchronized global monetary easing and stimulus underway, liquidityconditions are starting to improve, which often leads to actual economic growthby about six months,” Lakos-Bujas wrote.

He’salso optimistic that “trade tensions should ease” with U.S. electionsapproaching.

Given all that, Lakos-Bujasrecommends that investors buy energy stocks, and particularly explorers andproducers. The note doesn’t mention specific names, but exchange-traded fundsthat play the industry include SPDR S&P Oil & Gas Exploration& Production (ticker: XOP) and iShares U.S. Oil & Gas Exploration & Production (IEO).

TheSPDR ETF was down 3% on Thursday, as the Dow fell 0.2%.

Write to AviSalzman at [email protected]

PSCE-Small Cap Energy 600…$37 to $7

5.Invesco Offering First Active ETFs that Conceal Holdings.

Invesco Seeks SEC Nod for ETF Designed toThwart Copycats

By 

The firm wants to keepportfolio holdings confidential

Products would beactively run, like most mutual funds

InvescoLtd. wants to start a new type of exchange-traded fund that conceals itsportfolio.

The actively-managedETFs would rely on Invesco’s own, proprietary design, according toregulatory filings fromthe $1.2 trillion money manager. Unlike conventional ETFs, which mostly trackan index and publish a full list of assets every day, these funds would keepsome of their holdings hidden to protect their strategies from copycats.

6..Berkshire Is Getting Ready for the Next Crash?

Building cash reserves andmoving away from securities purchases suggests that Warren Buffett sees troubleahead

September 26, 2019 | About: BRK.A +0% BRK.B +0%

Investors and economists have many toolsand rules for measuring the temperature of the overall market. One method is totake the ratio of the total market capitalization of all U.S. stocks to U.S.gross domestic product. This particular method has come to be known as theBuffett Indicator, in honor of its leading exponent, Warren Buffett (Trades, Portfolio) of BerkshireHathaway (NYSE:BRK.A) (NYSE:BRK.B).

For years, Buffett has sung its praises asa simple tool for measuring the relative valuation of the stock market comparedto the broader economy:

“It is probably the bestsingle measure of where valuations stand at any given moment.”

As we discussed in a recent research note,the Buffett Indicator has been giving the danger signalfor some time. Yet, despite having first flashed a warning in 2013,Buffett remained unperturbed for years, continuing to buy stocks and adviseothers to do likewise.

Buffett’s longtime optimism may at last beturning. With Berkshire hoarding cash amidst growing global economic turmoil,it appears the Oracle of Omaha sees danger ahead and is getting ready for thedeluge.

That was then

Despite the Buffett Indicator signaling anincreasingly overheated stock market, Buffett kept on buying stocks. In aBloomberg interview on Aug. 30, 2018, Buffett was asked about his famousindicator. Despite hitting near-historic levels, the guru did not appear worried:

“I’m buying stocks, but I’m notbuying them because I think they’re going to go up next year. I’m buying thembecause I think they’ll be worth quite a bit more money 10 years or 20 yearsfrom now. And I don’t know whether they’re gonna go up or down tomorrow, nextweek, or next month, or next year. I do know they’re good businesses…We keepbuying as long as we find something that’s attractive to us. An attractivebusiness at a reasonable price. And I love it if it’s at a really juicy price,but I still keep buying.”

More recently, in his annual letter toshareholders in February, Buffett signaled that Berkshire would likely continue buying stocks throughout2019:

“In the years ahead, we hope tomove much of our excess liquidity into businesses that Berkshire willpermanently own. The immediate prospects for that, however, are not good:Prices are sky-high for businesses possessing decent long-term prospects. Thatdisappointing reality means that 2019 will likely see us again expanding ourholdings of marketable equities. We continue, nevertheless, to hope for an elephant-sizedacquisition.”

This is now

Things appear to have changed in BerkshireWorld in recent months. As we discussed in a recent research note, theinsurance conglomerate has moved away from its stock-buying pattern, insteadopting to hold unprecedented amounts of cash. Buffett always wants to put hismoney to work. The float created by Berkshire’s stellar insurance business –and by several other lucrative operating companies across the sprawlingconglomerate – has been put to work buying stocks and, whenever possible,buying whole companies.

While Buffett lamented the dearth ofacquisition opportunities in his most recent annual letter, he had not losthope. Given the increasingly shaky macroeconomic environment at home andabroad, it is not terribly surprising that the investor has opted to keep hispowder dry. Berkshire likes to own companies where possible. Thus, a stockmarket correction, or even a recession, could create a perfect opportunity forBuffett to pounce on targets that may currently be trading a bit too richly.

In many ways, that patience is one ofBuffett’s strongest advantages. Because he runs Berkshire like a familybusiness rather than as, say, a hedge fund or private equity fund, he does notfeel the same pressure to make acquisitions. He can afford to be patient:

“The stock market is ano-called-strike game. You don’t have to swing at everything – you can wait foryour pitch. The problem when you’re a money manager is that your fans keepyelling, ‘Swing, you bum!’”

Pitches are flying, but Buffett is notswinging yet.

What comes next

Berkshire is perfectly poised to takeadvantage of a recession to its benefit. Investors hoping for a return toBerkshire’s glory days may not have long to wait. The conglomerate’s best yearshave been during times of panic, when Buffett had the resources to scoop upopportunities and benefit from the better information afforded to strategicpartners, rather than exterior analysis.

In a follow-up research note, we willdiscuss how Buffett may put Berkshire’s dry powder to good use in the comingyears.

The Oracle of Omaha prophesies troubleahead. We consider that a warning worth heeding.

Disclosure: No positions.

7.Since 1990 Employment Growth Led by Education and Health.

8.MillennialsContinue to Leave Big Cities

Censusfigures show smaller drop in young urban residents than previous years, butmany still leaving for cheaper housing, better schools

9.The Full Official Trailer fort “The Irishman” is Out.

10. Billionaire Ray Dalio says this outlook will help you achieve your dreams

PublishedThu, Sep 26 2019  2:10 PM EDT

Ray Dalio, founder of investment firm Bridgewater Associates,speaking at the WEF in Davos, Switzerland on Jan. 22, 2019.

Adam Galica | CNBC

It’soften argued that some people are dreamers while others are realists. Buthedge-fund billionaire Ray Dalio believes that you need both qualities to besuccessful.

In fact,Dalio says all dreamers need a healthy dose of realism to help them achievetheir dreams. “Being hyperrealistic will help you choose your dreams wisely andthen achieve them,” Dalio wrote in a Facebookpost on Thursday.

Dalio isthe founder of the world’s largest hedge fund, Bridgewater Associates, whichmanages roughly $160 billion in assets.

In thatsocial-media post, Dalio touts the importance of balancing realism and idealismby pursuing your dreams while also being as realistic as possible about thebest ways to achieve them.

“Understanding,accepting and working with reality is both practical and beautiful,” Daliowrites on Facebook. “I have become so much of a hyperrealist that I’ve learnedto appreciate the beauty of all realities, even harsh ones, and have come todespise impractical idealism.”

By“impractical idealism,” Dalio is referring to the way of thinking that’s mostlyassociated with dreamers who either never follow through and pursue their loftyideals, or who do so in impractical, or unrealistic, ways. (For instance, animpractical idealist could be more likely to spend more time daydreaming about success than actuallyworking to achieve their goals.)

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But Dalioisn’t against dreaming at all, he asserts. “Don’t get me wrong: I believe inmaking dreams happen,” the billionaire writes on Facebook. “To me, there’s nothingbetter in life than doing that. The pursuit of dreams is what gives life itsflavor.

“My pointis that people who create great things aren’t idle dreamers: They are totallygrounded in reality,” he says.

A2018 Psychology Today article notes thatdreaming about success is more effective when a person also imagines therealistic obstacles they’ll face on the path to their dreams. “Successful goalpursuits require figuring out which wishes are desirable and feasible and whichones to let go,” Shahram Heshmat, an associate professor emeritus at theUniversity of Illinois at Springfield, writes in the article.

legacy he wants to leave behind

Dalio’spost is part of a series of the “Principles” he regularly posts on social media, many of which stem fromhis 2017 book, “Principles: Life & Work,” in which the billionaire shares his insights into leadership andsuccess.

Dalio isfar from the only business leader who believes that success requires a mix ofidealism and practicality.

In2016, Apple CEO Tim Cook discussed the characteristics helooks for in Apple employees, and one of them is “agitated idealism.” Cookdescribes the characteristic this way: “We look for people who won’t accept thestatus quo, people who aren’t satisfied with the way things are, that reallywant to change the world and sort of put all of themselves into doing it,” Cooksaid at the time.

At thesame time, Cook added that Apple looks for employees who are “wicked smart” andhave “grit and determination.” In other words, the ability to dream aboutchanging the world is essential for success at the tech giant, but so is theability to bear down and get to work on achieving those goals.

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