Shesa's AUGUST 2017 INVESTMENT BLOG
August 20, 2017
AUGUST
2017 INVESTMENT BLOG
Shesa
Nayak
U.S. Stock Market Update: After
several months of market run up finally stock market seems to be taking some
breather. Most people
wonder and worry how long the stock market rally will continue! President Donald Trump, who has been propagating on
stock market gains as a personal victory, may finally have gotten on the wrong
side of the stock market as investors realize that this could be a turning
point. For the first
time, people are now questioning if he can get anything done policy-wise. Meanwhile,
the 2nd quarter earnings season is almost over baring a few
companies. Cyclically the stock market goes south during September and October
so it won’t be surprising to see a sizeable market correction. We all know that
nothing goes up or down forever. So, what should be our strategy? I am going o
discuss that in a moment but first let’s take a glance at the stock market
indexes.
|
Q2 Earnings
Update
The earnings for 2nd quarter is almost
over except a handful of companies. I have provided a “Earnings Table” of the companies
in my blog portfolio for the convenience and reference of my readers.
Earnings & Sales Beat: As of Aug 11, 91% of the companies in the S&P
500 reported earnings, out of which 73% of S&P 500 companies have reported
positive EPS surprises and 69% have reported positive sales surprises.
Earnings Growth: Earnings
growth rate for the S&P 500 is 10.2% against
expected 7.2%, led by the Energy sector.
Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.4. This P/E ratio is above the
5-year average (15.4) and above the 10-year average (14.0).
(Source: Factset.com)
Q2 EARNINGS TABLE - Shesa's Blog
Portfolio
Stock
|
Earnings
|
My Opinion
|
AAPL
|
EPS: $1.67 per share vs. $1.57 per share consensus. Revenue: $45.4 billion vs. $44.89
billion consensus.
iPhone
Sold: 41 million vs. 40.7 million consensus.
|
I
have added a few more shares. Currently it has more than 260 Billion Cash.
iPhone 8 is expected to come in September.
|
ABX
|
Revenues of USD 2160
million, Net Earnings of USD 1084 million.
EPS: 0.22 vs. 0.20
estimated. Revenue: Grew 7.4% YOY
to $2.160 Billion vs. Consensus $2.155 Billion.
|
Despite
the increase in gold price, gold stocks have not gone up correspondingly. I
feel Gold should do better in Q3. I have added some more.
|
BABA
|
EPS: Earnings exploded to $1.17 million vs. consensus
$0.93.
Revenue: increased 56% to $7.4
billion vs. consensus $7.12 Billion.
|
I
have added a few more shares. BABA had a great quarter. In my view, this seems to be one of the best Chinese stock to be owned for long time.
|
BIDU
|
EPS: $2.36 a share, compared with $1.16 vs. $1.44 per
share consensus.
Revenue: Rose 14% to $3.08
billion vs. $3.06 billion consensus. Baidu said it expects revenue of $3.4
billion to $3.5 billion for the 3rd quarter.
|
BIDU
has bounced back from its restructuring. It seems to be on the right path. I
will add on dip.
|
CYBR
|
EPS: $0.21 vs. $0.29
per share last year.
Revenue: $57.5 Million vs.
projected 61 million.
|
I
have added this to the portfolio for trading purpose and see how it performs.
|
Facebook (FB)
|
EPS: $1.32 vs. $1.13
expected. Revenue: $9.32 billion
vs. $9.2 billion. Monthly users crossed 2 billion.
|
Facebook came out with
great Revenue and earnings. It may also monetize instagram and WhatsApp.
|
JD
|
EPS: Loss per share of $74.4 million vs. 38.8 million
last year.
Revenue: increased 44% to
$13.7 billion from same period last year.
|
Took
some profit. <Buy on dip below $38
>.
|
JUNO
|
EPS: Loss of 0.75 cents vs. -0.74% consensus. Revenue: $21.3 million vs. 17 million
consensus.
|
The
company plans to bring JCR017 for NHL as early as 2018. If KITE get approval
then it would be good.
|
KITE
|
EPS: Loss of $1.94 cents vs. -1.97% beating consensus
estimates. Revenue: $10.05 million
vs. 9.23 million beating consensus estimates.
|
Its
CAR-T based cancer drug (KTE-C19) for large B Cell Lymphoma is pending for Approval with FDA. ETA: before
NOV'17.
|
LUV
|
EPS: $1.24 vs.$1.20 consensus. Revenue: $5.744 Billion vs. 5.733 billion consensus. Revenue
improved 6.6% YOY.
|
At
this point, I will HOLD on to this. In fact, I have taken some profit.
|
MA
|
EPS: $1.10 a share vs. $1.04 per share consensus. Revenue: Rose 13% to $3.1 billion vs.
$2.98 billion consensus. Revenue growth was 17% YOY.
|
Master
Card is a good company to hold for long term with some dividend. I will hold
on to this stock and buy on dip.
|
TSLA
|
EPS: Loss per share of $1.33 vs. $1.82 expected. Revenue: $2.79 billion vs. $2.51
billion expected.
|
Company
says it has no concern to meet the production target for Model 3 (car about
$35K).
|
UA
|
EPS: 0.1 cents vs.$-0.06 consensus. Revenue: $1.1 Billion beating
consensus by 11 million consensus. Revenue improved 6.6% YOY.
|
Future
Revenue forecast is little weak. Company plans to close stores and lay off 2%
of the workforce. I have trimmed my holding.
|
XON
|
EPS: -0.14 cents vs.-0.21 consensus. Revenue: $54.4 million vs. 57 million
consensus.
|
Sent
an email to my Googlegroups member. But this stock should be accumulated over
a period of time and wait with patience.
|
Geopolitical uncertainties and Market
surge continues
The war of word between North Korea and U.S. continues.
Both countries claim that they are prepared for military option. U.S. General Joseph Dunford says President Donald
Trump has told the army to prepare viable military options on North Korea. China
and India in recent months are increasingly at odds over their mountain border.
Troops from India and China were involved in a tussle last week.
Trump announced plans Wednesday to dissolve the group and the Manufacturing
Jobs Initiative council after many CEOs resigned from the group. It started when he appeared to show support for
white nationalists involved in a violent protest in Charlottesville, Virginia. Every few days we keep
hearing that somebody or other got fired from his administration. The latest
news Friday was that Steve Bannon,
Trump’s chief strategist got fired. Also, the billionaire investor Carl Icahn dropped out of presidential advisory
role. How could the administration focus on resolving the agenda in such a chaotic
environment is any ones guess!
Investors were anticipating healthcare reforms, tax reforms,
infrastructure spending but none of those seems to be on the card now. The
republicans are struggling with many issues. But strangely, the stock market does
not seem like it cares about those. Now that republicans are left with no
choice, they are planning a
"go it alone" strategy as President Donald Trump is bogged down in
political controversies. They plan to take the economic agenda further. The
question is, can they have enough support to pass some legislation? I am not
sure unless they work closely with democrats. They have to come to a
negotiation table unlike Donald Trump.
As I wrote on my market
commentary, President Donald Trump, who has been propagating on stock market
gains as a personal victory, may finally have gotten on the wrong side of the
stock market as investors realize that this could be a turning point for the
market. Now what?
Is a stock
market correction coming soon?
A
lot of people keep asking why does the market keeps going up despite so much of
uncertainties? Is the market scary now? Will there be a correction? If so, when
will it happen? All these are very good questions. Let’s analyze:
- First question: Uncertainty? I wrote about partisan conflict index in my last month’s blog and explained why the stock market goes up when there is political uncertainty. If you missed it, please read it.
- Second question: Scary? I would not say it’s scary but I think the better word could be “concerning”. There were good corporate earnings and reasonably good economy data that support the market. However, the stock market has gone up so much since 2009 that the valuation is no cheaper.
- Third question: Market Correction? September and October are two of the worst months for the stock market. So, I do agree that market correction may not be imminent but there is higher possibility.
- Trim some portion of the portfolio where the stock has gone up significantly
- Trim some of the equities, which are highly volatile because they are hit hard when market goes down.
- To hedge against the downturn, buy some ETFs/Stock like SQQQ, SPXX, VIX, VXX etc.
- Short some stocks which are highly likely to go down. Preferably it should not be more than 10% of the total portfolio value. I am not a big fan of shorting stock.
- Have some safe heaven equities like Gold and Silver ETF/Stock/Mutual Fund and possibly little bit of gold coin. Basically, hedging against uncertainty.
- Preserve some cash and have an eye/shopping list to deploy those cash if market tanks.
Is market correction bad? Not necessarily! The
market correction is not good as we see our portfolio shrink. However, if we
see from another angle it’s not bad. Why is that? It gives opportunity to put
new money and expect better return once correction is over. In addition, it
provides opportunity for the investors who are sitting on the sidelines and
waiting for a correction. Also, it reduces the market bubble. Hence, it’s always
better to have some cash available to deploy when such time comes. I do not believe in getting all-out or all-in. It looks very risky to me. It’s better not to be panicked
cause that may results wrong decision. So, a diligent approach is immensely
important. Also, it’s not a good idea to jump out of the ship too early, so
caution is warrantedJ.
Commodities
Oil: U.S. keeps producing surplus amount of oil and the inventories
still remain high comparing to previous years. Hence, most of the oil stocks
are trending towards their 52-week low. As such, there could be some bottom
fishing opportunity to trade (not investing). If one does bottom fishing
then it has to be done carefully and do a dollar cost average rather than
buying all at once.
Gold: Gold has bounced back. On
Friday, spot gold touched its highest price of $1300.80
since November 2016 and then settled at $1286.06. Historically, September seems to be one of the best months
for gold. So, hopefully we should see some room to grown in the coming
days/weeks visualizing several macro economy factors. However, there is a
concern. The gold mining stocks, ETF, Mutual Funds are not going up the way
gold is going up. May be, investors are too complacent with the equity market
and they do not care about gold equities. My feeling is that, ultimately these
disparities will be visible in the next quarter. For example, “let’s say gold
is trading at $1300. The total sustaining cost for ABX is around $750 per ounce,
so straight the company gains $550, which translates into 42% profit”. Add
to that, gold production in 2017 has reduced about 2% comparing to last year
based on the latest report. It’s irony to see such phenomena. But let’s not
forget that “every dog has his day”.
Time will tell what happens next..
Let’s
talk now about this month’s inclusion to my blog portfolio.
Exelis Inc. (EXEL)
Exelixis
Inc., a biopharmaceutical company, engages in the discovery, development, and
commercialization of new medicines with the potential to enhance care and
outcomes for people with cancer. Basically, it’s an oncology company with a few
cancer drugs in market as well as in its pipeline. If you recall, almost 3
years ago, I had included EXEL in my blog portfolio. The stock was hammered to
as low as $1.50 after failure of its drug trial and I had to remove from my
Blog Portfolio. If any of the reader still hanged on to the stock then it could
have been a jackpot...
Why
do I like EXEL? The first major drug cabozantinib received regulatory approval in
2012 for patients with metastatic thyroid cancer. In April 2016,
cabozantinib received its second U.S. approval, as a treatment for patients
with advanced renal cell carcinoma. We will talk about its current pipeline
later on. The company has partnership with several big-name companies including
Bristol-Myers Squibb (BMY), Roche Holding (RHHBY) – Genentech, GlaxoSmithKline,
Sanofi, Merck etc. for the development and commercialization of various
compounds and programs. Exelis has advanced a global clinical development program that is
evaluating the drug for numerous promising clinical trials in the oncology
space.
Revenues at a glance: The company’s 2nd line kidney cancer
drug Cabometyx continued to grow
rapidly. In the second quarter it generated a revenue of $80.9 million out of
its total revenue of 99 million, 30% growth over previous quarter. Thyroid
cancer drug Cometriq contributed $7.1 million. Revenue growth was 424% in the March
quarter and 173% in the June quarter. Exelis beat the consensus earnings by an
average of more than 80% in each of the last five quarters. As I
perceive the
company has paid nearly all its debts of about $123.8 million of its notes
ahead of schedule, saving around $12 million in interest expense.
It paid off all
its remaining debt of $124 million, saving $12 million in interest and expenses
ahead of time, currently it has almost no debt.
Major
Pipelines:
The clinical trial for testing Cabometyx as first-line therapy for patients with advanced
kidney cancer or advanced RCC was submitted for FDA approval a few days ago
on August 16. If it goes well, possible approval could come early next year.
It also has its drug called Celestial in a phase-3 trial for liver
cancer whose interim data is expected before the end of the year. If the
data is positive, the company should be able to submit an application to FDA in
the first quarter of next year.
The cabozantinib,
an inhibitor compound has shown clinical anti-tumor activity in approximately
20 forms of cancer and is the subject of a broad clinical development program. If it works then the
drug can be backbone of choices for several other immunotherapy collaborations.
The company is also evaluating it for several other promising oncology drugs.
Another compound “cobimetinib” has also
a great potential for cancer treatment. It is being developed with Genentech (Roche
Group) planned for three pivotal Phase 3 combination trials this year.
Success with the aforesaid pipelines could potentially push the shares
considerably higher. In addition, the company is being rumored as an accusation
target and I won’t be surprised if that happens. We can discuss other
fundamentals but as we know, pipeline, revenue growth for small biotech
companies are enormously important than their fundamentals. There are many
institutional investors but Fidelity is a major one with about 15% of total
holdings followed by Vanguard, Blackrock etc.
As far as fundamentals are concerned, the major focus is
Revenue, profit and debt for this company. At present, the stock is trading at $26.33, 7.4% discount to its 52-weeks
high. Let’s see the fundamentals now.
Market Cap
|
7.39B
|
52 Week High
|
28.45
|
Trailing PE
|
1253
|
52 Week Low
|
10.04
|
Forward PE
|
43.16
|
Total Cash
|
349.2M
|
Price to Sales
|
24.21
|
Total Debt
|
0
|
Revenue / Sales
|
320M
|
Book Value
|
0.41
|
Quarterly Revenue Growth
|
173.1%
|
Beta
|
3.03
|
Profit / Earnings
|
58.08M
|
Institutional holders (Float) + Insiders
|
48.1% + 17.32%
|
Quarterly Earnings Growth
|
N/A
|
Return on Equity
|
N/A
|
EPS
|
0.02
|
Risk: There
could potentially be some market correction, if that happens, it may cause most
equity to go down, so EXEL may be no exception. However, the company is holding
pretty well even on the down days. So, I do not expect significant fall in the
stock price. Visualizing the drug pipelines, collaborations, and chances of
acquisition this stock has a great future potential. I have already bought the
shares but I may add some more if it goes down further. As a practice, I
usually do not buy all shares at once rather keep accumulating over a period of
time.
Shesa’s Blog
Portfolio (updated: 8/20/17)
Equity
|
Suggested Price
|
Current Price
|
Suggested Date
|
% Change
|
My View (see disclaimer)
|
Comment
|
STOCK ( All prices are in USD)
|
||||||
54.09
|
157.5
|
1/25/13
|
191%
|
HOLD
|
Add below $200
|
|
86.43
|
220.69
|
4/18/13
|
155%
|
HOLD
|
Add below $151
|
|
21.8
|
18.9
|
10/1/13
|
-13%
|
BUY
|
Ready to Sell
|
|
47
|
167.41
|
11/13/13
|
256%
|
HOLD
|
Add below $150
|
|
135
|
347.46
|
11/13/13
|
157%
|
BUY
|
Add below $300.
|
|
78.06
|
131.14
|
12/12/13
|
68%
|
HOLD
|
Add below $120
|
|
311.73
|
958.47
|
4/12/14
|
207%
|
HOLD
|
Add around $900
|
|
52.03
|
63.69
|
9/13/15
|
22%
|
HOLD
|
Take some profit.
|
|
67.28
|
167.5
|
2/21/16
|
149%
|
BUY
|
Add more on dip.
|
|
23.45
|
40.13
|
5/22/16
|
71%
|
BUY
|
Took profit.
|
|
ABX
|
22.21
|
16.64
|
7/4/16
|
-25%
|
BUY
|
Add
|
XON
|
26.37
|
17.3
|
7/4/16
|
-34%
|
HOLD
|
Added more.
|
36.89
|
53.17
|
9/5/16
|
44%
|
HOLD
|
Took profit.
|
|
RIO
|
38.76
|
44.64
|
12/18/16
|
15%
|
BUY
|
Took profit.
|
PVH
|
92.82
|
121.05
|
1/22/17
|
30%
|
HOLD
|
Took profit.
|
23.13
|
26.99
|
2/19/17
|
17%
|
HOLD
|
Wait
|
|
82.25
|
130.18
|
4/16/17
|
58%
|
HOLD/Add
|
Added few more.
|
|
19.65
|
15.64
|
6/25/17
|
-20%
|
HOLD
|
May Sell
|
|
42.35
|
40.08
|
7/23/17
|
-5%
|
HOLD
|
Hold
|
|
26.33
|
26.33
|
8/20/17
|
0%
|
NEW
|
BUY
|
|
ETF
|
||||||
26.88
|
22.93
|
4/1/13
|
-15%
|
BUY
|
||
31.94
|
33.7
|
3/15/15
|
6%
|
HOLD
|
||
INCO
|
34.46
|
43.06
|
5/15/15
|
25%
|
BUY
|
|
139.1
|
142.9
|
8/16/15
|
3%
|
HOLD
|
||
77.76
|
88.25
|
8/16/15
|
13%
|
HOLD
|
||
32.5
|
43.67
|
11/15/15
|
34%
|
BUY
|
||
112.83
|
112.77
|
3/19/16
|
0%
|
HOLD
|
||
EMQQ
|
32.65
|
34.84
|
5/21/17
|
7%
|
BUY
|
|
MUTUAL FUND
|
||||||
117.73
|
207.21
|
3/1/13
|
76%
|
Accumulate
|
||
52.48
|
69.4
|
2/2/14
|
32%
|
BUY
|
||
128.91
|
161.75
|
4/12/14
|
25%
|
BUY
|
||
27.17
|
29.65
|
10/25/14
|
9%
|
HOLD
|
||
28.19
|
30.22
|
12/20/14
|
7%
|
HOLD
|
||
61.72
|
93.27
|
12/20/14
|
51%
|
Accumulate
|
||
MINDX *
|
26.48
|
31.71
|
6/14/15
|
20%
|
Accumulate
|
|
MCDFX *
|
13.84
|
16.76
|
12/9/15
|
21%
|
Accumulate
|
|
95.32
|
115.42
|
1/15/16
|
21%
|
HOLD
|
||
38.65
|
49.14
|
3/20/16
|
27%
|
Accumulate
|
||
33.73
|
37.07
|
11/20/16
|
10%
|
BUY
|
||
* Indicates dividend adjusted
|
||||||
Positions closed since last Blog:
NONE.
That’s all for today.
Wish you good investing! Stay tuned for my SEP 2017 blog. Thanks for your time.
If you want to get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Also, feel free to
send me your comments and suggestions or alert request to shesa.nayak@gmail.com
Disclaimer: This
blog is meant to provide my personal opinion only. I do not provide any professional
recommendation to buy/sell any stock, ETF, mutual fund or any other
security(s). As an investor, it’s your hard earned money and you decide what is
best for you. The above are merely my own opinions and some of the information
provided may not be accurate. Please contact a professional money manager to
buy/sell any security. I do not earn any commission by writing the blog. I have
position(s) on whatever security I write on my blog and avoid recommending any
security that I do not own or follow.
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