Shesa's NOV/DEC 2020 Investment Blog

November/December 2020 - INVESTMENT BLOG

By Shesa Nayak

 

U.S. Stock Market Update   

Meanwhile, I completed 7 years of my investment blog!! Finally, a historic election has come to an end! We still see some political drama of denial and disbelief but this was the election where highest number of American people voted and that’s a great sign for the democracy. Democrat presidential candidate “Joe Biden” was declared as 46^th president of United States of America. Probably, a change from unpredictability to predictability! However, the existing president not willing to accept the verdict of the U.S nationals and unable to accept the reality brings some uncertainty to the stock market. Meanwhile, COVID-19 cases have been skyrocketing day by day causing tremendous stress to small businesses and people. The Coronavirus cases and deaths are expected to further rise in the fall due to cold season, unless strenuous steps are taken. Many counties are closing some businesses to control the pandemic, there are curfews and things are deteriorating further due to in-action of the current administration. Despite all these turbulence, stock market is doing OK. The volatility will remain but in my view we should look forward to have positive ending to one of the most eventful year in history! I am anticipating that 2020 will end with a bullish note unless we further see horrific COVID-19 cases or major political uncertainty. The holiday season is coming, usually market tend to do well. I am bullish that this year will have a positive ending for the stock market. In the near term, market may keep a closer look to the COVID cases, vaccine and stimulus. It’s not just my gut feeling but there are reasons to believe. I will share some of my thoughts but first let’s take a quick glance to U.S stock market indexes. 

Indexes	1/2/20	Close FRI 11/20/20)	Change in 2020	% Change in 2020	All Time High	From All Time High	% from All Time High	LOW this Year
DOW	28,538.44	29,263.48	725.04	2.54	29,568.57	-305.09	-1.03%	18213.65
S&P 500	3,230.78	3,557.54	326.76	10.11	3,588.11	-30.57	-0.85%	2191.26
NASDAQ	8,972.60	11,854.97	2,882.37	32.12	12,074.06	-219.09	-1.81%	6631.42
BTK	5,067.45	5,395.66	328.21	6.48	6166.36	-770.70	-12.50%	3985.72
NBI	3,786.54	4,364.15	577.61	15.25	4600.54	-236.39	-5.14%	2947.85

Major Economy News

• U.S Coronavirus Cases: Coronavirus cases have been making records day after day for last several days. The number of cases has gone up to 12.16 million vs. 8.14 million during almost 50% since my last blog, Death: 256,347 vs. 219,000 in my last blog. Unfortunately, 37,347 more people have lost their lives since then. 
• Retail Sales: In October the retail sales increased 0.3% vs. 0.5% expected
• Labor Department on Friday reported that 638,000 private payroll jobs were created in October, significantly higher than the economists’ consensus estimate of 530,000. Private payrolls soared by 909,000 in October, while 268,000 government jobs were lost.
• The unemployment rate declined to 6.9% in October, down from 7.7% in September. The labor force participation rate rose by 0.3% to 61.7%, which is encouraging, but it’s still below the 63.4% rate back in February. Average hourly earnings rose 0.1% by 4 cents to $29.50 per hour.
• First-time filings for unemployment benefits totaled 742,000 last week vs. the Wall Street estimate of 710,000. But continuing filing of unemployment benefits fell to 6.37 million, lowest since pandemic.
• Home Builders Confidence: In November, builder confidence in the construction market for single-family homes soared to its third record high in as many months
• GDP Growth: Q3 GDP growth 33.1% quarter over quarter. Last quarter it was -31.4%. GDP Annual growth: -2.9%
• US Total GDP/Economy: $21.42 trillion 
• Interest Rate: 0.25%
• Inflation rate: 1.2% (moth over month 0%)
• Consumer Confidence: 77, down from 81.8 last month.
• Biden appointed Ron Klain chief of staff.  He will be declaring few more of his Cabinet members on Tuesday, 11/24. 

Where is stock market heading till the end of 2020 and Beyond?

Well, finally the presidential election is over though but we still see a lot of drama by the current administration. The fate has been decided by the people of United States. The worst thing is to wait till 11.59am, January 20, when the president elect Joe Biden will take oath to become 46^th President of United States. Now, the question comes in mind; what happens till then. Let me first talk about the negatives and then will discuss about positives.

Negatives

The COVID-19 cases have been spreading at an alarming pace. The total cases have gone up beyond 12.16 million and deaths have 256,347 thousands. In last one weeks more than a million people have been impacted. There are curfews and restrictions re-imposed visualizing such humongous increase in cases. All these are impacting people emotionally as well as economically. The current president keeps playing golf rather than taking any action or allowing the incoming administration to transition. These are very serious concerns. Wall Street is watching but fortunately it has not dived south because of facts described under “Positive” section of my blog. 

 

The stimulus which street was expecting has gone to oblivion. I do not expect anything is going to happen till new administrations takes charge of the office. Evidently, many Americans families are going through horrendous time due to the pandemic and they need economy assistance. Thousands and thousands of people are hungry across U.S and standing on the food line to get some food, particularly in Texas and L.A area. Probably, it was never seen in American history! Unfortunately, some group of politicians do not understand the pain of those people! It’s ironic but that’s the fact.

Loss of Benefits: By the end of December 31st, 12 million Americans will lose their benefits unless congress does something. But looking to the attitude of current administration, I am not very optimistic it would happen. Hopefully, politicians will get some deal done otherwise, it may be a major blow to the stock market! 

Positives

Holiday Season is here: Despite the pandemic, U.S consumers are still spending a lot of money. Retails sales for past few months have gone up month over month. And as we know, 70% of U.S GDP depends on consumer spending. As long as job market is good, people will keep spending. Usually, people tend to spend more during the holiday season, almost 20% of yearly retail sales comes only during November and December. In addition, thanksgiving is a happy time of year as people gather with family and friends. When investors are in a good mood, it tends to rub off on investor sentiment. Also, thanksgiving rallies are also a typically a holiday tradition. So, we may see some market bounce this fairly soon.

 COVID-19 Vaccine

Now that Pfizer and Moderna have already come with COVID-19 vaccines which are 95% effective, the stock market is rejuvenated. Yesterday FDA approved Regeneron's REGEN-COV2, the first antibody for emergency use. Despite lack of support from Trump administration, Joe Biden has already created a Coronavirus Task force to deal with the situation on highest priority as soon as he takes charge on Jan 20, 2021. It would be a humongous tasks to provide vaccines to all the people in first few weeks, but hopefully people with highest risk and frontline workers should be able to get one soon. Once vaccine is available, many businesses could reopen, people may be able to travel, go for leisure, restaurants, movies, public places and so on.. It will provide further impetus to the economy. I may write more in my next blog. Moreover, once vaccine is available there could be sectorial rotation of money from some of the tech companies to the beaten down sectors like travel, leisure, entertainment, financials etc. In fact, it has already started happening the day after election when Pfizer declared that vaccine is 95% effective, investors started selling some tech stocks and bought stock of beaten down sectors. Just to let the readers know that since my last blog all big tech stocks like AAPL, AMZN, NFLX, SHOP, BABA are down and FB is barely up.

 

Stimulus

As you may be aware, stimulus is under discussion between Democrats and Republican since September but they could not reach a deal till date. Democrats had proposed $2.2 trillion package. I am not too optimistic that they will be able to do anything significant before the end of the year. I can only expect a small interim deal, if any. However, I am sure once new president takes over they will try to get a major stimulus package. In case, Democrat wins the Senate after Jan 5^th Georgia election then they many have enough power to pass bigger stimulus, green energy push and many other key policy changes. But we have to wait and watch..

 

We are in the best two months of the Year

Traditionally, November and December are two best month for the stock market. Barring some exception like the three months of 2018 were terrible for the stock market, where the S&P500 lost 19.9% from its peak. Since 1980, S&P 500 has returned 1.48% in November and 1.11% in December.

 

Trillions of dollar sitting on the sideline: There were about $4.5 trillion Cash in money market funds during August as more investors stepped to the sideline to mitigate stock market risk. The previous record of $3.8 trillion was set in January 2009. Please note that current Stock market valuation is about $36.2 trillion (all U.S stock index). Furthermore, November is the beginning of the season for a lot of year-end pension funding, many of those money could go to stock market. Of course, some stock selling will also happen to provide those pension. 

 

Federal Reserve: I believe the key factor behind the stock market rally has been federal reserve, who has not only kept interest rate low but also unlimited quantitative easing has brought a lot of liquidity to the market. I feel this is the KEY reason for stock market run!

 

Sectors that could do well after Democrat win

I had written during my last blog that the following sectors are expected to do well. Now that they have won, I would like to keep my focus on these segments. If democrats get the majority on Senate after Georgia election on January 5 then these sectors should do well. If not, there may be some challenges. I will write more after in my next blog. I have provided it again to re-visit.

 

Renewable energy or Green Energy: The clean energy, comes from natural sources or processes that are constantly replenished, such as Solar, Wind etc. Based on Senate Democrats' Special Committee on the Climate Crisis, calls on Congress to spend at least 2% of annual U.S GDP. Biden's climate plan calls for spending $2 trillion on clean energy investments over four years. That’s astronomical! Hence, I expect that this sector (Solar, Wind) to boom. My Stock of interest: ENPH, SEDG, NIO, TSLA, JKS, FSLR, QCLN are some of the equities that I like in this sector.

 

HealthCare: Particularly insurance companies because of emphasis on Obama Care are expected to better. UNH, Centene, TDOC, IHF, Cigna. As far as biotech are concerned, they primarily depend upon their drug pipelines, success of trials and approvals of drugs. Hence, it does not depend on any specific government. However, some policies may influence the drug approval process and new drug pricing. 

 

Infrastructure related stock: Roads, Constructions etc. At this time, I do not hold any stock in this sector but may look for some opportunities.

 

Cannabis: Democrats are expected to decriminalize marijuana possession offenses. Also, they could change the SAFE Banking Act, which would allow cannabis businesses to work freely with banks. This will enable the cannabis companies to get financing from banks which is not possible at this time. I also expect that down the line they will legalize marijuana for medical use but I do not expect recreational use. I also expect that the government will empower states to have their own rules/regulations for recreational use of marijuana.  The stocks that I had told APHA, CGC have gone up more than 40% and 20% since then.

 

Cannabis was a huge success in November Election

Several states had included Cannabis as a measure to be voted by voter in the ballot. And it was an overwhelming success. Cannabis legalization racked up a slew of victories in last election.

 

New Jersey, Arizona, South Dakota, and Montana voted to legalize cannabis for all adults over the age of 21. South Dakota and Mississippi voted to create a medical-cannabis program. However, it will take time for legalization to take effect in each of the states. But now these states have green signal to go ahead and enact it. Medical marijuana will be legal in 35 states and 13 of the states have legalized recreational marijuana.

 

The current cannabis sales in U.S is approximately $10-12 billion. This is expected to grow more than $80 billion by 2030. Already, cannabis stocks are on fire and most of those gone up 20, 30, 40, 50% in last few weeks.

 

Major Stock Market Performances in 2020 

Indexes	52 weeks (% change)	YTD % (last blog)	YTD % Change (current)
DOW	4.98%	0.24%	2.54%
S&P 500	14.38%	7.83%	10.11%
NASDAQ	39.14%	30.08%	32.12%
China Shanghai Index	17.07%	9.38%	10.74%
India BSE Sensex	8.73%	-3.08%	6.37%
Japan Nikki	10.45%	-1.04%	7.91%
Hongkong Hang Seng	-054%	-13.49%	-6.17%

Source: Wall Street Journal

 

Sectorial Performances 1 Year % Change (U.S Stocks)

Sectors	Last Blog	1 Yr. % Change
IT (Best sector YTD)	47.29%	37.26%
Consumer Discretionary	31.71%	31.47%
Communication and Services	17.42%	18.89%
Materials	15.94%	16.37%
Health Care	18.82%	12.07%
Consumer Staples	9.97%	8.20%
Industrials	5.87%	6.06%
Utilities	-5.72%	1.29%
Real Estate	1.25%	-4.68%
Financials	-10.90%	-8.89%
Energy	-46.70%	-37.59%

Source: Fidelity.com

 

JinkoSolar Holding (JKS)

JinkoSolar Holding Co., Ltd. is world's largest solar panel manufacturer. The company is engaged in the design, development, production, and marketing of photovoltaic products - solar modules, silicon wafers, solar cells etc. It also provides solar system integration services; and develops commercial solar power projects. The company is located in Shanghai, China and its ADR trades in New York Stock Exchange (NYSE).  JinkoSolar distributes its solar products and sells to utility, commercial and residential customer base in China, U.S, other Asian countries, European countries, Australia, South Africa and Latin America. Those who are in my WhatsApp group may be knowing that I liked JKS when it was trading around $45. I also included this company a few years ago in my blog portfolio and then removed after a mediocre profit. However, many things have changed in last couple of years and now it looks very reasonable and promising.

 

First of all, now that democrats have won the presidential election the emphasis on green energy is anticipated to increase substantially. As I have told in many times, Joe Biden's climate plan calls for spending $2 trillion on clean energy investments over four years. That’s an astronomical amount. Agreed that they do not have majority in the Senate but in case they win the Senate election in Georgia on January 5 then they may have majority in Senate as well. If that happens, it would be huge! Even if they fail to win, then also they will try to do whatever possible to push green energy agenda as it’s expected to generate hundreds of thousands of jobs apart from keeping climate better. Last Friday, President-elect Joe Biden announced that U.S will reenter into the Paris Climate Agreement which Trump had withheld. This accord has nearly 200 nations that meet to avoid the worst impacts of climate change. The U.S. is the second largest emitter of greenhouse gases behind China and is seen as key in the global effort to avoid the worst impacts of climate change. This sent the stock of most of the solar companies higher last Friday. In addition, China and the European Union are moving ahead with large carbon reduction plans. That could be very helpful for JKS.

 

Why I do I like JKS and what has changed now?

Solar power was expensive a few years ago but now the efficiency of the solar panel industry has gone up significantly and they are more consolidated today than early days. This has brought continuous cost reductions making solar energy cost effective against fossil fuels and other energy even without subsidies. Solar Electricity or Solar Power has been an economic reality now. The demand has increased many fold all over the globe because of climate change and global warnings. 

 

Revenue & Profit: JKS is not only one of the largest producer of solar panels but also one of profitable company having solid fundamentals comparing to its peer. It is also one of the cheap stock in the industry. JKS reported strong fiscal second quarter earnings a couple of months ago. The company shipped modules of $1.2 billion which was high end of their guidance. Revenue increased 18.8%, delivered EPS of $0.93 beating analyst estimates by a handy $0.24, 35%. Management also announced an acceleration of Giga Watt (GW) production targets to 30 GW before the end of 2020, up from an initial target of 22 GW earlier this year. China has been very proactive to reduce pollution by achieving emission goal. The Chinese President Xi Jinping told at a meeting of the U.N. General Assembly to accelerate China's progress to peak emissions before its previous goal of 2030 and achieve zero net carbon emissions by 2060. This is really an encouraging sign for the green energy company, particularly JKS. We will keep seeing more adoption of solar, wind, hydrogen energy and reduction in coal and fossil energy in the foreseeable future. In 2019, renewable energy sources accounted for about 11% of total U.S. energy consumption and about 17% of electricity generation. The share of renewables in global electricity generation jumped to nearly 28% in Q1 2020 from 26% in Q1 2019. The company’s EPS has grown 27% year-over-year, compound over three years. If the company can sustain such profitability then the share price is destined to rise. Now let’s take a look at its fundamentals:

 

Fundamentals:

Market Cap	$2.79B	52 Week High	90.20
Trailing PE	14.59	52 Week Low	11.42
Forward PE	16.75	Total Cash	$6.26B
Price to Sales	0.59	Total Debt	N/A
Revenue / Sales (TTM)	$5.17	Book Value	29.95
Quarterly Revenue Growth (yoy)	22.20%	Beta	1.07
Profit / Earnings	318.04M	Institutional holders	68.11%
Quarterly Earnings Growth (yoy)	153.6%	% Held by Insiders	5.48%
EPS	1.29	Return on Equity	14.85%
Price/Sales	0.57	Float	28.27M

 

My View: Currently, the stock is trading at $62.14. The stock price had a 52-weeks high of $90.20, meaning buying the share at this price gives us a 31% discount from its peak. In last 3 months the stock price for JKS has gone up 200%. So, obviously it’s not as cheap as it was few months before and as the share prices have gone up significantly and correspondingly the risks also increase. But it seems to be consolidating around $60. However, visualizing 22% revenue growth, 154% profit growth and a forward P/E of 16.7, Price/Sales of 0.57; the stock seems to be cheap. I still think that JKS is one of the best in the industry having solid fundamentals and cheaper comparing to its peer. Jinko's future, along with those of other solar industry leaders, looks bright. 

 

My Strategy: I have already taken some positions at different price levels. As a strategy, I do not buy everything at once, rather I prefer to buy in a phased manner and do dollar cost average. The primary reason is nobody know the TOP or Bottom of a stock. There are many more advantages to this approach which I have written in many of my blogs and talked during many of my investment meets. It’s better to have some long-term investment (core position) and some shares to trade as we are in a fluctuating stock market environment. That way, one can keep making some money having to wait for longer-term reward. I will keep accumulating the stock when it comes down and trim a little bit if it goes up certain percentage. 

 

Risk(s): We know that no stock is immune to stock market decline. Particularly JKS is a highly volatile stock and it can go either way (up/down) significantly. Also, Georgia senate election on January 5 could be another factor which may bring more volatility. If democrats win Senate then it JKS may fly, if they lose we may see some correction and that may provide further opportunity to accumulate JKS. Hence, buying at phases makes more sense. One has to diligently decide when to buy, when to accumulate and when to sell. 

 

My Final thoughts

JinkoSolar (JKS) is a leader in the growing solar power industry. Its revenue, profit, market shares have been growing. The new government will be in place on January 20, 2021 whose key emphasis is expected to be on renewable energy. If they succeed in that mission then JKS may have a humongous opportunity in next months and years to come. So, also China and other nations are emphasizing on renewable energy, hence the prospects for long term investors seems to be pretty good. However, future is unpredictable, hence one must be cautiously optimistic and take investment decision accordingly. If anything goes wrong then I will not hesitate to pull the trigger or any stock in my portfolio for that matter. Investments are made to make money, if we don’t and something goes wrong we must revisit our strategy. Reminding all the reader that “investment needs patience” and strategy. At this time, I am quite optimistic that JKS has a great long-term future, hence I am invested and will keep accumulating/trimming depending on how it goes.

 

Other Stocks of my interest: FSLR, NVDA, PVH, EXPE, CVM, INO, SRNE.

 

Shesa’s Blog Portfolio (As of November 22, 2020)

Equity	Suggested Price	Current Price	Suggested Date	% Change	My View  (see disclaimer)
STOCK (All prices are in USD)
AAPL	12.9	117.34	1/25/13	810%	HOLD
FB	47	269.7	11/13/13	474%	BUY
MA	77.18	323	12/12/13	319%	HOLD
AMZN	311.73	3099.4	4/12/14	894%	Buy on Dip
BABA	67.28	270.74	2/21/16	302%	BUY
EDIT	36.53	28.42	5/28/18	-22%	BUY
SHOP	134.81	988.51	11/25/18	633%	Buy around $900
NFLX	297.57	488.24	1/6/19	64%	HOLD
AMRN	17.66	4.62	2/17/19	-74%	BUY
CGC	20.16	23.72	12/10/19	18%	BUY
GH	87.53	112.95	9/1/19	29%	HOLD
SDC	8.74	10.91	1/1/20	25%	Accumulate
NIO	4.27	49.25	1/29/20	1053%	Incredible Run!! 1053% - Trimmed, still a BUY.
CCL	12	17.37	3/22/20	45%	Accumulate
BYND	76.91	136.56	4/19/20	78%	Accumulate
SPG	54.59	81.12	5/25/20	49%	Accumulate
ENPH	45.3	129.59	6/28/20	186%	BUY
TGTX	19.58	29.85	8/2/20	52%	Accumulate
BBBY	12.03	20.24	9/13/20	68%	HOLD
MU	51.61	61.4	10/18/20	19%	BUY
JKS	62.71	62.71	11/21/20	0%	NEW ADDITION
ETF
IHF	139.1	223.76	8/16/15	61%	HOLD
MUTUAL FUND
FBIOX	11.46	26.24	3/1/13	129%	HOLD
PRMTX	59.45	181.06	12/20/14	205%	HOLD
FSRPX	9.05	22.63	1/15/16	150%	HOLD
FBSOX	37.32	89.56	3/20/16	140%	HOLD
FSMEX	43.66	73.66	9/24/17	69%	HOLD
Note: Dividends are not adjusted on the price.

Positions CLOSED since last Blog

None.

 

That’s all for today. Wish you great investing! Stay tuned for my next blog. Thanks for your time. 

 

Disclaimer: This blog is meant to provide my opinion only. The information provided is to the best of my knowledge but may not be accurate. 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. Please contact a professional money manager to buy/sell any security. I do not charge any fees or commission by writing the blog except anything from Google AdSense. I have position(s) on whatever security I write on my blog and avoid recommending any security that I do not own or follow. Anybody buying or selling the equities mentioned here would do it on their own risk.

 

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