Bullseye Brief presents three thematic, actionable investment ideas every other week. My goal is to help identify only those opportunities most worthy of your time… by analyzing data, distilling complexity and sharing insights from a deep network of experts. I love what I do and invite you to join me.
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Adam Johnson

Adam Johnson anchored several business programs at Bloomberg Television over five years, interviewing CEOs, heads of state, and Nobel laureates. His daily video investment blog, Insight and Action was sponsored by a major U.S. lender. Previously he managed global risk assets for ING Furman Selz and Louis Dreyfus, trading oil futures, listed equities and equity options. Adam began his career at Merrill Lynch with a degree in economics at Princeton.


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Bottom Fishing

One Semi Stands Out

  • China purchases 40% of US semiconductor manufacturers’ total annual output
  • The semiconductor industry is more exposed to trade with China than any other single US sector
  • Semiconductor stocks have fallen 20% in four weeks compared to 7% for the S&P 500 Index

US semiconductor manufacturers have become ground-zero in Washington’s the trade war with Beijing. Over 40% of the group’s sales come directly from Chinese tech companies, and when the President reinstated tariffs last month, investors ran for the exits. The benchmark Philadelphia Semiconductor Index (SOX) has fallen 20% since May 1, compared to 6% for the S&P 500 Index. I’ve rarely seen such carnage across an entire sector in such a short period of time. Curiously, selling seems to have abated, and the SOX even rallied a couple of times last week when the Dow was down triple digits. That’s good action, and one stock in particular has caught my attention. Three-quarters of sales occur outside China, and valuation is the cheapest since 2012. Already the dominant supplier of chips for PCs, the company has set its sights on electric vehicles, 5G and the Internet of Things. We may not have clarity on trade, but we do have a 5-year plan the C-suite… and a very cheap stock. At this price, I too am a buyer.


June 07, 2019

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Cooler Heads Prevail

Looking Past Huawei

  • The top 10% highest-rated US large and medium cap stocks have fallen more than 10% since May 1
  • Fallout from the banning of high-tech equipment sales to Huawei has upended high quality US suppliers
  • Optical networking gear is a specialized market with high barriers to entry and long runway for growth

Too many high quality stocks have gotten clobbered by concerns about trade. True, unresolved tensions with China and 25% tariffs completely upend established supply chains in the US, but the 10% highest-rated stocks in the S&P 500 and Midcap 400 Indices have fallen more than 10% in the past month… some as much as 30%. This kind of wholesale panic gets my attention, and then leader in optical networking has fallen so far I have to step in and buy. To be clear, I don’t initiate positions simply because stocks are down and Wall Street analysts reiterate their enthusiasm. Any new Bullseye pick has to meet my threefold criteria: 1. Great story 2. Data supports the thesis 3. Newsy hook we’re all taking about. In the case of the world’s #1 maker of optical networking gear, all these boxes are checked, and the long-term outlook is far brighter than the markets believe… even after the loss of Huawei as its top customer.


June 07, 2019

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Partners, Like It or Not

US and China’s Glaring Reality

  • The top 10% highest-rated US large and medium cap stocks have fallen more than 10% since May 1
  • Fallout from the banning of high-tech equipment sales to Huawei has upended high quality US suppliers
  • Optical networking gear is a specialized market with high barriers to entry and long runway for growth

Too many high quality stocks have gotten clobbered by concerns about trade. True, unresolved tensions with China and 25% tariffs completely upend established supply chains in the US, but the 10% highest-rated stocks in the S&P 500 and Midcap 400 Indices have fallen more than 10% in the past month… some as much as 30%. This kind of wholesale panic gets my attention, and then leader in optical networking has fallen so far I have to step in and buy. To be clear, I don’t initiate positions simply because stocks are down and Wall Street analysts reiterate their enthusiasm. Any new Bullseye pick has to meet my threefold criteria: 1. Great story 2. Data supports the thesis 3. Newsy hook we’re all taking about. In the case of the world’s #1 maker of optical networking gear, all these boxes are checked, and the long-term outlook is far brighter than the markets believe… even after the loss of Huawei as its top customer.


June 07, 2019

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2.05

As in the US 10-yr yield falls to a 21-month low of 2.05% as Fed Fund Futures put odds of a July rate cut at 85%.
#TerribleMayJobsData

67

As in 67% of Mexican imports to the US are intra-company transfers from one division to another, not Mexican products per se.
#FactsAboutTrade

22,000,000,000

As in total ETF outflows of $22B in May were the highest since Jan of this year and Jan of 2016, both which marked notable market bottoms.
#BailingAtTheBottom

 

img-1

“My ideal investing is stuff that looks a little crazy now and in 3-5 years is obvious.”
Reed Hoffman, Co-Founder LinkedIn.
#AmericanIngenuity

“It’s a whole big mess. Volumes are falling and we have to redeploy ships to ports outside of China where cargo is not taxed.”
– CEO of a large Asian container shipping line quoted anonymously in the WSJ
#EnoughOfTariffs

“The real purpose of this note is to say I’m well, and love you as much as ever, all the time, day and night.”
–General Dwight Eisenhower writing to his wife the night before the D-Day landings.
#Leadership