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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Artificial Gets Real

The ETF for AI

  • Global internet traffic will likely triple by 2020 compared to 2015
  • Data generated by social media on consumer preferences expands 36% annually
  • Artificial Intelligence is rapidly evolving from data interpretation to behavior prediction
  • Large cap technology companies infusing AI across entire enterprises are best positioned to drive growth

After the Boston Marathon bombing, I travelled to Houston with Bloomberg Television in order to interview a former FBI agent who’d teamed up with several data scientists from Rice University. The group had just created a device linking video surveillance cameras to computers capable of recognizing suspicious activity, and the Boston Police Department had bought several hundred. Without realizing it, we’d stumbled upon one of the first Artificial Intelligence (AI) companies with a practical product, and it was amazing to observe. Imagine a camera outside a parking garage which records cars entering a certain gate every day… presumably the entrance. The computer creates a database of pixelated shapes moving in a predictable pattern, and then compares each new observation to the baseline. Only when something out of the ordinary appears does the alarm sound, like a car exiting through the entrance in the case of a robbery. AI has been percolating in the background across many businesses for several years, but with Microsoft’s recent decision to pivot from a mobile-first strategy to an AI-first strategy, Artificial Intelligence moves to page one. It’s disruptive, innovative and powerful… an investment theme we’ll be exploring for years. I offer my own take here in a Q&A format, since big picture ideas naturally lend themselves to probing questions.


August 12, 2017

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Go-Time For Tax Reform

Go-To Infrastructure Bet

  • Lawmakers in both parties need a win as impatient voters begin focusing on mid-term elections
  • Tax reform offers a rare bipartisan opportunity to cut taxes and win support for re-election
  • A streamlined package of cuts, repatriation and infrastructure provides the most viable path forward
  • The federal government’s top infrastructure contractor could see a significant win if tax reform passes

Congress needs to get something done… or it’s out of a job. Voters propelled a renegade Republican to the White House, and gave the Senate a rare GOP majority on the promise of legislative action. So much for mandates! That said, failure to move on health care may actually have advanced tax reform. Stakes are now so high lawmakers can’t afford to fail again. In addition, tax cuts generally make everyone look good, so even Dems may cross the aisle on this one. Eager for a win, House leadership has decided to pursue tax reform under budget reconciliation, which requires only 51% majority approval provided tax cuts are deficit neutral. It’s challenging but achievable, courtesy of some clever accounting adjustments which provide sufficient political cover for both sides, while still preserving deductions popular with voters. Bottom line, I anticipate a deal in coming months. I’m equally confident it will include revenue generating repatriation of foreign profits and a territorial tax system, both of which pave the way for infrastructure projects conveniently awarded to lawmakers on the fence. See how this game works? There’s also a stock to buy here… the government’s favorite construction company.


August 12, 2017

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One Day Wonder?

Retail Reality Check

  • Three beleaguered retail companies beat earnings estimates and shares rally 15-20% in 24 hours
  • Better than expected results driven largely by cost control, store closings and a pivot to e-commerce
  • Restructurings fail to ignite sell-side support as few analysts raise targets or forecast upside
  • This week’s gains present tactical short opportunities for trading oriented managers

Retailers have become investors’ favorite punching bag, as Amazon grabs market share and proves how much cheaper it can sell anything which fits in a box. e-Commerce, instant connectivity and high-speed delivery have become the new mantra. It’s why I’m short mall REIT Simon Property Group (SPG), and even beloved Costco Wholesale Inc. (COST), home of treasure hunt shopping and entertainment for the kids on rainy Saturdays. With the S&P 500 Retail Index down 10% YTD, these shorts are serving me well. Yet something strange happened this week. Three consumer companies reported earnings and promptly saw their stocks soar 15-20% over the next 24 hours. They didn’t offer exceptional guidance, but the sudden surge serves as a good reminder how one-sided thinking can get us into trouble. I’m still short these retailers, and I’m even going to propose a new retail short today. My point is simply that we need to be mindful about where we pick our spots, and I like this new spot.


August 12, 2017

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1.8

As in U.S. Consumer Prices (CPI) rose 1.8% in July compared to last year, approaching the Fed’s 2% target.
#RateHikes

7.21

As in cable companies pay Walt Disney Co. an average of $7.21 per subscriber to carry ESPN’s live sports programming.
#UnbundleIt

96

As in J.C. Penny Company Inc. (JCP) has lost 96% of its market value since peaking in 2007.
#TargetMadeBasicsCool

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“We currently have no duties with the United States and we want this free trade to continue.”
–Mexico’s lead negotiator, Kenneth Smith Ramos as NAFTA talks begin
#WhyImLongEWW

“Hopefully it will all work out… nobody loves a peaceful solution better than President Trump.”
–Mr. Trump himself when asked about tensions with North Korea.

#DeepBreath

“My team did a great job. Having a gold and silver medal on the same relay team gives us confidence. They’re thinking and acting like veterans and I’m proud of them.”
–U.S. sprinter Justin Gatlin after qualifying to run the relay in the finals at the World Championships against retiring Jamaican legend Usain Bolt.

#QualityGuy