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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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Homeward Bound
Where Money Is Going
- US manufacturing activity rises to a 16-yr high and suggests US GDP could sustain plus 4% growth into 3Q
- First-time home buyers reach a multi-decade high 36% of homes sold as economic expansion broadens
- Industrials and utilities outperform technology stocks by three to one during the first week of September
Two related shifts are playing out across global markets right now: Money is flowing back to the US and industrial stocks are catching a bid. While technology companies have dominated headlines for many quarters, vulnerability at Facebook and Netflix has shifted investor attention to the stalwarts of U.S. economic growth. Companies like Boeing and Honeywell are back in focus, producing big ticket capital goods and enabling the surge in GDP to 4.2%. It’s why I’m buying three industrial companies in this week’s issue, which is something I’ve never done before. One offers potential upside as a late-cycle chemical play, another should benefit from progress on NAFTA, and the third exemplifies something we can all appreciate: the roof over our heads. Just as institutional money is flowing back into the U.S. from abroad, individuals are putting more money into their homes… likely a reflection of increased disposable income from tax cuts, and an inclination to remodel rather than buy as interest rates rise. Home sweet home, one of the places where money is going.
September 07, 2018
Read MoreChemical Imbalance
Unlocking Value Outside Tech
- Technology and Healthcare dominate returns (+16% YTD) while other groups are up only single digits
- Chemical sector fundamentals indicate notable strength accelerating across the global economy
- The world’s largest chemical producer is splitting into three new companies to unlock additional value
This year you’re either a technology company and leading the market higher, or you’re everything else and stuck in neutral… if only the chemical business could add FAANG to its description. I’ve been itching to deploy capital into non-tech related sectors with strong fundamentals, and the recent breakout of the S&P 500 Index above its January high gives me reason to move forward. Chemicals are integral to the global economy and highly reflective of growth. While not as glamorous as software, chemicals are arguably just as ubiquitous… the building blocks of virtually every product we consume. I’m especially attracted to the world’s largest chemical producer. It’s an $87B revenue business growing double digits and splitting into three separate pieces. I think management’s strategy will unlock additional value, especially as the rally broadens and balance returns.
September 07, 2018
Read MoreMy NAFTA Bet
Canadian Auto Parts
- Pressure rising on Canada to join US/Mexico trade pact as labor and content issues appear resolved
- 25% tariffs on auto parts wreak so much havoc across supply chains a compromise seems only logical
- Auto-related equity valuations imply worst case scenario and stocks could rise dramatically in a deal
People born on under the sign of Taurus are steadfast, fiscally-minded and claim the bull as their mascot… no wonder I’m wading into the NAFTA battle as a value buyer. The recently announced deal with Mexico ratchets up pressure on Canada, and I think we’re going to get a three-way deal. I know Mssrs. Trump and Trudeau have yet to find their own handholding moment à la Trump and Macron, but pessimism of achieving a three way accord has pushed cross-border auto suppliers to the point where value buyers like me must step in and buy them. I have already added US-based BorgWarner to the portfolio, now I’m buying a Canadian company defined by operational prowess and the cheapest valuation since 2010. Take quality down far enough and we Taureans take notice… on both sides of the border.
September 07, 2018
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2.9
As in U.S. hourly wages rise by 2.9%, the most since 2009… careful what you wish for.
#MoreRateHikes
61.3
As in U.S. Manufacturing (ISM Index) rises to 61.3, the highest since 2004.
#Hello3.25%
452
As in the Transportation and Logistics sector has 452k open jobs, a new record as US economic activity accelerates.
#I’mBuyingCyclicals
“We see content as being more valuable over time. Our job is to be one step ahead, and make our case to investors once we have the goods to prove it.”
–Comcast CEO Brian Roberts explaining his rationale behind bidding for Sky Broadcasting.
#HeReallyWantedFOX
“I don’t usually smoke weed… it’s very difficult to keep a car company alive.”
–Tesla Founder Elon Musk hits the guardrails again… this time during a podcast with comedian Joe Rogan, and cameras captured all 2 1/2 hours in gritty detail.
#CarWreck
“Anyone who gets a degree here should get a green card with the degree.”
–J.P. Morgan CEO Jamie Dimon wades into the immigration debate, something he’s been doing a lot more lately.
#Candidate?
