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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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Bargain Hunting
Auto Sector Opportunity
- Third quarter GDP revised upwards to a two-year high of 5% as strong employment buoys record spending
- Auto sector valuations remain depressed on lingering recession fears and now-irrelevant UAW disruptions
- Reliable Growth-Meets-Value stock screen uncovers a top electronics supplier trading near valuation low
Stock Picking – Morningstar named David Herro, of Harris Associates its Fund Manager of the Decade for his consistent ability to identify high-growth companies at low-priced valuations… and he shared his formula with me. Some years ago, we were on a panel at Bloomberg Television and during a commercial break I asked whether he had a favorite stock screen. He said “absolutely” and then outlined three specific criteria: Price to Cash Flow less than 10x; Debt to Cash Flow less than 2x; 3-yr average ROE of at least 13%. I have incorporated David’s insight into my own process, and I periodically run his screen to see what percolates, recently uncovering this week’s new pick. It’s a double-digit growth story in the auto sector with a single-digit valuation. As the UAW strike disappears in the rearview mirror, I see open road ahead.
December 09, 2023
Read MoreRevolutionizing Supply Chains
Hands-On Goes Hands-Off
- The market for contract logistics is estimated at $450B annually and expected to rise 45% by 2027
- Only one-third of logistics services are outsourced despite generating operating leverage for customers
- Rising e-commerce volumes and increasingly asset-light business models favor logistics outsourcing
Sweet Spot – My mentor of many years asked the same question to every person he interviewed: How do you make the most amount of money on Wall Street? The answer he wanted to hear, and the one that got the job, was: Find a theme and leverage it. Three mega-themes are converging right now, and one particular industry stands to benefit the most. The themes are Automation, e-Commerce and Outsourcing. The industry is contract logistics, which provides all the behind-the-scenes shipping, stocking, restocking and ordering for companies that would rather focus on making stuff than managing stuff. This is a symbiotic relationship. Companies free-up capital and resources by shedding assets and outsourcing, which drives operating leverage and higher ROE. GXO introduces efficiency by investing in robotics and real estate, spreading those costs over the entire customer base in exchange for long-term service agreements that generate their own ROE. With e-commerce at 15% of retail sales and rising half a percent per year, according to the St. Louis Fed, automated and outsourced logistics will become increasingly relevant to profitable growth. That’s why I’m buying the world’s #1 contract logistics provider. Find a theme and leverage it.
December 09, 2023
Read MoreLeveraging Artificial Intelligence
Storage, Spreadsheets and Security
- Artificial Intelligence leverages 5G, complex data sets and cloud computing at unprecedented speed/scale
- New tools are need to manage exponentially higher bandwidth demand on existing and NextGen platforms
- AI is only as good as the infrastructure that enables complex number-crunching and real-time analytics
Inside the Machine – My mentor of many years would always ask the same question to people he interviewed: How do you make the most amount of money on Wall Street? The answer that got the job was “Find a theme and leverage it.” Right now that theme is Artificial Intelligence, just as Cloud Computing was three years ago and 5G before that. Arguably, all three themes are related, and this week’s new pick leverages their combination. As businesses and governments around the world begin integrating AI into their daily operations, demand for AI enabling products will rise significantly. Yes, I want to own AI software companies. I also want to own the infrastructure stocks that make AI possible. This week’s new pick is one such company… a great example of American Ingenuity.
December 09, 2023
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As in not a single EV charger has been installed under the $7.5B initiative passed by Congress in 2021 (Politico).
#We’reFromTheGovernmentAndWe’reHereToHelp
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As in Nvidia CEO Jensen Huang says US chipmakers are at least 10 years away from being independent of China (TechHQ).
#ReshoringTakesTime
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As in 20 of 23 Federal agencies have yet to implement OMB’s cybersecurity initiatives outlined two years ago (WSJ).
#ReferToItemOne
“My ideal investing is stuff that looks a little crazy now and in 3-5 years is obvious.”
– LinkedIn Co-founder Reed Hoffman
#AmericanIngenuity
“If you think of supply problems as pushing up price, healing supply problems should push price back to equilibrium.”
– UBS Economist Alan Detmeister
#SeemsLogical
“Climate change is making it very hard for us right now. There’s a lack of drought-resistant tomatoes in the world.”
– Kraft Heinz CEO Miguel Patricio
#HydroponicsAreGreatButExpensive
