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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Industrial Strength?

Back to Basics with a Twist

  • U.S. industrial stocks have fallen four times farther than the S&P 500 since the all-time high in January
  • Total internet connected devices worldwide will rise by an estimated 46% in 2018 to 1.2B (Statista)
  • IT focused industrial companies stand to benefit significantly and their stocks offer attractive entry points

Geopolitics have taken their toll on all of us recently… just ask investors long Chinese equities or U.S. soybeans, they’re down 21% and 23% respectively. Worrying doesn’t do any good, but I’ve still been waking up every night about 2am to check positions. As one subscriber told me, “When we stop waking up in the middle of night thinking about things at work we have lost the edge and it is time to retire.” Fair point and I’m certainly not in retirement mode, but this week I’ve been hunting for a place to deploy capital where I can worry a little bit less and recoup some much needed sleep. What I’ve found is an exceptional U.S. industrial company with virtually no exposure to China, a history of beating estimates and a smart pivot towards differentiating technologies built around the Internet of Things (IoT). I call it Back to Basics with a Twist.


July 14, 2018

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Reality Check

#1 Bank at a Discount

  • The nation’s top-rated bank posts strong earnings but expresses concern about overall lending standards
  • Regional banks fall 5% over three days and analysts begin tempering forecasts in response
  • Economic expansion and robust employment still provide significant runway for additional loan growth

Early in my career I worked with an exceptional portfolio manager who returned well over 20% annually for nearly four decades. He only followed 75 companies, but he knew everything about them and they were all he traded. He’d go in and out at will. He might buy and hold for two years, then turn around and go short. Mostly he transacted in equities, though occasionally he’d opt bonds if they offered better value. He delighted in options. My point is, he’d done the work and chose the position which maximized the opportunity at hand. I am borrowing a page from the maestro’s notebook, and re-recommending a bank I’ve owned since launching Bullseye. I’ve already done the work and love the story, especially since it’s been rated the #1 bank in the U.S. for 8 years in a row and shares are down 11% on an earnings report which I think the Street has misinterpreted.


July 14, 2018

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The House Always Wins

Best in Breed Broker

  • Average daily volume on the New York Stock Exchange has risen 2.3% this year compared to 2017
  • U.S. equity IPO volume of $88.95B YTD represents an increase of 8.2% over the same period a year ago
  • Online brokerage firms have declined 20-25% from all time highs and remain near their lows YTD

I traded options in the 90s and loved getting up for work. Tech stocks kept doubling. The firm paid bonuses every six months, and office hours ended promptly at 4:01… generally so we could meet clients for drinks and figure out what to buy the next morning. It was a heady time and I bear-hugged each moment, though I also could sense something didn’t quite add up. While the firm accounted for considerable NYSE volume and collected significant commissions, my top five accounts changed nearly every quarter. Of all the hedge funds I traded with over a seven year period, only three or four remained on page one of my speed dial. How odd that we made money as clients came and went. I recall sharing the observation with my boss in the old Four Seasons Grill Room, where he paused to opine, “The brokerage business is a very good business, Adam. The house always wins.”


July 14, 2018

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5.5

As in commercial and industrial loan volume rose 5.5% YoY during June, up from 1% in January according to Federal Reserve data.
#WhyI’mLongBanks

62

As in 62% of U.S. companies operating in China plan to increase their investments in the country this year.
#TradeWar?

300

As in Apple plans to launch a $300M clean energy fund in… wait for it… China!
#SeeWhatIMean?

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“We have ordered 100 Airbus 330 NEOs for $23B, but to finally confirm it we must make sure the price is right… or else.”
–AirAsia CEO Tony Fernandes taking to Twitter like another master negotiator we know.

#Seriously?

“When we have a trade problem, we should talk about it.”
–China’s Vice Minister of Commerce Wang Shouwen several days after the additional $200B in tariffs were announced by the White House.
#OpeningDoorToNegotiations?

“I was really happy to get this far. I’m literally just getting started.” 
–Serena Williams after losing the Women’s Final at Wimbledon, still trying to come back from a challenging pregnancy and a series of medical setbacks. 

#KeepTheFaith