April 13, 2020
Airbnb
A stock valuation of $50 billion looks more like a dream of the past than reality today. Just in the first six months of 2020 the company is expecting a loss of $1 billion. To stay afloat going forward the company is in talks to raise $1 billion of debt with a steep interest-rate of more than 10%. Going forward a public offering may only be in the works for 2021. It’s unlikely it will get the same valuation it would’ve gotten had the company gone public in 2019. Good for the prospective shareholders not so good for Airbnb and the insiders.
April 14, 2020
Investing In Boeing
I have made my reservations over investing in Boeing very clear and the news continue to worsen. The company announced in March that there were an additional 150 cancellations for its 737 Max jet. Total net cancellations which subtracts new orders from cancellations now stands at 307 planes for the first 3 months of the year. With debt building, cash flow struggling, and an unclear timeline for the return of the 737 Max, I believe there are much better opportunities out there.
Biotech & Pharmaceutical Companies
I recently discussed my optimism surrounding our biotech and pharmaceutical companies here in the U.S plus the additional support from other companies all around the world. My belief that we can find a treatment and vaccine and enhance testing capabilities for Covid-19 is why I believe we will see that V-shape recovery in the economy. This again would mean a massive decline followed by a quick resurgence in economic activity. On top of previously used treatments like Gilead’s remdesivir which was used for Ebola and British health-care giant AstraZeneca’s Calquence which has been approved for the treatment of leukemia, businesses have announced various trials and there are now 70 candidate vaccines that are working through the approval process. While a vaccine will be the most effective solution in the long term it does take some time to get through the approval process, so the treatments and testing capabilities will be crucial in the short term. As we look at 2021, Johnson and Johnson believes if trials go as scheduled it could produce 600 – 900 million doses of the potential vaccine by the end of the first quarter next year. Be patient, continue to practice good health habits and we will get through this!
April 15, 2020
Restricting Access to Alcohol
The World Health Organization’s regional office for Europe recently recommended governments should restrict access to alcohol. They cite that more than 3 million people die every year from alcohol and said, “adding alcohol consumption during an emergency can exacerbate health vulnerability, risk-taking behaviors, mental health issues, and violence.” I do not think this would go over well with U.S. citizens. I believe it is crazy for the government to be able to tell you what you can and can’t buy for consumption in your own home (excluding illegal substances of course). What are your thoughts?
G oogle & Apple Using Bluetooth for Contact Tracing
Do you trust Google and Apple to present technology for contact tracing? The idea is that through Bluetooth, the providers can utilize smartphones to see if you have recently been in contact with someone that now has Covid-19. The theory is that once someone marks themselves as having Covid-19 those that had their Bluetooth device around that person would receive a warning and would then know to get tested. The problems here are people have indicated their concerns over privacy and big tech and the system would need large adoption to provide any true value.
April 16, 2020
NY Governor Extending Opening Economy
I just finished my segment on Newsmax TV and I’m really angry and disgusted seeing the NY governor and other governors back East extending opening their economies until May 15th. Why? No doubt that our “wonderful” governor of California will more than likely follow suit in this after announcing that he is giving illegals a check for $500, shouldn’t he be for the citizens of California? Wouldn’t it be nice as a taxpayer of California to get some help? There are now 22 million people unemployed in the country of which most want to get out of the house and get back to work. We need to get this economy back to work May 1st! The hole that some of our leaders are digging is getting deeper and it needs to stop now!
Gilead
Great news after hours! In the University of Chicago’s phase 3 trial of Gilead’s Remdesivir, results are looking strong. The study pulled in 125 patients with the virus, of which 113 were severely ill. According to the University of Chicago, “The best news is that most of our patients have already been discharged, which is great. We’ve only had two patients perish.” Most patients were discharged in less than a week. This is a major positive because Remdesivir is already an approved drug which means it will not have to go through the same rigorous regulations as a new vaccine. Before more governors impose extended lockdowns let’s give our medical specialists some time. Things could move very quickly over the next couple of weeks.
Bank of America
A recent survey from Bank of America shows why now might be the time to buy. The Bank of America Global Fund Manager survey shows managers have the highest cash balance since the September 11, 2001 terrorist attacks and the lowest equity allocation since March 2009. While this may be counterintuitive this is a contrarian buying signal as we could reach a peak in pessimistic selling. As this crisis continues to be resolved you should see equities rip higher as cash comes back into the market and managers reallocate towards equities. As a reminder March 2009 was the start of the recent bull market that lasted for 12 years. This may not be the bottom, but I am still seeing plenty of opportunities in this market.
April 17, 2020
America’s Food Industry
There is an unfortunate disconnect in the food chain. With the current situation there are some people across the country who are unable to buy enough food to feed their family. On the production side many farmers are unable to sell the milk they produce to restaurants and have been flushing it down the manure troughs at the farms. Last week as much as 7% of all milk produced in the US was dumped. There is fear that the same may happen again this week as well. Certain large company chicken producers like Sanderson Farms have contemplated euthanizing chickens and burying them on the farms. Food prices are falling, which is a positive for consumers, but it is unfortunate that the food producers cannot somehow get their products to those less fortunate rather than destroy them.
Goldman Sachs Cuts Target Sell Price on Apple
Goldman Sachs cut their target sell price on Apple today to $233 per share. We have been concerned with Apple's stock price for a while at Wilsey Asset Management as the stock trades at very rich valuations. The reason Goldman Sachs is concerned as we are is about the sales drop going forward will not meet the current expectations. It's so funny to listen to all the talking heads justifying why Apple deserves the high price. It is laughable some of the reasons they come up with just to love the stock. Apple is a great business, but it is very expensive at this time.
This newsletter is for informational purposes only and should not be used as investment advice. If you would like to discuss more in detail your investment needs or have other investment questions, feel free to call me at 858-546-4306 or visit our website at Smartinvesting2000.com.