April 27, 2020
Decline in Stock Prices of Big Chain Restaurants
I get excited when I see some of the declines in the stock prices of some well-known big chain restaurants like Cheesecake Factory and Darden Restaurants. I do believe that people will get tired once again of cooking at home including the cleanup after dinner, which is one thing I hate myself. I think it is wise to be patient here, but do not take these restaurants off your watch list. As far as changes at the restaurants that I think we will see, I believe the restaurants wi ll have longer dinner periods stretching from perhaps 4 PM to 10 PM to offset reduced capacity. We may also see temperature checks and I have even seen perhaps silverware sealed in plastic. There may be no more waiting in the lobby but rather in your car, we could also see in the restaurants dividers and panels separating tables and you may not recognize your servers as they all will be wearing masks. So, I do believe we will see an explosion in restaurant dining once again but investors need to remain patient.
The Housing Market
Millennials have generally preferred living in dense cities that offer a lot of amenities. Has the stay at home order now shifted their preferences? Sales of newly built homes began plummeting as they fell nearly 85% at the beginning of April as people stayed home. Sales are still off last year’s levels, but they have been recovering substantially off their lows. According to John Burns Real Estate Consulting, the demand for these newly built homes have been tilted toward ren ters that feel secure in their employment. Pair this with a lower level of existing homes on the market and some homebuilders in the entry level market could gain some good market share. The consulting group also pointed to homebuyers that may now be concerned about germs. These homes are safe, new, and clean. Buyers may also now prefer a yard and more space after being stuck in their homes. I know I’m glad I have a yard to enjoy to get some fresh air!
April 28, 2020
The Science in This Pandemic – A Study from Professor John loannidis
People keep saying we need to listen to science in this pandemic, well research from John loannidis, a professor at Stanford’s school of medicine who is ranked by Google Scholar as one of the world’s 100 most cited scientists, has some interesting points. His study looked at blood tests of 3,300 volunteers in Santa Clara County and from it they estimate 2.49% to 4.16% of the population in the county had been infected. This would amount to total cases that exceed the current c onfirmed count by 50 – 85 times. This would also produce a fatality rate between 0.12% and 0.2%. In a recent paper with his wife, Despina Contopoulos-Ioannidis, an infectious disease specialist at Stanford (Talk about a power couple!), they found in Italy people under 65 without underlying conditions accounted for 0.7% of Coronavirus deaths and in New York City that number was just 1.8%. With these numbers the fatality for those under 65 without underlying conditions would be outrageously low! Professor loannidis was quoted in The Wall Street Journal saying, “There’s far, far, far, more. . . young people who commit suicide” and that “we will see many young people committing suicide. . . just because we are spreading horror stories with Covid-19. There’s far, far more young people who get cancer and will not be treated, because again, they will not go to the hospital to get treated because of Covid-19. There’s far, far more people whose mental health will collapse.” The interesting thing about the interview is that John loannidis generally describes himself as a pessimist, but from his research in this case he says he’s probably an optimist. My point here again is that we still need to try and do as much as we can to protect those at risk, but why are we risking so much of the economy and placing a population on lockdown that likely will have very low fatalities?
The Roaring 20’s – A Prosperous Time for Our Country
Many people keep talking about how this will take us many years to recover from this as consumers change and times are different. Gary Kelly, CEO of Southwest, made an interesting point on CNBC this morning. He acknowledged while demand will remain challenged in the short-term, think about what followed the 1918 Spanish Flu. The answer is the roaring 20’s which was an extremely prosperous time for our country. We will get back to normal and people will continue to spend money, it just seems scary at the current time
April 29, 2020
Fox 5 Segment – Chase Wilsey: Smart Stimulus Spending
Chase Wilsey joins Raoul Martinez on Fox 5 San Diego discussing establishing an emergency fund, paying off high interest debt, supporting local businesses and where to spend and not to spend your stimulus check.
Click here to view segment: https://www.youtube.com/watch?v=54kT-RUBlSw&t=8s
April 30, 2020
Drug Companies Are in Beginning Stages of Testing Experimental Coronavirus Vaccine
In addition to the good news from Gilead yesterday and a new study that caused the Dow to climb 532 points or 2.2%, drug company Pfizer said it would begin testing its experimental vaccine in the US as early as next week. While people were concerned that a vaccine will take years, Pfizer did state that the vaccine they are developing could be available for emergency use as early as September if it passes muster in studies. Another drug company, Moderna Inc. said it was preparing to enter its vaccine into the second phase of human testing. More good news on how hard our drug companies are working to get a vaccine out quickly.
May 1, 2020
Tesla Stock
How can analysts and investors justify some of the unrealistic price targets for Tesla now that even Elon Musk believes the stock is overpriced? This morning Elon tweeted, “Tesla stock price is too high imo” IMO short for in my opinion. I’d have to agree with Elon there. The stock still trades for over 100x next year’s estimated GAAP EPS. Its current market cap of approximately $130 billion also now exceeds the combined market cap of Ford, GM, Fiat-Chrysler, Lyft, Paccar (builds large semis under its Peterbilt, Kenworth, and DAF brands), Navistar (another large truck manufacturer), BorgWarner (provides engine and drivetrain solutions), Cooper Tire, Penske Automotive (operates automotive and commercial truck dealerships), Advance Auto Parts, and Carmax. As a reminder market cap is the shares outstanding multiplied by the stock price and is a good proxy for a company’s value. The sales for Tesla in the most recent fiscal year were $24.5 billion. Compare this to the sales of the combined companies listed above at nearly $508 billion and you can see why we believe Tesla’s valuation makes absolutely no sense!
Newsmax Tv – Brent Wilsey: Coronavirus, Unemployment, & the Economy
John Bachman from Newsmax TV interviews Heather Zumaraga and Brent Wilsey discussing unemployment rates, reopening our economy, and Brent’s thoughts on investing in drug companies.
Click here to view segment: https://youtu.be/KXAOehentw4
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.