HI Market View Commentary 04-29-2019
What I want to talk about today?
“I just want stock that have a 10 year track record of going up!” “This must be a reliable safe stock to be in!”
Why is this a bad way to value a stock or pick a stock? Or does it make sense?
What has the market done for the last 10 years? We’ve gone through a 10 year market bull run!
We know where the stock has been, but where is it going?
The price history of a stock is not the same as the companies earnings/profit history.
Why would a stock run up over the last 10 years and not justify it?
– Stock buy backs (easy money after financial crisis) AMZN, FB, NFLX
– Hype and high investor sentiment.
Past history is still important but we need fundamentals to help us know the health and future prospects of a company going forward.
EPS – earnings per share growth trend
ROE – Return on equity. Stable or growing
Dividend increase trend
Book value (shareholders equity) per share growth trend
YOU MISSED THE RUN UP!!!!!!!!!!!!!!!
What’s the risk?
The price you pay is not worth the companies profit. In other words investors are going to realize the hype is just hype and they will run. Starting to happen for AMZN.
Comparing AMZN to DIS last 6 months. How did both weather the negative market influences. DIS fell 15%. AMZN fell 55%!!!!!!
We want undervalued companies with solid fundamentals.
– Less influenced by market downturns
– Allows us to get in a good company BEFORE they have a lot of favorable market sentiment
– When we collar trade and protect, allows us to be patient through those frustrating 3 years when DIS went sideways, and allowed us to accumulate more shares through that time.
Look at the company and not just the CHART!
Where will our markets end this week?
– More big Earnings Reports coming out.
– “No” on FED rate hike.
DJIA – Bullish
SPX – Bullish
COMP – Bullish
Where Will the SPX end May 2019?
Mon: L, SOHU, AKS, GOOG, MGM, RIG, WDC
Tues: BP, COP, GLW, CMI, GE, GM, MA, MCD, PSX, FEYE, PFE, AAPL
Wed: CLX, EL, GRMN, HUM, TAP, YUM, QCOM, SQ, JCI, MRO
Thur: CI, K, BZH, ATVI, FSLR, FLR, FLS, GILD, SWKS, X, UAA, MUR
Fri: NBL, VFC, NBL
Mon: Personal Income, Personal Spending
Tues: Case-Shiller, Chicago PMI, Employemnt Cost Index, Consumer Confidence, Pending Home Sales,
Wed: MBA, ADP Employment
Thur: Initial, Continuing, Productivity, Factory Orders,
Fri: Average Workweek, Non-farm Payrolls, Private Payrolls, Hourly Earnings, ISM Non- Manufacturing Index
Tues – CN: NBS Manu PMI, Non- Manu PMI
Thursday – CN: Caixin Manu PMI, GB: BoE Interest rate decision
How am I looking to trade?
Going long for a China Deal and next Earnings which I expect to be better than expected Earnings
www.myhurleyinvestment.com = Blogsite
5 reasons experts think autonomous cars are many years away
By Tom Krisher, Associated Press | Posted – Apr 23rd, 2019 @ 2:00pm
PITTSBURGH — In the world of autonomous vehicles, Pittsburgh, Phoenix and Silicon Valley are bustling hubs of development and testing. But ask those involved in self-driving vehicles when we might actually see them carrying passengers in every city, and you’ll get an almost universal answer: Not anytime soon.
An optimistic assessment is 10 years. Many others say decades as researchers try to conquer a number of obstacles.
That makes Tesla’s declarations that it will offer fully autonomous vehicles by the second quarter of next year all the more striking. The company announced its ambitious plans during an investor conference on Monday. But skeptics doubt that Tesla can pull it off.
Here are the problems that researchers must overcome to start giving rides without humans behind the wheel:
Snow and weather
When it’s heavy enough to cover the pavement, snow blocks the view of lane lines that vehicle cameras use to find their way. Researchers so far haven’t figured out a way around this. That’s why much of the testing is done in warm-weather climates such as Arizona and California.
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Heavy snow, rain, fog and sandstorms can obstruct the view of cameras. Light beams sent out by laser sensors can bounce off snowflakes and think they are obstacles. Radar can see through the weather, but it doesn’t show the shape of an object needed for computers to figure out what it is.
“It’s like losing part of your vision,” says Raj Rajkumar, an electrical and computer engineering professor at Carnegie Mellon University.
Researchers are working on laser sensors that use a different light beam wavelength to see through snowflakes, said Greg McGuire, director of the MCity autonomous vehicle testing lab at the University of Michigan. Software also is being developed so vehicles can differentiate between real obstacles and snowflakes, rain, fog, and other conditions.
But many companies are still trying to master the difficult task of driving on a clear day with steady traction.
“Once we are able to have a system reliably perform in those, then we’ll start working toward expanding to those more challenging conditions,” said Noah Zych, Uber’s head of system safety for self-driving cars.
In some limited areas that have been mapped in three dimensions, the cars can function in light snow and rain.
Pavement lines and curbs
Across the globe, roadway marking lines are different, or they may not even exist. Lane lines aren’t standardized, so vehicles have to learn how to drive differently in each city. Sometimes there aren’t any curbs to help vehicles judge lane width.
For instance, in Pittsburgh’s industrial “Strip District,” where many self-driving vehicles are tested, the city draws lines across the narrow lanes to mark where vehicles should stop for stop signs. Sometimes the lines are so far back and buildings are so close to the street that autonomous cars can’t see traffic on the cross street if they stop at the line. One workaround is to program vehicles to stop for the line and creep forward.
“Is it better to do a double stop?” asked Pete Rander, president of Argo AI, an autonomous vehicle company in which Ford has invested heavily. “Since intersections vary, it’s not that easy.”
Dealing with human drivers
For many years, autonomous vehicles will have to deal with humans who don’t always play by the rules. They double-park or walk in front of cars. Recently in Pittsburgh, an Argo backup driver had to take over when his car stopped during a right turn, blocking an intersection when it couldn’t immediately decide whether to go around a double-parked delivery truck.
“Even if the car might eventually figure something out, it’s shared space, and it’s socially unacceptable” to block traffic, Rander said.
Humans also make eye contact with other drivers to make sure they’re looking in the right direction, something still being developed for autonomous vehicles.
Add to that the antagonism that some feel toward robots. People have reportedly been harassing Waymo’s autonomous test vehicles near Phoenix. The Arizona Republic reported in December that police is suburban Chandler have documented at least 21 cases in the past two years, including a man waiving a gun at a Waymo van and people who slashed tires and threw rocks. One Jeep forced the vans off the road six times.
Deciding when to turn left in front of oncoming traffic without a green arrow is one of the more difficult tasks for human drivers and one that causes many crashes. Autonomous vehicles have the same trouble.
Waymo CEO John Krafcik said in an interview last year that his company’s vehicles are still encountering occasional problems at intersections.
“I think the things that humans have challenges with, we’re challenged with as well,” he said. “So sometimes unprotected lefts are super challenging for a human, sometimes they’re super challenging for us.”
The fatal Uber crash near Phoenix last year did more than push the pause button on testing. It also rattled consumers who someday will be asked to ride in self-driving vehicles.
Surveys taken after the Uber crash showed that drivers are reluctant to give up control to a computer. One by AAA in March found 71 percent of people are afraid to ride in fully self-driving vehicles.
Autonomous vehicle companies are showing test passengers information on screens about where the vehicles are headed and what its sensors are seeing. The more people ride, the more they trust the vehicles, says Waymo’s Krafcik.
“After they become more and more confident they rarely look at the screens, and they’re on their phones or relaxing or sleeping,” he said.
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Apple gets target boosts ahead of earnings
Goldman Sachs raises its Apple (NASDAQ:AAPL) target from $140 to $182 while sticking to the sidelines.
The firm cites “less short term downside,” change in Goldman’s valuation methodology, and a slightly more optimistic view for iPhone demand.
Analyst Rod Hall says market checks show no further deterioration in China demand, but European consumer sentiment implies worse demand there.
When Apple reports earnings on April 30, Goldman expects a beat with “roughly in line to slightly weak guidance for FQ3.”
More action: Bernstein raises Apple from $160 to $190 saying the numbers appear safe, but sticks with a Market Perform rating as “next year’s iPhone cycle appears uninspiring.”
Disney: New Streaming Service Could Transform Its Valuation
Apr. 24, 2019 3:18 AM ET
Value, special situations, Deep Value, Growth
On Apr. 11, Disney announced its new streaming service, Disney+.
Disney+ is priced at $6.99 per month; Disney clearly aims to undercut Netflix, the current market leader, and make a play for the streaming crown.
Disney is attempting to forge a new narrative, positioning itself as a growth stock story akin to Netflix or even Amazon.
If the market opts to treat Disney similarly to Netflix, investors might well expect a major revaluation to the upside.
From television to theme parks, from films to toys, Disney’s (DIS) entertainment empire spans virtually every conceivable medium through which content can be consumed. Thus, it was only a matter of time before it made a foray into the newest and hottest platform for consuming media content: streaming services.
On April 11, Disney+ was unveiled to much fanfare. The advent of Disney+ raises new questions about the venerable company’s future. While the service was long anticipated, its potential impact on Disney’s business remains hotly debated.
Do You Want to Build a Streaming Service?
It certainly wasn’t because people didn’t know about Disney’s streaming plans. Disney has been extremely transparent about almost all the details throughout its development. We have known the service was in planning for years. We knew its name in November. We knew about the massive investment in proprietary platform content, the new VP heading up the group, and the details of some of the individual programming planned in January. In LexisNexis Newsdesk’s database, between March 31, 2018 and March 31, 2019, there were more than 48,400 news articles, major blogs, press releases mentioning Disney and streaming.”
Despite the long lead time and general lack of surprises regarding Disney+, Disney shares leapt higher in the wake of the official unveiling. The stock is now trading 12% higher than it was the day before the advent of Disney+. That means the market has added more than $20 billion to the company’s valuation virtually overnight.
So why did the market react as if this was a surprise?
Just can’t wait to be king
The Disney+ announcement was a long time coming and broadly expected. Disney received a raft of upgrades from analysts in the run-up to the announcement, and the general contours of the service were well understood before CEO Bob Iger pulled back the curtain.
With so much already known, this was hardly some binary investment event. One would think that the market’s reaction would be positive, sure. But the ebullience left many surprised. We are inclined to concur with Guinn’s answer to this apparent conundrum: price.
At $6.99 per month, Disney+ will undercut many other streaming services. It also stands in stark contrast to Netflix (NFLX), the original and largest streaming platform, which has been raising prices in an effort to plug its still-yawning financial gap.
A low initial price point makes sense as part of an effort to build a wide subscriber base, and no one expects the price to remain that low forever. But the chosen price point has further significance. It is definitely not profit-maximizing, and Disney no doubt intends to jack up prices eventually.
But setting the initial price point for Disney+ so low signals that Disney is here to compete for the streaming crown, not merely be an also-ran. It appears that Disney is throwing down the gauntlet to Netflix.
A Whole New Narrative
Disney+ is far more than a content platform. It is not merely a different medium through which one may watch and enjoy Disney-branded content. Rather, it represents a fundamental shift in Disney’s narrative as a company. Guinn’s recent article proffers an excellent crystallization of this point:
Disney is creating a powerful narrative that it will take market share. Because Disney is creating Common Knowledge that it will dominate streaming. Because Disney wants you to know that everyone else knows that it is now a Growth Stock – not in the constituent-of-the-Russell-1000-Growth-Index sense, but in the put-us-in-your-basket-with Netflix, Nvidia and Amazon sense.”
In other words, Disney+ is set to shape Disney the company, transforming it from a company valued as a multimedia profit-spinning machine with an unrivaled intellectual property portfolio, into one valued like an ultra-growth tech stock. If Disney can make that reassessment stick, it could see massive revaluation to the upside akin to that currently experienced by Netflix.
The Wonderful World of Profits
Some analysts and commentators are already fumbling with the idea of “Disney as a service,” but most fail to grasp just how much of an impact such a narrative change could have on the stock price.
It is here that the comparative with Netflix becomes important. The current king of streaming is valued at nearly $170 billion, a valuation built entirely on future expectations of monumental growth. Despite price hikes and only limited competition from a few upstart rival streaming services, Netflix has still failed to get out of the red.
Disney, on the other hand, has a vast profitable empire, in addition to owning the most valuable entertainment-related IP in the world. It can afford to subsidize its streaming service with relative ease if it wants to do so. But its tremendous pricing power, proven time and again across numerous platforms, might well mean it does not have to absorb losses from Disney+ to compete for streaming dominance – not for long anyway.
Investors’ Eye View
At $233.36 a share, Disney boasts a market capitalization of nearly $240 billion and trades for a bit more than 18 times earnings. That is not exactly cheap, but it is not horrifically expensive either.
However, if the new narrative takes hold, the current valuation could soon look very cheap indeed. Lest we forget that, last May, Netflix actually surpassed Disney, albeit briefly, to be the most valuable media company in the United States.
If Disney can catch some of the tech stock fairy dust that has lifted Netflix to dizzying heights, it may end up receiving a radical re-evaluation from the market. If Disney can make a credible play for the streaming crown, whether it crushes Netflix in the process or not, the company might well find itself receiving far more generous price targets.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Facebook jumps as Stories users and ads show promising growth
PUBLISHED WED, APR 24 2019 • 3:30 PM EDT UPDATED WED, APR 24 2019 • 7:43 PM EDT
- Facebook exceeded revenue expectations and matched estimates for its daily active user growth.
- Facebook said it took a one-time charge of $3 billion due to an ongoing Federal Trade Commission inquiry.
- The company said its Stories features on Instagram, Facebook, Messenger and WhatsApp all now have 500 million daily active users.
- Facebook stock rose as much as 9% in after-hours trading despite the company announcing that it could take a one-time charge of as much $5 billion due to an ongoing Federal Trade Commission inquiry.
The company exceeded revenue expectations and matched estimates for its daily active user growth. Here’s what Facebook reported:
- Earnings: 85 cents per share (can’t be compared to analyst expectations because of a one time charge)
- Revenue: $15.08 billion, vs. $14.98 billion, forecast by Refinitiv
- Daily active users: 1.56 billion, vs. 1.56 billion forecast by FactSet
- Monthly active users: 2.38 billion, vs. 2.37 billion forecast by FactSet
- Average revenue per user: $6.42, vs. $6.39 forecast by FactSet
The company’s earnings per share analyst expectations are not comparable due to the anticipated FTC charge.
The company said it counts 2.7 billion monthly users across the its family of apps, which is unchanged compared to last quarter. Facebook saw its user base in Europe grow to 286 million daily active users, up from 282 million last quarter. The company’s user base in the U.S. and Canada remained flat quarter-to-quarter at 186 million. The company said average revenue per user was $6.42, up 16% from $5.53 a year ago.
The FTC has been probing Facebook since March 2018 following reports that political consulting firm Cambridge Analytica had improperly access the data of 87 million Facebook users. To date, the FTC’s biggest fine against a tech company was in 2012 when Google agreed to pay a $22.5 million penalty due to its privacy practices.
“We estimate that the range of loss in this matter is $3.0 billion to $5.0 billion,” Facebook said in a statement. “The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”
The company is undergoing a major transition from News Feed ads as it grows ad revenue from its newer Stories products. CEO Mark Zuckerberg on Wednesday said Facebook, Messenger and WhatsApp’s Stories features now have 500 million daily active users, joining Instagram, which hit that mark in January. Facebook COO Sheryl Sandberg on Wednesday said the company now has 3 million advertisers using Stories ads across Instagram, Facebook and Messenger.
“Stories are an increasingly important growth opportunity,” she said. “We are helping advertisers keep up with the shift in how people are sharing just as we did with mobile.”
Stories was the largest contributor of year-to-year impression growth for the company during the first quarter, Chief Financial Officer David Wehner told analysts on Wednesday.
“Ultimately, we believe we can increase demand for Stories as we attract more advertisers and bring more effective direct response units to Stories, and over time that will play through to increased prices,” Wehner said.
Pivot to privacy and regulation
During the call with analysts, Zuckerberg touched on his March call for regulation, saying he doesn’t think people “want private companies making so many decisions around speech, elections and data privacy without a more robust democratic process.”
“There should be a public process for determining what is allowed and required for keeping harmful content to a minimum,” he said.
In a March memo, Zuckerberg wrote that the future of the company will be “private, encrypted services.” The company is working to integrate the messaging functions of WhatsApp, Messenger and Instagram, and Zuckerberg said he expects “Messenger and WhatsApp to become the main ways people communicate on the Facebook network.”
The company’s shift to privacy will “be a central focus for the company for the next five years or longer,” Zuckerberg said on Wednesday. He added that he does not expect the privacy pivot to be a real contributor to Facebook’s business for “the next couple of years.”
Zuckerberg said that as the company builds out the Facebook Marketplace and Instagram’s new e-commerce feature, that will result in more “private interactions around payments.” These types of features will help businesses make sales on Facebook and lead them to spend more on advertisements, Zuckerberg said.
“If payments becomes a really important part of what we do, we’ll have some options and choices about how we choose to have the revenue flow to us in the future,” Zuckerberg said.
The IRS stats are in: Here’s how tax refunds look compared to last year
PUBLISHED THU, APR 25 2019 • 10:59 AM EDT UPDATED THU, APR 25 2019 • 2:03 PM EDT
- The average tax refund for the week of April 19 was $2,725 — down 2% from last year’s levels.
- Overall, the federal government paid $260.9 billion in tax refunds, which is nearly $5 billion less compared to last spring.
- This season marked the first time taxpayers filed under the Tax Cuts and Jobs Act.
- The final stats are in from the IRS — and it looks like the average tax refund check isn’t all that different from last year.
The average refund check for the week ended April 19 was $2,725, according to the tax agency. That’s down 2% from a year ago.
In all, the federal government paid $260.9 billion in refunds to taxpayers, compared to $265.3 billion in 2018.
Tax returns are in the public eye as filers and accountants grapple with the Tax Cuts and Jobs Act, the 2018 overhaul of the tax code.
Under the new law, the standard deduction has been nearly doubled to $12,000 for single filers ($24,000 for joint) and a number of key itemized deductions have been curtailed. The personal exemption — once valued at $4,050 for each filer, spouse and dependent — has been suspended.
The new law also doubled the child tax credit to $2,000 per kid under 17.
Finally, the Tax Cuts and Jobs Act has trimmed down individual income tax rates across the board.Though the IRS data suggests that things aren’t all that different for individual taxpayers year over year, CPAs said that clients had plenty of surprises when they filed.
“Everyone wants to compare refunds from one year to the next, but that doesn’t tell the whole story,” said Debbie Freeman, CPA and director of financial planning at Peak Financial Advisors in Denver.
“They did generally see a benefit from tax reform, be it from the adjustment to their income tax brackets or from the larger child tax credit, ” she said.
“But they also saw less withheld in taxes, meaning they had more money in their paychecks, which created less of a refund,” Freeman said.
Last year, the IRS and Treasury changed the tax withholding tables to closely follow the overhaul of the tax code. Employers use these tables and your Form W-4 to deduct income taxes from your pay.
Tax withholding is a balancing act. If you withhold too much in taxes, you’ll likely get a refund the following year. Withhold too little, and you will owe the IRS.
Filers — especially those who used to itemize deductions or who have a mixture of W-2 income and side-gig money — ought to review their tax withholding to avoid being underwithheld for 2019.
Another tax tweak that tripped up filers this spring is the change to unreimbursed employee expenses.
This tax break, which is now suspended, is part of a group of miscellaneous itemized deductions. Prior to the tax overhaul, filers could only claim them to the extent they exceeded 2% of adjusted gross income.
A range of workers — from traveling salesmen and telecommuters to construction workers and pipefitters — were hit when they could no longer deduct those unreimbursed employee costs, CPAs said.
Residents in high-tax states took a hit when the new tax law applied a $10,000 cap on the deduction for state and local taxes.
Homeowners on the coasts felt the pain acutely, due to their inability to fully deduct their property tax bills.
The top three counties with the highest average property taxes were Westchester County, New York ($17,392); Rockland County, New York ($12,925); and Marin County, California ($12,242), according to Attom Data Solutions.
If you were unhappy with your 2018 tax results, now is the time to act.
• Prepare for 2019: Clients who had tax projections last year were on track this spring, said Freeman. Meet with your CPA, get a projection of your taxes for 2019 and see what — if anything — will you need to do differently. “This is about education,” she said. “Not just with the tax law changes, but also being proactive with what you can do for next year.”
• Plan your giving strategy: If you’re on the bubble with itemizing deductions, consider working with your CPA on a charitable giving strategy. “Bunching” charitable giving allows you to stuff two or more years’ of donations into one year. This way, you itemize deductions every other year.
• Assess your withholding: If your withholding fell short in 2018, you’re likely to have a repeat performance in 2019 if you fail to act. Review your W-4 and make sure you are withholding sufficient taxes.
• Be tax-smart at work: Got a 401(k) plan? How about a health savings account at work? Saving in these accounts reduces your taxable income and boosts your chances at retirement security.
If you have kids under 13, ask about a dependent care flexible spending account at work. This way, you can save up to $5,000 on a pretax basis to pay for summer day camp, after-school care and more.
Buffett says investors would be served just as well buying an S&P fund as his own company’s stock
PUBLISHED THU, APR 25 2019 • 1:45 PM EDT UPDATED THU, APR 25 2019 • 6:28 PM EDT
- “I think the financial result would be very close to the same,” Buffett told the FT when asked if it would be better to own the S&P or Berkshire over a lifetime.
- As one of history’s most revered money managers, the billionaire has served as a model for a generation of investors with a frugal, bargain-based buying strategy.
- Buffett has been candid about how difficult it is for Berkshire to match the stock market. He told CNBC in February “it has been a tough time to beat the S&P.”
Renowned stock picker Warren Buffett believes investors would be as well off simply buying the stock market as they would owning a stake in Berkshire Hathaway.
“I think the financial result would be very close to the same,” Buffett told the Financial Times when asked whether it would be better to put a share of Berkshire or a share of the S&P into a child’s investment account.
Buffett, the chairman and CEO of Berkshire with a personal worth north of $80 billion, has served as a model for a generation of investors with a frugal, bargain-based buying strategy. That’s begotten both a no-frills investing philosophy as well as modest Midwestern lifestyle marked by regular trips to McDonald’s, a taste for Coca-Cola and folksy business mantras.
Though arguably less seductive than short-term tactics that try to time the market, Buffett’s method has long served as a blueprint for those looking for steady, reliable return over the long term.
Notwithstanding Buffett’s value-hunting prowess and dramatic lifetime outperformance, Berkshire has over the last 10 years underperformed the S&P 500 — the broad market index that tracks the largest stocks in the American economy.
Buffett has long been candid about how difficult it is for Berkshire to keep up with the stock market. He told CNBC in February that “it has been a tough time to beat the S&P.”
“I think it’s the best investment — because most people don’t know how to pick stocks. And — most of the time I don’t know how to pick stocks,” he told CNBC’s Becky Quick earlier this year.
“It’s — it is not an easy game. And by definition people are going to do average,” Buffett added. “I mean, if you take everybody in aggregate, and if half of ’em are paying big fees and jumping around and paying brokerage commissions, the other half have to do better.”
Buffett will join other Berkshire leaders on the first weekend of May at Berkshire’s annual shareholder meeting in Omaha, where he will discuss the portfolio’s performance and investment opportunities. CNBC will provide live coverage of the event.