In a new report, Cantor Fitzgerald analyst Steve Ferazani took a close look at spinoffs and ran through the numbers on their historical performance. Ferazani found that spinoffs typically outperform the market by a wide margin in their first year of trading.
According to the report, spinoffs completed between 2009 and 2013 outperformed the S&P 500 in their first year of trading by an average of more than 17 percent. Ferazani identified several factors that seem to be contributing to this outperformance.
“These factors include spin-off exclusion from the S&P 500, the ability and willingness of the spin-off company’s board and management to repurchase shares, and users of the cash contribution from the spin-off to the parent,” he explained.
For investors looking for the best possible time to buy spinoffs, look no further than their first week of trading. Ferazani found that more than 62 percent of spinoffs trade down during their first six trading days.
Cantor Fitzgerald believes that 2015 may be mark the peak for tax-free spinoffs, but it does not expect a dramatic reduction coming in 2016. Too many companies recognize the potential benefits of a spinoff from the parent company, including higher margins, better growth and a higher multiple.
For traders looking for spinoff-related stocks to play, Cantor Fitzgerald has Buy ratings on Barnes & Noble, Inc. (NYSE: BKS), Gannett Co Inc (NYSE: GCI), KLX Inc (NASDAQ: KLXI) and MSG Networks Inc (NYSE: MSG).
Disclosure: The author holds no position in the stocks mentioned.
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Information received since the Federal Open Market Committee met in July suggests that economic activity is expanding at a moderate pace. Household spending and business fixed investment have been increasing moderately, and the housing sector has improved further; however, net exports have been soft. The labor market continued to improve, with solid job gains and declining unemployment. On balance, labor market indicators show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation moved lower; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams. Voting against the action was Jeffrey M. Lacker, who preferred to raise the target range for the federal funds rate by 25 basis points at this meeting.
During the halcyon days of quantitative easing, dollar weakness and inflation expectations, commodities exchange traded products were hits. Just five years ago, there was $125 billion in assets under management across commodities exchange-traded funds and exchange traded notes (ETNs) and there was a time, albeit brief, when the SPDR Gold Trust (ETF) (NYSE: GLD) was the largest ETF in the world.
Over the past year, commodities ETFs have been beset by dismal performances and massive outflows, prompting some investors to question the value of commodities as core portfolio holdings, even in modest allocations.
While the PowerShares DB US Dollar Index Bullish (NYSE: UUP), the U.S. dollar index tracking ETF, has climbed 9.3 percent over the past year, commodities ETFs have been decimated. For example, GLD and the iShares Silver Trust (ETF) (NYSE: SLV) have posted an average loss of 6.5 percent, while the United States Oil Fund LP (ETF) (NYSE: USO) has plunged 53.4 percent. Outflows have come along with those troubling showings.
“Consider that at the end of 2005, there was less than $5 billion invested in U.S.-listed commodity ETPs. About five years later, after a period of exponential growth, assets in commodity ETPs topped out around $125 billion. By this time, investors started to learn about terms like contango and backwardation, realizing that they needed to adjust their expectations.
“Since topping out in August 2011, commodity ETP assets have been in decline thanks to negative returns and sharp redemptions. Investors have yanked more than $22 billion out of commodity ETPs over this period,” according to Morningstar.
With some market observers noting that the dollar's strength is still in the early to middle innings, a large part of the bullish thesis for commodities has been eroded. Further erosion is found when evaluating data that suggest commodities are not as negatively correlated to bonds and equities as the asset class once was.
As Morningstar noted, a study by professors Gary Gorton and Geert Rouwenhorst highlighted disappointing correlation data for commodities futures.
“The results speak for themselves: Over the past 15 years, an allocation to commodities has generally resulted in lower returns and greater risk,” according to Morningstar.
Commodities ETFs still have utility as trading vehicles. Traders that know USO can be vulnerable to contango can still use the ETF as a short-term trading vehicle and plenty do. And as recently reported, no ETF has benefited from the Volkswagen AG (ADR) (OTC: VLKAY) scandal on par with the ETFS Physical Palladium Shares (NYSE: PALL).
However, what long-term investors should concern themselves with is long-term, risk-adjusted returns – and that outlook is bleak for commodities because, as Morningstar's data indicate, portfolios including commodities result in lower Sharpe Ratios than traditional 60 percent equity/40 percent fixed income portfolios.
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TA Associates, a leading global growth private equity firm, today
announced it has signed a definitive agreement to acquire Frank Russell
Company's asset management business ("Russell Investments") from London
Stock Exchange Group plc (OTC: LDNXF) in a transaction valued at
US$1,150 million, subject to customary closing adjustments. Reverence
Capital Partners ("Reverence Capital") partnered with TA Associates and
will make a significant minority investment in Russell Investments. The
transaction is contingent upon standard regulatory and other required
approvals and is expected to be completed in the first half of 2016.
This Smart News Release features multimedia. View the full release here:
Russell Investments is a leading global investment manager, with a
nearly 80-year heritage of delivering innovative solutions, strong
Inc. (Nasdaq: PLCM), today issued the following statement in
response to a Schedule 13D filing by Elliott Associates, L.P., et. al.
"Polycom's Board and management regularly review and evaluate the
company's strategy as part of our commitment to enhance shareholder
value. We maintain an ongoing dialogue with our shareholders, and we
will be meeting with Elliott's representatives to discuss their
thoughts. It is our policy, however, not to comment on our discussions
Forward Looking Statements and Risk Factors
This release contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform
Earnings season unofficially kicks off on Thursday with Alcoa Inc (NYSE: AA) to report after market close and the pace of earnings reports set to surge next week.
In a report published Thursday, Goldman Sachs analyst John Marshall gathered his top 25 "out-of-consensus opportunities," noting that his "favorite trade" is buying call options as the "elevated level of fear priced into single stock options shows elevated potential for relief rallies."
Marshall continued that during last quarter's earnings season, call and put buyers benefited from the high volatility and low correlation among stocks. S&P 500 stocks moved +/- 3.8 percent on their earnings day on average – the largest move in three years. The analyst added that he expects a similar move during the upcoming earnings season.
"Coming into this earnings season, single stock put skew is high, showing that Micro investors are pricing another negative earnings season," Marshall wrote. "We believe expectations are low and look for stocks with relief rally potential.
“In contrast to single stock options, we see evidence of bullish positioning in index options. We agree with shift towards a more positive view in Macro markets, but prefer to trade this view by buying single stock calls where expectations are lower and the opportunity to add alpha is great."
Here are all of the analyst's 25 picks.
Technology, Media, Telecom Stocks:
Technology, Media, Telecom Stocks:
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Shares of select companies including Alcoa Inc (NYSE: AA) whose fortunes tend to rise and fall with commodities have been flogged this year. That’s because prices for everything grown or pulled from the ground have dropped steeply amid economic pullback and government action in China, weak fiscal trends in Japan and Europe, and a worldwide commodities glut that many industry analysts believe is still working its way through the pipeline.
Wall Street could be watching Alcoa’s unofficial kickoff to the heart of the Q3 earnings season today for a sense of China’s ongoing impact on U.S. multinationals. In fact, it’s one of the leading themes of this earnings round and traders wonder if the worst sting from China has yet to be felt in the stock market. For example, restaurant chain YUM Brands (YUM) in its results issued earlier this week warned of “unexpected headwinds” in China and cut its full-year earnings outlook.
Some industry analysts think Q3 could be the weakest reporting season in six years for S&P 500 (SPX) companies. Has the market fully braced for this potential outcome?
Industry analysts believe AA could turn in its first year-over-year profit decline in six quarters when it releases results after the closing bell. It has coped with about a 20% drop in aluminum prices compared with the year-ago period ending in September. Analysts reporting to Thomson Reuters are anticipating that per-share earnings will come in at $0.14, down 55% on a year-over-year basis. They peg revenues at $5.69 billion, which would be off 9% from the year-ago period. AA has typically beat earnings expectations—in 12 out of 13 quarters, in fact— but missed last quarter.
China is the largest exporter of aluminum, according to global trade statistics, and thus competes against Alcoa’s business. But a drop in demand for many products that are created using Alcoa’s alumina is impacting demand for the base metal, industry analysts say. Last quarter, the company reduced full-year 2015 and 2016 projections by approximately 20%. The stock has followed suit, falling 40% year to date (figure 1).
As for Alcoa stock, short-term options traders have priced in a 6.5% share move in either direction around the earnings release, according to activity tracked on the new-look thinkorswim® platform.
Current implied volatility in AA options is at 61%, running near its recent readings. Action in put option trading is at 2.5 times the typical volume today. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price and over a set period of time.
Renewable energy stocks have been a popular choice for investors this year as a growing interest in ‘going green' across the United States has spurred on demand for alternative energy sources. However, a new bill signed into law in California on Wednesday may set the tone for a new era in which renewables are not only of interest, but mandatory.
On Wednesday, California Governor Jerry Brown signed a bill into law which requires the state to produce half of its electricity through renewable means by 2030. The bill also called for increased efficiency, requiring buildings within the state to double their energy efficiency during the same 15 years. The bill was cheered by environmentalists as well as renewable firms, who hope other states will follow California's example.
Investors who are hoping to profit from California's latest effort to cut down on its carbon footprint are looking to First Solar Inc. (NASDAQ: FSLR) and NextEra Energy Inc.(NYSE: NEE), which have been responsible for much of the state's solar capacity over the past few years. Others are putting their faith in big name electric companies like PG&E Corporation (NYSE: PCG), which have already begun to work on increasing their renewable energy capacity.
For those looking further afield, there is Trina Solar Limited (NYSE: TSL), which designs, operates and sells solar power projects across the world in places like China, the UK and India. While California may be considered a green pioneer, the trend to increase reliance on renewables is global with several nations with historically poor environmental standards working to reform.
Morgan Stanley recently conducted its AlphaWise survey, which showed that Wal-Mart has goodwill with customers. The analysts believe the company “should make the most of it,” and lay out a few ideas that could put this “out-of-favor stock back on track.”
According to the report, the analysts believe the medium-term setup for the stock is not particularly compelling, especially given that estimates for fiscal 2017 look to high, while the company really looks poised to deliver further margin downside. They also see comps decelerating over the medium term.
Over the longer term, Wal-Mart faces one fundamental challenge: “managing the transition from a higher-margin, higher-return store-based business, to what today is a lower-margin model, leveraging online.”
Gutman and Siber believe the stock could work again. Below are seven strategies Morgan Stanley proposes for the company to get back on its feet:
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
Shares of Amazon lost more than 2 percent Thursday morning after ChannelAdvisor stated that the e-commerce giant saw its September same-store sales fall to 19.2 percent growth from 24.7 percent in August.
The report also noted that eBay’s September same-store sales came in at 1.1 percent, a decrease from August’s 3.4 percent and “well below” ChannelAdvisor’s 15 percent projection.
EBay’s stock plunged more than 7 percent as ChannelAdvisor added that September’s performance was among the worst seen since February 2011.
ChannelAdvisor’s chart (seen below) shows that Amazon’s September 2014 same-store sales peaked at 37.9 percent while only three other readings since then have been above 30 percent. In addition, the most recent reading of 19.2 percent is the lowest level seen since last September.
Amazon’s stock has surged around 60 percent since ChannelAdvisor reported the company’s September 2014 data.
There is no doubt that Amazon’s stock has suffered some setbacks over the past year. However, the company was able to satisfy investor appetite for anything cloud-related with its AWS (Amazon Web Services) segment.
Amazon announced in April 2015 that the AWS segment was profitable with sales of $1.57 billion and operating income of $265 million in the first quarter of the year. The company added that the segment remains on track to earn more than $1 billion in profit during the full fiscal year. According to Business Insider, this made Amazon “the biggest cloud computing infrastructure player of all.”
Investors would naturally place a greater emphasis (and pay a higher premium) on the AWS segment given its outsized growth potential, rather than focus on monthly same-store sales metrics for the Amazon marketplace.
EBay’s monthly same-store sales performance over the past year peaked at 9.8 percent in November 2014 and see-sawed between 5.1 percent in December 2014 and 7.2 percent in June 2015 before steadily declining to September’s 1.1 percent.
Correlating eBay’s stock performance to its ChannelAdvisor’s readings may not yield any significant outcome. The company divested Paypal Holdings Inc (NASDAQ: PYPL) into a separate company in July. Prior to the split, investors were valuing eBay’s stock as a sum of its parts, which consisted of eBay’s core marketplace platform and its e-commerce payment arm.
During PayPal’s first day of trading as its own separate company, its market share eclipsed that of eBay’s. According to Fortune, PayPal’s market value rose to nearly $50 billion, while eBay’s valuation stood at $35 billion.
Now that eBay’s stock consists of only its core platform, investors can better value the company based solely on the performance of its marketplace. September’s same-store sales marked the third consecutive month of declines, justifying Thursday’s heavy selling activity in the stock.
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