Archive for Emily Graffeo

JPMorgan stands by Nikola ‘buy’ rating following chairman Trevor Milton’s departure

Nikola Trevor Milton
CEO and founder of U.S. Nikola Trevor Milton attends a news conference held to presents its new full-electric and hydrogen fuel-cell battery trucks in partnership with U.S. Nikola, at an event in Turin, Italy, December 3, 2019.
  • JPMorgan is standing by its "buy" rating for Nikola, even as the executive chairman and founder Trevor Milton resigned.
  • Analysts from the firm wrote that the stock of the electric-truck company may not be fully pricing in a "successful execution of the multi-year growth strategy," which would yield $1.6 billion Ebitda in 2027. 
  • JPMorgan is also cutting its 2021 year-end price target to $41 per share from $45 per share. 
  • "Milton's resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now," the JPMorgan team wrote.

JPMorgan reiterated its "buy" rating for Nikola despite news on Monday that executive chairman and founder Trevor Milton resigned. 

"We believe the stock may not fully price in successful execution of the multi-year growth strategy, which yields earning power of ~$1.6bn EBITDA in 2027E," a team of analysts led by Paul Coster wrote in a Monday note.

The firm is also cutting its 2021 year-end price target for the electric-truck company to $41 per share from $45, to "reflect the risk associated with the resignation."

"We believe the inbound Chairman, a former GM board member, is probably better suited to the next – execution – phase of the company's development," the team wrote. "But Trevor Milton's resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now, just as the workload is intensifying and competitive threat looms."

Read more: 5 commercial real-estate investors who are raising billions lay out which strategies are heating up after a major market upheaval

Nikola tumbled as much as 30% after the Monday opening bell. 

The analysts wrote that Nikola is currently a "story stock," but they are "on board" so long as the company executes to plan, and providing that the stock offers a favorable risk-reward trade-off. 

The JPMorgan analysts also said that they may become less constructive on Nikola if Milton sells his own stock in the company. The Nikola founder owns roughly one-quarter of the company's approximately 380 million shares outstanding, according to a mid-September Securities and Exchange Commission filing.

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JPMorgan stands by Nikola ‘buy’ rating following chairman Trevor Milton’s departure

Nikola Trevor Milton
CEO and founder of U.S. Nikola Trevor Milton attends a news conference held to presents its new full-electric and hydrogen fuel-cell battery trucks in partnership with U.S. Nikola, at an event in Turin, Italy, December 3, 2019.
  • JPMorgan is standing by its "buy" rating for Nikola, even as the executive chairman and founder Trevor Milton resigned.
  • Analysts from the firm wrote that the stock of the electric-truck company may not be fully pricing in a "successful execution of the multi-year growth strategy," which would yield $1.6 billion Ebitda in 2027. 
  • JPMorgan is also cutting its 2021 year-end price target to $41 per share from $45 per share. 
  • "Milton's resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now," the JPMorgan team wrote.

JPMorgan reiterated its "buy" rating for Nikola despite news on Monday that executive chairman and founder Trevor Milton resigned. 

"We believe the stock may not fully price in successful execution of the multi-year growth strategy, which yields earning power of ~$1.6bn EBITDA in 2027E," a team of analysts led by Paul Coster wrote in a Monday note.

The firm is also cutting its 2021 year-end price target for the electric-truck company to $41 per share from $45, to "reflect the risk associated with the resignation."

"We believe the inbound Chairman, a former GM board member, is probably better suited to the next – execution – phase of the company's development," the team wrote. "But Trevor Milton's resignation could weigh on some of the partner and customer relationships he has forged, and employee morale is probably fragile right now, just as the workload is intensifying and competitive threat looms."

Read more: 5 commercial real-estate investors who are raising billions lay out which strategies are heating up after a major market upheaval

Nikola tumbled as much as 30% after the Monday opening bell. 

The analysts wrote that Nikola is currently a "story stock," but they are "on board" so long as the company executes to plan, and providing that the stock offers a favorable risk-reward trade-off. 

The JPMorgan analysts also said that they may become less constructive on Nikola if Milton sells his own stock in the company. The Nikola founder owns roughly one-quarter of the company's approximately 380 million shares outstanding, according to a mid-September Securities and Exchange Commission filing.

Read the original article on Business Insider

UBS breaks down what Ruth Bader Ginsburg’s death means for the healthcare sector’s future

Ruth Bader Ginsburg
Supreme Court Justice Ruth Bader Ginsburg.
  • A team of UBS investment strategists said that the passing of Ruth Bader Ginsberg will increase uncertainty within the healthcare sector, though they still list it as "moderately preferred" in their broader sector allocation. 
  • Their analysis rests on the outcome of a Supreme Court decision involving the constitutionality of the individual mandate component of the ACA. 
  • Depending on the future of the Supreme Court, this mandate could continue or be completely struck down. 
  • This uncertainty will likely weigh on valuations for managed care companies, said UBS.

A team of UBS investment strategists said that the passing of Supreme Court Justice Ruth Bader Ginsburg will increase uncertainty for healthcare stocks, but they still list the sector as "moderately preferred."

Much of their analysis rests on the uncertainty surrounding the future of one specific healthcare policy: the individual mandate component of the Affordable Care Act. 

The Supreme Court is scheduled to hear oral arguments in a case that involves the constitutionality of the mandate on November 10. UBS said that the various outcomes for the decision increase uncertainty within the healthcare sector. And, while it's too early to predict what the new Supreme Court will look like, "the heightened uncertainty will likely weigh on valuations for managed care companies," they said. 

"Still, with the sector trading at its lowest valuation relative to the market in at least 25 years, we think a good deal of uncertainty is already priced into the sector," UBS added. "This policy uncertainty should begin to lift within the next year, and we therefore continue to rate the sector moderately preferred within our US sector allocation." 

Read more: Tony Greer made 5x his money with an early investment in Apple. The macro investor and ex-Goldman Sachs trader provides an inside look into his trading tactics, and shares his top 3 ideas right now.

If a new justice is seated before the election, the mandate will likely be struck down, "potentially dismantling the ACA," according to UBS. If Trump nominates a justice but they are not seated before the election, the court will be deadlocked at a 4-4 decision, and the appeals court will likely declare the mandate unconstitutional, or the court will decide the case at a later date. If Democratic presidential nominee Joe Biden wins the election and fills the court, the mandate is likely to survive, UBS said. 

The team also mentioned that potential shifts in health policy under a new Supreme Court may lead to volatility within the broader healthcare sector.

The Health Care Select Sector SPDR Fund (XLV) is down more than 3% Monday, and has increased roughly 11% over the last 12 months. The broader S&P 500 is up roughly 9% over the same time period.

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5 ways investors should position their portfolios for the coming months, according to the world’s largest wealth manager

wall street coronavirus
  • Mark Haefele — chief investment officer at UBS Wealth Management, which oversees $1.4 trillion in assets — highlighted five ways investors can position their portfolios for the uncertain months ahead.
  • While the timeline for a vaccine is unknown, Haefele expects an economic recovery next year and said now is the time for investors to pivot into stocks that will benefit.
  • He also said that opportunities can be found in gold and sustainable investments.
  • Investors waiting for a large correction to dive into the market may be disappointed, Haefele said, especially if a vaccine is announced sooner than expected.
  • Visit Business Insider's homepage for more stories.

With a blurred vaccine timeline and uncertain US election ahead, portfolio construction can be intimidating.

But Mark Haefele — chief investment officer at UBS Wealth Management, which oversees $1.4 trillion in assets — says investors holding cash on the sidelines and waiting for a large correction "run the risk of disappointment," particularly if a vaccine arrives sooner than expected.

In a recent note to clients, Haefele broke down five pro-active measures investors can make now to position portfolios for coming months.

(1) Take advantage of upcoming volatility 

Although Haefele expects near-term volatility, he's confident about the longer-term trajectory for the economy and said that investors should "put excess cash to work straight away."

Cautious investors can use near-term volatility to build up positions for the long term. This can be done through a "disciplined phasing-in strategy," or through options or structured solutions.

Read more: A 'disturbing new all-time low' in the market just flew under the radar as stocks hit record highs — and one Wall Street expert warns it implies years of bleak returns for young investors

(2) Position for a rotation into values and cyclical stocks 

The economic rally will broaden beyond the growth and mega-cap tech names that have dominated the market recently, said Haefele.

While he said the timing of the rally is uncertain, he thinks now is the right time for investors to look to position into areas like US mid-caps stocks, emerging-market value stocks, and global industrials. 

(3) "Hunt for yield"

Investors will need to work especially hard to find yield in an environment of record-low interest rates. One strategy is to seek income generation with high-dividend paying stocks, said Haefele.

Outside of equities, Haefele said US dollar-denominated emerging-market sovereign bonds, green bonds, and Asian high-yield bonds provide opportunities for yield.

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here's an inside look at the strategy that propelled him to millionaire status before age 25.

(4) Find opportunities in commodities

Haefele also said that broad commodity indexes will rise in the months ahead, and cyclical commodities will rise as the economy begins to recover. He added: "Gold also continues to look attractive in a portfolio context in an environment of negative real interest rates and elevated geopolitical uncertainty."

(5) Invest in sustainability 

As economies recover from the pandemic they will spend more on "green initiatives," said Haefele. Investors can gain exposure to sustainability by investing in multilateral development bank or green bonds, or investing in stock themes that align with the UN Sustainable Development Goals, he added.

Read more: Jefferies handpicks the 17 best stocks spanning multiple sectors to buy now — and details why each company's future looks 'particularly attractive,' even in a downturn

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‘We need to appeal to the Gen Z-ers’: A Fidelity fund manager overseeing $230 billion explains how his firm is responding to the Robinhood revolution — and laments selling out of Tesla

William Danoff
  • Will Danoff, manager of the $230 billion Fidelity Contrafund, told Bloomberg that there's a "demographic issue" for mutual funds: Gen Z is not very interested in owning them. 
  • "We need to appeal to the Gen Z-ers and the younger generation as well," Danoff said.
  • Danoff also lamented selling a large portion of the fund's Tesla stake.
  • Visit Business Insider's homepage for more stories.

Will Danoff has managed the Fidelity Contrafund for over 30 years, but he hasn't seen anything like the "demographic issue" facing mutual funds right now, he told Bloomberg in a recent interview.

He was referring to the rise of day-trading activity from young market participants, which has thrown many traditional money managers for a loop.

"We need to appeal to the Gen Z-ers and the younger generation as well, and luckily I think our app is quite good," Danoff said. "But you know, a typical Gen Z-er may not be as interested in owning a mutual fund."

Danoff's mutual fund has beaten the S&P 500 benchmark by an average of more than three percentage points annually for the last 30 years, according to Bloomberg. But he said outperforming the market is "much more competitive now," given the thousands of investment options available.

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here's an inside look at the strategy that propelled him to millionaire status before age 25.

"When I started in 1990 there were 260 equity funds, now there are thousands," he said. "There are thousands of hedge funds. There are millions of robinhood investors." 

In terms of what the Fidelity Contrafund is looking to invest in now, Danoff said it's looking more closely at companies that have a strong environmental, social, and governance (ESG) component.

"Companies that I'm invested in care deeply about our country," he said. "They care deeply about the environment and they realize making all stakeholders happy is good for business." 

Read more: A 'disturbing new all-time low' in the market just flew under the radar as stocks hit record highs — and one Wall Street expert warns it implies years of bleak returns for young investors

Danoff also said the fund is heavily invested in work-from-home beneficiaries, while he has not made a large bet on industries that have been hit hardest by the pandemic like airlines and hotels.  

With regards to Tesla, he said that the Contrafund sold a large portion of its stake in 2017 and 2018 amid short-term profitability concerns. Danoff now laments the divestiture.

"Elon Musk is a remarkable executive, he's a super smart man, and I should not have cut back," he said, predicting that in 10 years from now all new cars may be electric vehicles or hybrids.

He concluded: "At some point hopefully I'll be able to buy back the stock. I own a very small position now but I wish I owned more."

Read more: Jefferies handpicks the 17 best stocks spanning multiple sectors to buy now — and details why each company's future looks 'particularly attractive,' even in a downturn

Read the original article on Business Insider

‘We need to appeal to the Gen Z-ers’: A Fidelity fund manager overseeing $230 billion explains how his firm is responding to the Robinhood revolution — and laments selling out of Tesla

William Danoff
  • Will Danoff, manager of the $230 billion Fidelity Contrafund, told Bloomberg that there's a "demographic issue" for mutual funds: Gen Z is not very interested in owning them. 
  • "We need to appeal to the Gen Z-ers and the younger generation as well," Danoff said.
  • Danoff also lamented selling a large portion of the fund's Tesla stake.
  • Visit Business Insider's homepage for more stories.

Will Danoff has managed the Fidelity Contrafund for over 30 years, but he hasn't seen anything like the "demographic issue" facing mutual funds right now, he told Bloomberg in a recent interview.

He was referring to the rise of day-trading activity from young market participants, which has thrown many traditional money managers for a loop.

"We need to appeal to the Gen Z-ers and the younger generation as well, and luckily I think our app is quite good," Danoff said. "But you know, a typical Gen Z-er may not be as interested in owning a mutual fund."

Danoff's mutual fund has beaten the S&P 500 benchmark by an average of more than three percentage points annually for the last 30 years, according to Bloomberg. But he said outperforming the market is "much more competitive now," given the thousands of investment options available.

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here's an inside look at the strategy that propelled him to millionaire status before age 25.

"When I started in 1990 there were 260 equity funds, now there are thousands," he said. "There are thousands of hedge funds. There are millions of robinhood investors." 

In terms of what the Fidelity Contrafund is looking to invest in now, Danoff said it's looking more closely at companies that have a strong environmental, social, and governance (ESG) component.

"Companies that I'm invested in care deeply about our country," he said. "They care deeply about the environment and they realize making all stakeholders happy is good for business." 

Read more: A 'disturbing new all-time low' in the market just flew under the radar as stocks hit record highs — and one Wall Street expert warns it implies years of bleak returns for young investors

Danoff also said the fund is heavily invested in work-from-home beneficiaries, while he has not made a large bet on industries that have been hit hardest by the pandemic like airlines and hotels.  

With regards to Tesla, he said that the Contrafund sold a large portion of its stake in 2017 and 2018 amid short-term profitability concerns. Danoff now laments the divestiture.

"Elon Musk is a remarkable executive, he's a super smart man, and I should not have cut back," he said, predicting that in 10 years from now all new cars may be electric vehicles or hybrids.

He concluded: "At some point hopefully I'll be able to buy back the stock. I own a very small position now but I wish I owned more."

Read more: Jefferies handpicks the 17 best stocks spanning multiple sectors to buy now — and details why each company's future looks 'particularly attractive,' even in a downturn

Read the original article on Business Insider

Mohamed El-Erian warns that stocks could tank if the Fed’s liquidity ‘engine’ stops running, cites disconnect between prices and fundamentals

mohammed el erian.JPG
  • Economist Mohamed El-Erian says markets may falter as the Fed's liquidity "engine" becomes less and less powerful, and as investors begin to challenge elevated valuations. 
  • "If that engine disappears, we have a long way between where asset prices are right now and where fundamentals will validate them," he told Bloomberg TV. 
  • In a separate op-ed for Bloomberg, El-Erian said economic and corporate fundamentals must improve for valuations to be sustained.
  • Visit Business Insider's homepage for more stories.

Renowned economist Mohamed El-Erian says the stock market faces downside risk as the Fed's liquidity "engine" becomes less and less powerful. He also sees the possibility of a dip if more investors start to question whether sky-high valuations can be validated by fundamentals.

"Where we go from here is going to continue to be liquidity driven, if that engine disappears, we have a long way between where asset prices are right now and where fundamentals will validate them," he said in an interview with Bloomberg TV on Friday.

El-Erian detailed how, since Wednesday's FOMC meeting, there have been signs that investors are "less comfortable about the effectiveness of Fed liquidity," and as a result of that, "more willing to challenge pretty elevated valuations." 

In a separate Bloomberg op-ed published before the interview, El-Erian warned that the Fed has injected liquidity into markets not only through policies, but by sparking a fear-of-missing-out mindset for investors. 

"The Fed's repeated support for financial markets has engendered a deep 'buy-the-dip' investor conditioning and a prominent FOMO mindset," he wrote.

Read more: Jefferies handpicks the 17 best stocks spanning multiple sectors to buy now — and details why each company's future looks 'particularly attractive,' even in a downturn

Now that the Fed isn't meeting for the next two months, El-Erian expects "more skeptical investors may now feel more comfortable to challenge valuations."

For these valuations to be sustained, more economic improvement and stronger corporate fundamentals are necessary, wrote El-Erian.

Citing Thursday's mildly improving jobless claims, he said: "The economic recovery continues but at a space that is too slow relative both to what's possible and what's needed."

"Unless Congress steps up to the responsibility of taking timely action to support both the demand and supply side of the economy...the risk increases of a missed market hand-off from previously strong but fading liquidity to what's urgently needed also for economic and social well-being: A strong lasting and inclusive recovery," El-Erian wrote. 

Read more: Goldman Sachs says oil prices are set to move 'meaningfully higher' into next year. Here are 7 reasons why the firm is bullish, and 5 stocks it recommends buying in advance

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DraftKings soars 10% amid exclusive New York Giants deal, and with Big 10 football set to resume

FILE - In this May 2, 2019, file photo, the DraftKings logo is displayed at the sports betting company headquarters in Boston. Sports daily fantasy and betting website DraftKings will debut as a publicly traded company Friday, April 24, 2020, against a backdrop of a near-complete shutdown of athletic competition across the globe due to the coronavirus pandemic. (AP Photo/Charles Krupa, File)
  • DraftKings surged as much as 10% on Wednesday following the announcement of an exclusive partnership with the New York Giants.
  • The stock also moved as the Big 10 Conference announced plans to commence its previously postponed football season in October.
  • The jump notched another record intraday high for the sports betting company, which has gained roughly 400% since the start of 2020.
  • Watch DraftKings trade live here.

DraftKings surged as much as 10% on Wednesday after signing an exclusive partnership with the New York Giants. The gain also came amid news that the Big 10 Conference restored plans to start its football season, which will begin in October.

The jump notched another record intraday high for the sports betting company, which is up roughly 400% since the start of 2020.

DraftKings will be the Giants' official sports betting partner and Daily Fantasy operator, with access to the team's trademarks, logo, and exclusive digital gaming rights.

The Big Ten Conference reversed its decision on Wednesday to postpone the college sports season due to COVID-19. The conference said football will start the weekend of Oct. 23 and 24. 

DraftKings' competitor Penn National Gaming increased 4% at intraday highs on Wednesday following the Big 10 announcement. 

Read more: A Wall Street firm says investors should buy these 15 cheap, high-earning stocks now to beat the market in 2021 as more expensive companies fall behind

Screen Shot 2020 09 16 at 2.50.40 PM

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Goldman’s global stock chief says tech investors should expand beyond the usual mega-cap favorites and focus on these 3 specific areas


NYSE-AMEX Options floor traders from TradeMas Inc. work in an off-site trading office built when the New York Stock Exchange (NYSE) closed, due to the outbreak of the coronavirus disease (COVID-19), in the Brooklyn borough of  New York City, U.S., March 26, 2020. REUTERS/Brendan McDermid
  • Peter Oppenheimer — the chief global equity strategist at Goldman Sachs — said in a Bloomberg interview that investors should diversify out of popular mega-cap tech names and consider three new areas within the sector: medical tech, educational tech, and environmental tech. 
  • He said that the new bull market we're in right now will be driven by large tech firms, similar to the prior instance, as digital revolution disrupts the nature of many "traditional businesses."
  • Oppenheimer also said the traditional 60/40 portfolio is likely to generate "very low return."
  • Visit Business Insider's homepage for more stories.

Investors with all of their holdings concentrated in mega-cap tech stocks may want to diversify into three specific areas within technology that are likely to grow during this new bull market phase, according to Goldman Sach's Peter Oppenheimer.

The chief global equity strategist told Bloomberg on Wednesday the new cycle we're in will continue to be dominated by technology and growth companies, but investors should "look at how technology is evolving," and broaden their stock portfolios accordingly.

Oppenheimer listed medical, educational, and environmental technology as three specific areas that investors can use to diversify. he pointed to Europe's Green New Deal plan to emphasize that environmental technology is likely to "be a really significant theme over the next ten years or so." 

Read more: Legendary options trader Tony Saliba famously put together 70 straight months of profits greater than $100,000. Here's an inside look at the strategy that propelled him to millionaire status before age 25.

The continued domination of technology is consistent with the ongoing shift to more negative real interest rates and a result of how technology companies are disrupting traditional businesses as the digital revolution continues, he added.

"Strategically we're in a new bull market phase, but the secular trend is probably likely to be quite similar in terms of leadership," Oppenheimer said.

He also noted that continued low interest rates are pushing investors away from the traditional 60/40 portfolio.

"A 60/40 equity, bond mix has generated one of the longest and strongest bull markets in history, and a good chunk of that, given that we're at the zero bound, is likely to generate a very low return, if not a zero return," Oppenheimer said. "So moving up the risk curve is partly what these policies are doing."

Read more: MORGAN STANLEY: Buy these 6 stocks poised for gains as the economic recovery continues and Congress mulls more coronavirus stimulus

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Billionaire investor Ray Dalio warns the US is in a period of ‘great risk’ — and says the most important thing investors can do is diversify

Ray Dalio

 

  • Billionaire investor Ray Dalio told Bloomberg that the US is in a period of "great risk" because of rising deficits and the uncertainty around the upcoming US election. 
  • The most important thing investors can do to manage this risk is to diversify their portfolios by asset class, country, and currency, he said. 
  • "Diversification is a wonderful, mechanical, good way to reduce risk without reducing expected return," the founder of Bridgewater Associates added.

Ray Dalio told Bloomberg on Tuesday that the US is currently in a period of "great risk" because of rising deficits and the upcoming election, and the most important thing for investors will be to know how to diversify well.

The founder of Bridgewater Associates said if there's no clear winner of the election and no agreed-upon way for concluding the winner, "you could start to see bad things happening."

A situation where "power politics" and different states get involved could become an "extreme risk," he added. "It exists as a possibility. I'm not saying what the probability is, but it's a major thing."

Dalio added that in either outcome of the election, there will be "very large deficits going forward."

Read more: MORGAN STANLEY: Buy these 6 stocks poised for gains as the economic recovery continues and Congress mulls more coronavirus stimulus

The most important thing investors can do to manage this risk is to diversify by asset class, country, and currency, Dalio said. He suggested gold and inflation-indexed bonds as good diversification tools, and suggested more global holdings for investors with all their assets in the US.  

The investor who founded the world's largest hedge fund added that diversification can be achieved with no costs.

"Diversification doesn't cost you anything. Because when your asset classes are going to — if you balance them right — have approximately equal expected risk-adjusted returns, so you can balance them, because they all compete with each other, so not one is necessarily clearly better," he said.

He added: "Diversification is a wonderful, mechanical, good way to reduce risk without reducing expected return." 

And investors shouldn't subscribe to the "dangerous bias" that the past is representative of the future, he said. "If you go through history, when you have some of these conflicts, you might have a different result."

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