Not every sector of the market is a longer-term buy even with stocks continuing to be on autopilot, warn strategists at Goldman Sachs.
Some of the worst stocks to own in a U.S. economy trying to claw back from the COVID-19 pandemic are those with high exposure to tight labor markets, which runs the risk of pressuring profit margins as wages are hiked.
“Labor market tightness will remain a challenge during the next few years. Investors should avoid stocks with high labor costs relative to EBIT [earnings before interest and taxes],” says David Kostin, Goldman Sachs chief U.S. equity strategist, in a new research note to clients.
Several of the companies that fall under this category, per Goldman’s analysis includes IBM (IBM), Raytheon (RTX), HCA Healthcare (HCA), FedEx (FDX) and Dollar General (DG).
On the other hand, Kostin and his team think reopening stocks with cyclical exposure are the better bet at the moment.
Explains Kostin, “While virus counts are now rising and weighing on reopening stocks, as the winter wave passes, declining virus and inflation headwinds should provide a near-term boost to corporate revenues and margins for the businesses most exposed to these challenges.”
Companies such as Best Buy (BBY), Home Depot (HD), Lowe’s (LOW), D.R. Horton (DHI), KB Home (KBH) and Lennar (LEN) appear positioned for a cyclical upswing, points out Kostin.
In the near-term, however, both high labor exposure stocks and reopening stocks may work well for investors as markets digest recent Federal Reserve news.
Monday morning, President Biden renominated Powell as Fed chief, ending weeks of speculation on the topic. Biden also nominated Lael Brainard to the position of vice chair. Both are seen as monetary policy doves by market participants, hinting the Fed may be inclined to push off interest rate hikes in 2022 even with inflation remaining elevated.
In turn, that would be good for valuation multiples.
Stock markets soared on the news, with the Dow Jones Industrial Average rising by more than 300 points at one point early in Monday’s session.
“With the Fed on hold until mid-year 2022 and bond yields below 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, equities will remain the asset of choice for both institutional and retail investors,” contends Kostin.
The closely watched strategist sees the S&P 500 hitting 5,100 by the of 2022, up about 10{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from current levels.
Saule Omarova, President Joe Biden’s , sketched out the possibility of “scary” scenarios emerging in cryptocurrency, but faced a mix of skepticism and agreement from senators on her views.
During her appearance before the Senate Banking Committee on Thursday, Omarova — who is being vetted to be the next Comptroller of the Currency, which regulates the majority of the nation’s banks — voiced concerns that large tech companies could control the payment infrastructure in the U.S. if private digital currencies are allowed to thrive, potentially displacing the value of the U.S dollar.
“I’m struggling with your view about digital assets,” Senator Cynthia Lummis (R-WY) told Omarova at the hearing.
When asked by the senator whether she only believes in fiat currency, Omarova replied, “No … My concern is … we may end up in a situation where a large company like a big tech company might control all of the infrastructure through which the money that every American and every American business uses in their daily moves.”
Omarova agreed with Rhode Island Democrat Jack Reid, who posed a scenario in which Facebook designs a digital currency that overtakes the U.S. dollar making the dollar something that can’t be used to regulate our economy.
“National banks would not need a charter, they would just need to get a franchise from Facebook, is that right?” Reid asked.
“That’s correct,” the nominee replied. “This is the scary scenario everyone should take seriously these days.”
Omarova said she worried that embracing private cryptocurrencies could make it harder for the U.S. dollar to remain dominant — a concern .
“My concern is that in the system where a lot of private actors like Facebook can issue their own version of currency, that can potentially outpace and even displace the U.S. dollar,” Omarova told senators.
That could have “implications far beyond what we typically consider in the banking sphere, but might also undermine our sovereignty and the value of the dollar,” she added.
Keep the dollar dominant
WASHINGTON, DC – NOVEMBER 18: Chairman Sen. Sherrod Brown (D-OH) listens during Dr. Saule Omarova’s nomination hearing to be the Comptroller of the Currency with the Senate Banking, Housing and Urban Affairs Committee on Capitol Hill on November 18, 2021 in Washington, DC. Senators questioned Omarova about her views and past comments on bank oversight. (Photo by Anna Moneymaker/Getty Images)
Omarova stated the new technologies offer a lot of potential benefits for better efficiency of payment and transactions as well as financial inclusion. Still, “it does raise a lot of issues with regard to the ability of our nation to maintain the dominant status of the U.S. dollar in the global economy.”
She argued the reason the dollar has retained its dominant status is because the Federal Reserve has been able to maintain the value of the dollar and maintain the money supply in the economy.
When asked by Lummis whether she thought Bitcoin () threatens national security, Omarova said she’s not an expert in bitcoin, but worried that if all U.S. financial transactions were part of a blockchain system. Various actors might be acting in the interest of the U.S. could take control of the system, she suggested.
Omarova added that she worried private companies are pursuing profits, which may cut into the public interest by not allowing equal access to money for everyone.
“I do believe we have government issued money now in this country and it’s working great and I worry about allowing private innovation to undermine a lot of important public policies we need to pursue,” said Omarova.
While she worries about private currencies, Omarova says she favors a over privately issued stablecoins because it’s issued by the government and will ensure access for everyone.
“The one potential advantage of CBDC over privately issued stablecoins is that it will be issued subject to statutory mandate legal decisions made by democratically elected lawmakers,” Omarova told the committee.
“So that will allow the central bank under the oversight of congress to ensure everyone has fair access to new forms of money,” she added.
Read the latest financial and business news from Yahoo Finance
Read the latest cryptocurrency and bitcoin news from Yahoo Finance
Amazon (AMZN) CEO Jeff Bezos is no longer the richest person in the U.S. That honor now goes to Elon Musk.
Musk, the CEO of both SpaceX and Tesla (TSLA), holds a net worth of a whopping $299 billion. Formerly a resident of California, Musk relocated to Texas this year, also making him the richest resident of the state. He stated that his reason for moving was due to Texas having no income tax while California’s is the highest in the country.
Tesla CEO Elon Musk talks during a tour of the plant of the future foundry of the Tesla Gigafactory on August 13, 2021 in Grünheide, Germany. (Photo by Patrick Pleul/Getty Images)
Meanwhile, with a net worth of $204 billion, Bezos is still the richest person in the state of Washington. The Amazon founder has garnered criticism over the years, especially after it was revealed that between 2014 and 2018, he paid a true tax rate of only 0.98{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Taking the top spot formerly held by Musk in California is now Meta (FB) CEO Mark Zuckerberg, who has a net worth of $127 billion.
There are some newer names to the list of the richest people in each U.S. state. Following the death of her husband Sheldon, Miriam Adelson became the richest person in the state of Nevada as the majority shareholder in Las Vegas Sands (LVS), a company that Sheldon formerly led. Adelson’s net worth is currently $27.2 billion.
Other new names include Philip Anschutz of Colorado ($14.5 billion); Mitchell Rales of Maryland ($9.14 billion); Rocco Commisso of New Jersey ($9.52 billion); Ron Corio of New Mexico ($1.1 billion); George Kaiser of Oklahoma ($10.6 billion); and Jeff Yass of Pennsylvania ($12 billion).
Some of the richest people in their respective states aren’t even billionaires. Such is the case of current West Virginia governor, Jim Justice II. The Republican politician lost his billionaire status after it was revealed he holds more than $850 million in debt to a now insolvent financial services company. His current net worth is estimated to be around $513.3 million.
Several sports team owners made the list. Gayle Benson, the owner of both the New Orleans Saints and the New Orleans Pelicans, is the richest person in Louisiana with a net worth of $3.8 billion. Glen Taylor, the owner of the Minnesota Timberwolves and Minnesota Lynx, is the richest person in Minnesota with $2.7 billion to his name. And Daniel Gilbert, the owner of the Cleveland Cavaliers, is the richest person in Michigan with a net worth of $28.8 billion.
Nov 7, 2021; New Orleans Saints owner Gayle Benson smiles during the first quarter of their game against the Atlanta Falcons at the Caesars Superdome. (Chuck Cook-USA TODAY Sports)
Founders and CEOs were the most common occupations among members of the list, however. Warren Buffett, the CEO of Berkshire Hathaway (BRK-A, BRK-B), is one of them. With a net worth of $103 billion, he’s the richest person in the state of Nebraska.
In Kansas, Koch Industries CEO Charles Koch is by far the richest resident with $60.6 billion to his name. Fidelity CEO Abigail Johnson is Massachusetts’ richest resident with a net worth of $27.1 billion.
And in Oregon, Nike (NKE) Co-founder Phil Knight’s $64.2 billion makes him the richest person in the state.
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at adriana@yahoofinance.com.
Read the latest financial and business news from Yahoo Finance
Additional than 300 lawsuits totaling a staggering $3 billion have been submitted around the Astroworld catastrophe on November 5 that eventually claimed the lives of 10 people today.
Most a short while ago, Live Nation (LYV) and Apple (AAPL), along with rapper and headliner Travis Scott, were sued for $2 billion by hundreds of concertgoers who allege they had been hurt at the fatal event at NRG Stadium, where concertgoers surged towards the phase through Scott’s general performance, sparking lethal mayhem.
“The ensuing catastrophic incident and carnage ended up simply foreseeable and preventable experienced the Defendants acted in a reasonably prudent way in organizing a huge-scale competition like Astroworld,” the lawsuit browse. However, authorized industry experts have doubts about no matter if the artist himself will be held financially liable for the fatalities.
“I consider it’d be a extend to set this on [Travis Scott],” Nick Rozansky, lawyer at Brutzkus Gubner Rozansky Seror Weber, advised Yahoo Finance.
In the meantime, a different fit (submitted Tuesday by Houston lawyer Tony Buzbee) is searching for a lot more than $750 million in damages on behalf of 125 victims. Scott was once all over again named in the criticism, alongside with fellow rapper Drake, who done as a surprise visitor.
In accordance to the complaint, Scott’s earlier steps and social media posts “[glorify] violence and other risky behaviors” while Drake “was perfectly mindful of the destruction [Scott] had brought on at his demonstrates in the previous.” For context, Scott was arrested in 2015 soon after encouraging fans to storm the stage at Lollapalooza. He was sentenced to just one year of court supervision ahead of getting arrested once more in 2017 on suspicion of commencing a riot even though carrying out in Arkansas.
Also, Houston Fire Chief Samuel Peña reported Scott “absolutely” must have stopped the demonstrate as soon as he noticed the group surge, saying in the course of an NBC ‘Today’ demonstrate interview that “every person at that celebration has a obligation, starting off from the artist on down.”
Travis Scott, Dwell Country, Apple and Epic Records did not promptly reply to Yahoo Finance’s request for comment.
‘Not enough’ to keep up in courtroom
HOUSTON, TEXAS – NOVEMBER 09: A female walks earlier a memorial to those who died at the Astroworld pageant outside of NRG Park on November 09, 2021 in Houston, Texas.
According to Bryan Sullivan of Early Sullivan Wright Gizer & McRae, although “hypothetically an artist can be held potentially liable,” that does not appear to be to be the situation with Scott.
The lawyer even more spelled out that the rapper would have had to incite the violence through some kind of immediate motion. Under this standards, Scott’s name, lyrics, earlier habits and authorized troubles are “not adequate” to maintain up in court docket, Sullivan said.
“You can be a pretty violent human being in an location the place there was a struggle, but not have thrown a punch,” he told Yahoo Finance.
“The legislation requires him to engage in unique carry out that incited the incidents…What did he do at Astroworld that evening? That is the query the courts will be inquiring,” he continued — surmising that Scott “probable will be dismissed from the scenario” barring no damning allegations arrive to light.
Rozansky stated the fiscal burden most most likely will drop on the protection enterprise and event promoters like Dwell Country and ScoreMore, but anticipated extra “finger pointing” ahead.
“It truly is not unheard of for all of the defendants to get started suing just about every other for identity and contribution if they are located liable,” the lawyer noted.
Much more fallout in advance for Scott
HOUSTON, TEXAS – NOVEMBER 05: Travis Scott performs during 2021 Astroworld Competition at NRG Park on November 05, 2021 in Houston, Texas. (Photograph by Erika Goldring/WireImage)
Although Scott probable will never be held economically dependable for Astroworld, there could be much more fallout forward for the 30-year-aged — particularly when it arrives to future performances and brand name offers.
Sullivan spelled out that if he have been advising a consumer on danger administration he’d be hesitant to propose Scott as a performer or headliner “just simply because of who he is.”
Alternatively, if Scott have been to execute, the attorney reported there’d probable be “a reallocation of the hazard” — including that any added safety element or particular insurance policies would have to come out of the rapper’s pocket.
“All of all those fees would be reallocated to Travis in the negotiations of the deal,” Sullivan claimed.
Already, big manufacturers affiliated with Scott have started to length by themselves from the controversy, suggesting Scott may well now be having to pay a money penalty of kinds for the tragedy.
Nike (NKE), performing “out of respect” for individuals affected by Astroworld, postponed the launch of its Travis Scott shoe collaboration.
HOUSTON, TEXAS – NOVEMBER 09: A general See of the environment through the next once-a-year Astroworld Festival at NRG Park on November 9, 2019 in Houston, Texas. (Picture by Gary Miller/Getty Photos)
Fatalities at concerts and festivals, though tragic, are not an totally new phenomenon. During 2017, two lethal occasions rocked the songs business: Las Vegas’ Route 91 Harvest Pageant taking pictures where more than 55 people ended up fatally gunned down, and Ariana Grande’s Manchester Arena terrorist bombing which killed 22.
Even now, Sullivan stated these deadly functions had been “very diverse” from Astroworld.
“The concern in this situation is much more, ‘Did the location and promoter take all affordable precaution to stop individuals from receiving damage?’ Essential phrase is fair…did they have enough safety detail to offer with the situation? Did they have ample health-related staff? Did they respond fast enough? Did they allocate enough funding?”
“It all relies upon on the points,” he concluded.
Alexandra is a Producer & Amusement Correspondent at Yahoo Finance. Observe her on Twitter @alliecanal8193
Stock futures pointed to a higher open up Thursday early morning after dropping a day before, as traders gave again some gains as jitters more than inflation remained and overshadowed the most current batch of good corporate earnings results.
Contracts on the S&P 500 gained for the duration of early buying and selling. Though the index ended Wednesday’s session reduce, it remained up by 1.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for November to date, and was much less than .7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} down below its all-time intraday high.
Nvidia (NVDA) shares jumped in pre-sector investing soon after the semiconductor organization posted document quarterly revenues and powerful comprehensive-12 months steerage, suggesting it was successfully navigating a lingering global lack and conference elevated demand. Dow organization Cisco (CSCO), on the other hand, observed final results dented by elements shortages, and the laptop or computer networking equipment company posted a disappointing recent-quarter forecast. Meanwhile, retailer Victoria’s Top secret (VSCO) noticed shares surge soon after providing considerably better-than-envisioned 3rd-quarter income and suggesting gross sales would increase by as a lot as 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in the existing interval.
The broader equity sector fall on Wednesday coincided with a established of new economic knowledge demonstrating a surprise fall in new-home building final month. Commentary about inflation also mounted and included to investors’ worries above elevated cost pressures. Target (TGT) executives flagged growing labor and other input expenses through their earnings simply call on Wednesday and added to a chorus of other business mentions of inflation.
The probability that elevated inflation will adhere all-around lengthier than earlier expected remained a central concentrate for traders, each for its possible dampening outcome on buyer expending, and as a probable catalyst for the Federal Reserve to increase desire fees sooner than beforehand telegraphed. The U.S. central bank has so far managed its accommodative tilt and telegraphed that an preliminary fascination charge hike could choose location sometime future year, depending on the evolution of the economic recovery. Buyers also continue on to await a official announcement from President Joe Biden about his nominee for Fed chair, with the most possible candidates becoming present Fed Chair Jerome Powell, and present Fed Governor Lael Brainard.
The Fed’s present nevertheless-accommodative leaning has served guidance fairness markets and capped Treasury yields, which has in change additional stored traders targeted on riskier property like stocks above bonds.
“The generate query is kind of world-wide in character,” Uma Pattarkine, CenterSquare senior analyst, told Yahoo Finance Are living on Wednesday. “We however see [central] banks becoming quite, really accommodative. So it appears like we may possibly be type of in this ‘lower level for a longer time’ natural environment.
“At this place traders truly require to be on the lookout at yields, the place they can get it elsewhere in the current market if they’re not planning on receiving it through preset revenue in the near upcoming, right up until we see that movement in the world wide level sector,” Pattarkine additional.
—
7:32 a.m. ET Thursday: Stock futures advance
This is wherever markets had been buying and selling Thursday morning:
S&P 500 futures (ES=F): +11.75 factors (+.25{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,696.00
Dow futures (YM=F): +34 points (+.09{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,901.00
Nasdaq futures (NQ=F): +84.25 details (+.52{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 16,395.75
Crude (CL=F): -$.67 (-.84{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $77.69 a barrel
Gold (GC=F): -$4.20 (-.22{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,866.00 for every ounce
10-12 months Treasury (^TNX): -.5 bps to generate 1.599{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
—
6:17 p.m. ET Wednesday: Stock futures open mixed
This is where markets had been buying and selling Wednesday night:
S&P 500 futures (ES=F): +.5 details (+.01{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,686.75
Dow futures (YM=F): -34 details (-.09{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 35,833.00
Nasdaq futures (NQ=F): +18 details (+.11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 16,329.5
A male walks previous the New York Stock Trade on Wall Street on Might 10, 202 in New York City. – Wall Avenue shares were being blended early May possibly 10, 2021 forward of important purchaser price tag and retail income info predicted to affect the outlook for US monetary coverage. Main inventory indices closed at records Friday pursuing a disappointing April work opportunities report that bolstered anticipations the Federal Reserve will continue to keep desire prices reduced for a long period of time of time to guidance the financial restoration. (Photograph by Angela Weiss / AFP) (Picture by ANGELA WEISS/AFP by using Getty Pictures)
We had some serious economic news this month, when October’s inflation rate came in at 6.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} annualized. It was the sixth consecutive month +5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} year-over-year inflation gains – and the highest inflation rate seen in the US since 1990.
Billionaire Ray Dalio, founder of Bridgewater Associates, reminds investors that the worst asset to hold in this environment is cash.
“Some people make the mistake of thinking that they are getting richer because they are seeing their assets go up in price without seeing how their buying power is being eroded. The ones most hurt are those who have their money in cash,” Dalio noted.
Dalio didn’t become as successful as he is by letting inflation degrade his wealth. Aside from keeping out of cash, he also targets his investments. A savvy investor can get a good handle of equities that show the strongest prospect of guarding value by following Dalio’s purchases now.
Looking into Bridgewater’s basket of stocks, we’ve chosen three of the fund’s new holdings that TipRanks reveals as “strong buys” and offer healthy upside potential. Let’s take a closer look and see what Wall Street analysts have to say.
We’ll start in the online payment processing sector, with Global Payments. This company is one of the main competitors to the better-known PayPal, and handles over 50 billion transactions annually for more than 3.5 million customers in over 100 countries. Global Payments operates mainly on the seller side of the transactions, offering its services to merchants and vendors. Services include credit and debit card processing and data analytics.
Global Payments shares have been falling since the spring; the stock peaked above $200 in April, but is down 39{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} since then. At the same time, earnings and revenues in the Q2 and Q3 have shown sequential gains – and management reported the Q3 results as a company record. EPS came in at $2.18 per share, up 27{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} yoy.
However, despite the sound results, the company issued full-year 2021 revenue guidance that fell shy of analyst forecasts. Specifically, the company guided toward $7.71 billion to $7.73 billion, just under the $7.74 billion that Wall Street had expected.
During the third quarter, Global Payments completed its $500 million acquisition of SaaS company MineralTree, a move that will give GPN a foot into the B2B payment market. The MineralTree move was only one that GPN took during September to enhance its footprint. The company also completed an agreement with the UK financial service group Virgin Money to enable a connected payment offering for Virgin Money’s customers. Moreover, GPN was chosen as the official provider of commerce technology at Mercedes-Benz Stadium, the home field of the NFL’s Atlanta Falcons.
Keeping all of this in mind, we can look at Dalio’s purchase of GPN. He’s started a new position in this stock during Q3, totaling 12,021 shares that are now valued at $1.57 million.
This action will not be surprising to Cowen’s 5-star analyst George Mihalos, who highlights several reasons to back the stock.
“GPN has gone from trading at an average ~2x premium to the SPX over the past 4 years (Acquirer Dislocation Opportunity) to a 6x discount presently, despite what we deem as a very achievable long-term outlook (low double-digit organic revenue growth, high-teens to low 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} adj. EPS growth) and hardly a deceleration from pre-pandemic levels. The price action across the sector and to a much lesser extent for the networks, reflects a perception of imminent disintermediation from newer entrants and payment methods,” Mihalos opined.
To this end, Mihalos gives GPN an Outperform (i.e. Buy) rating, and his $228 price target implies room for ~76{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} one-year upside potential. (To watch Mihalos’ track record, click here)
Overall, it’s clear that Wall Street is in broad agreement with Mihalos’ outlook. The stock has 18 reviews, which include 15 Buys and only 3 Holds, for a Strong Buy consensus rating. Shares are priced at $129.69 and the $200.89 average target suggests ~55{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} upside in the next 12 months. (See GPN stock analysis)
We’ve talked a lot about inflation in recent weeks, mostly because the country appears to be hitting a period of inflationary pain that hasn’t been felt since the Carter Administration. But some companies are proving to be mostly immune. Levi Strauss, best known for its blue jeans, is one. A look at the company’s quarterly report will provide some illumination.
Levi Strauss has reported 5 consecutive quarters of positive EPS – a strong recovering from the pandemic-induced negative result in 2Q20. The company’s 48-cent EPS result in 3Q21 was the best in over 2 years. Revenue also delivered; the company reported a top line of $1.5 billion, the best result since 1Q20. Both the revenue and earnings beat Wall Street’s expectations, revenue by a 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} squeaker of a margin, but EPS by a much wider 29{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Management was upbeat, and justly so. The company’s performance in 3Q21 was comparable to, or slightly better than, pre-pandemic 2019 levels. The turnaround was driven in part by the reopening of schools, and a resumption of back-to-school shopping.
So we shouldn’t be surprised, given the company’s strong position, that Dalio has chosen Levis for a new position. The billionaire investor bought a total of 135,430 shares in the jeans company, stake that is now valued at $3.68 million.
Evercore analyst Omar Saad notes another important point – that Levi Strauss has achieved this performance despite the supply chain crunch that has been making unwelcome headlines.
“Fears that supply chain bottlenecks and cost inflation would cause Levi’s to miss sales and earnings expectations and lower guidance (a la NKE and BBBY) proved to be unfounded as the denim juggernaut grew sales 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} (vs. cons +1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), delivered a multi-decade high 14.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} EBIT margin, and raised guidance… Although Levi’s is not immune to broader supply chain challenges (was a 70-bp drag on sales in 3Q and could be 2-3x that in 4Q), the combination of its diversified manufacturing base and newfound pricing power is more than offsetting the inflationary drags,” Saad wrote.
In line with his positive outlook, Saad rates the stock an Outperform (i.e. Buy) and sets a $40 price target that indicates confidence in ~46{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} upside for the year ahead. (To watch Saad’s track record, click here)
Overall, the Strong Buy consensus rating here is unanimous, based on 5 recent positive reviews. The shares are priced at $27.42 and their $37.25 average target implies a one-year upside potential of ~36{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from that level. (See LEVI stock analysis)
We’ll wrap up with a shift in focus, to the automotive industry. The double whammy of inflation and supply chain problems have been putting strong upward pressure on automotive prices. Manufacturers are having trouble meeting demand due to shortages of semiconductor chips, dealers are having trouble filling their lots, due to lower production and delayed deliveries, and today’s used car prices are starting to look like new car sticker prices from 2015.
That’s the background to remember when we look at Lithia Motors, the third largest automotive retailer group in the US. The Oregon-based company sells both new and used vehicles through a network of locations in the US and Canada. Lithia’s network includes 264 dealerships selling 34 automotive brands. Vehicles in stock include 34,793 used vehicles and 18,485 new vehicles.
The immediate effect of inflation on Lithia has been to push up revenues. Automobile prices are up – way up. Used cars have seen a 45{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} increase, while new cars are averaging $42,000. This can be seen in Lithia’s Q3 revenue, which grew 70{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} yoy to reach $6.2 billion. EPS came in at $10.11, up 47{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} yoy. Counting cash and available credit, the company claimed $1.7 billion in available liquidity at the end of the quarter. Earnings and revenue beat the Wall Street estimates; EPS by 14{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} margin and revenue by a narrower 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.
Ray Dalio was suitably impressed, and opened up his position on this stock with 7,537 shares. Due to the high share price, these shares are now worth $2.45 million.
Among the bulls is Guggenheim’s 5-star analyst Ali Faghri, who rates LAD a Buy along with a $542 price target. This figure implies share appreciation in the next 12 months of ~64{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. (To watch Faghri’s track record, click here)
Backing his stance, Faghri noted, “LAD reported 3Q results well above expectations in a tough environment amid significant new vehicle inventory shortages. We came away even more bullish on the outlook and reiterate LAD as our Best Idea… LAD’s outperformance continues to highlight its sourcing advantages and that of its franchise dealer peers, given their access to the trade-in and off-lease channels which gives the group a structural advantage compared to standalone used car dealers which rely heavily on auction.”
Once again, we’re looking at a stock with a unanimous Strong Buy consensus, supported by 4 positive stock reviews. The average price target of $505.75 implies a one-year upside of ~53{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} from the current trading price of $329.63. (See LAD stock analysis)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
