Sector Strategies

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>>> 3 Nuclear Energy Stocks to Buy and Hold Forever


Zacks

by Benjamin Rains

Aug 23, 2024


https://finance.yahoo.com/news/3-nuclear-energy-stocks-buy-110000268.html


Today’s episode of Full Court Finance at Zacks explores nuclear energy’s rapid rise and why nuclear energy is poised to become one of the most important industries in the economy and on Wall Street.

The episode dives into three nuclear energy-focused stocks—Rolls-Royce (RYCEY), BWX Technologies, Inc. (BWXT), and Constellation Energy (CEG)—that investors might want to buy now and hold for long-term upside.

Nuclear energy has become one of the hottest industries on Wall Street over the last year as investors realize its ability to power the growing global economy as the world attempts to curb fossil fuel use. On top of that, the energy-hungry artificial intelligence arms race sparked technology giants such as Amazon, Microsoft, and many others to commit to nuclear energy expansion and innovation.

Two of the top six performing S&P 500 stocks so far this year are nuclear energy companies. The buildout of the nuclear-powered economy will cost tens of trillions of dollars and take decades, even though nuclear energy has supplied around 20% of U.S. electricity for over 30 years running (and 10% of the current global total).

The U.S. and many other nations have done a 180-degree turn on nuclear energy technology over the last few years as key players across technology, finance, the government, and beyond finally throw their collective force behind nuclear energy. The U.S. government has rolled out multiple efforts to support the nuclear energy resurgence and pledged to help triple global nuclear energy capacity by 2050.

Outside of the U.S., China, India, and tons of other key economies are going all in on nuclear. Investors are pouring money into the largest nuclear power producers, uranium (nuclear fuel) miners, and other standout players.

Now let’s look at our three nuclear energy stocks to consider buying now.

Rolls-Royce (RYCEY) is a historic engine maker of complex power and propulsion solutions for aircraft, ships, and beyond. Rolls-Royce is utilizing its expertise in nuclear propulsion systems to design cutting-edge small modular nuclear reactor (SMR) technology and micro-reactors. Rolls-Royce’s SMR tech is making its way through the approval process to be rolled out in the U.K.

Rolls-Royce will be able to achieve these lofty nuclear energy goals because it is successfully revamping and streamlining its business to boost profitability after a disappointing decade.

Former oil industry executive Tufan Erginbilgic took over as CEO in January 2023, aiming to quadruple Rolls-Royce’s profits in the next five years and complete other key initiatives. Rolls-Royce raised its full-year guidance on August 1 and said it plans to reinstate its dividend.

Rolls-Royce is projected to grow its adjusted earnings by 35% in FY24 and 19% in FY25 on the back of 30% and 7%, respective revenue expansion.

Rolls-Royce’s recent upbeat EPS revisions help it earn a Zacks Rank #2 (Buy) and extend its impressive run of positive EPS revisions over the past year and a half.

Rolls-Royce stock soared over 750% off its 2022 lows, including its 155% YTD surge. Rolls-Royce stock hit new 52-week highs of $6.50 a share on Thursday. Despite the climb, Rolls-Royce trades 34% below its average Zack price target and 70% below its all-time highs.

On the valuation front, Rolls-Royce trades in line with its 10-year median and near its industry at 24.9X forward 12-month earnings.

BWX Technologies (BWXT) is a top supplier of nuclear technologies, components, and fuel to the U.S. government, including U.S. naval submarines and aircraft carriers. BWX Technologies is actively growing its commercial nuclear power segment and other non-defense units.

BWXT owns one of the largest commercial nuclear equipment manufacturing facilities on the planet. BWXT is expanding that operation to “support ongoing and anticipated customers’ investments in Small Modular Reactors, traditional large-scale nuclear and advanced reactors, in Canada and around the world.”

BWX Technologies has landed deals and partnerships with GE Vernova, the Wyoming Energy Authority, Bill Gates-backed SMR company TerraPower, and beyond. BWXT’s beat-and-raise second quarter was supported, in part, by a growing “appetite for nuclear solutions across the global security, clean energy, and medical markets.”

BWXT is projected to post solid mid-single-digit sales and earnings growth in 2024 and 2025.

BWX Technologies stock has climbed 250% in the last 10 years to outpace the S&P 500’s 190% and its industry’s 110%. BWXT broke out to new highs last summer, with the stock up 38% the last 12 months.

BWXT is trading above its 21-week and 21-day moving averages while sitting 5% below its average Zacks price target.

Constellation Energy (CEG) is the largest nuclear power plant operator in the U.S., helping it produce 10% of the country’s total clean energy. Constellation boasts over 20 nuclear reactors at roughly a dozen sites across the Midwest, the Mid-Atlantic, and the Northeast.

Constellation benefits from the nuclear energy-focused aspects of the Inflation Reduction Act. The U.S. government is helping provide a price floor for nuclear power to boost the expansion of the domestic nuclear industry.

Constellation is retrofitting its current nuclear power plants to help keep them running for a lot longer. The company is also expanding into next-gen nuclear power plant technologies.

Constellation aims to grow through mergers and acquisitions and return capital to shareholders via buybacks and dividends. Constellation announced in early 2024 its plans to boost its dividend by 25% in 2024, exceeding its 10% annual growth target.

Constellation lifted its adjusted 2024 earnings guidance in early August and reaffirmed its ability to grow its adjusted EPS by at least 10% from 2024-2028. Constellation is projected to grow its adjusted earnings by 57% in 2024 and 18% in 2025.

Constellation shares soared since their 2022 IPO. CEG has climbed by 150% in the past two years and 70% YTD. Thankfully, for investors who ‘missed’ the run, Constellation trades 15% below its May records after falling alongside tech and other growth stocks.

CEG is attempting to retake its 50-day moving average. On top of that, CEG's improving EPS outlook, mixed with its recent downturn, has it trading at a 32% discount to Constellation's highs at 21.8X forward earnings.

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>>> Semiconductor ETFs -- These companies are all intriguing, and many of them, but perhaps not all, will be outstanding performers in the years and decades ahead. (Much will also depend on the price at which you invest in them, if you do, so aim to buy when they appear undervalued or at least reasonably valued.)

One way to play it a bit safe — while also aiming for outsized returns — is to invest in semiconductors via ETFs that focus on them. Check out these that have solid track records:

iShares Semiconductor ETF (NASDAQ: SOXX)

VanEck Semiconductor ETF (NASDAQ: SMH)

SPDR S&P Semiconductor ETF (NYSEMKT: XSD)

Invesco Semiconductors ETF (NYSEMKT: PSI)

Consider keeping some of your assets in semiconductors — whether via individual stocks or ETFs. Or both!

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https://finance.yahoo.com/news/7-semiconductor-stocks-could-millionaire-093800468.html


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>>> With marijuana reclassification on the table, here's a breakdown on Schedule 3 drugs


by Sarah Gleason

USA TODAY

May 17, 2024


https://www.usatoday.com/story/news/politics/elections/2024/05/17/marijuana-reclassification-schedule-1-vs-schedule-3/73729781007/


President Biden endorsed the Justice Department's move to reclassify marijuana from a Schedule I drug to a Schedule III drug Thursday. In his X, formerly known as Twitter, video, the president said the move is in line with his mission of "reversing long-standing inequities" regarding the criminalization of marijuana, calling the move "monumental."

"Look folks, no one should be in jail merely for using or possessing Marijuana," the president said in his video statement.

What is a Schedule 3 drug?

The United States Drug Enforcement Administration puts regulated drugs into five categories, per the Controlled Substance Act from 1970, each indicating a level of "abuse potential," with five being the lowest and one being the highest, while also taking into account the drug's use in medicine, according to the DEA.

Schedule I drugs have no approved medical usage, according to the DEA, and include substances like heroin, LSD, and ecstasy, which are highly likely to be abused. In comparison, Schedule V drugs have the least potential for abuse, and the drugs in this group are usually used for "antidiarrheal, antitussive, and analgesic purposes," according to the DEA.

Schedule III drugs, which is where marijuana could move to, as defined by the DEA, are "drugs with a moderate to low potential for physical and psychological dependence." If pot does become a Schedule III drug, it would be in company with testosterone and Tylenol (which contains less than 90 milligrams of codeine), according to the DEA.

Does reclassifying marijuana make it legal?

No. This change from the DEA would not make weed legal nationally; instead, it simply shows a shift in how the DEA sees marijuana's risk for abuse and use in medical scenarios. Marijuana will still be a controlled substance.

However, 24 states and Washington DC have made marijuana legal for recreation, and another 14 states have made it legal for medical use, according to the Pew Research Center.

When will the change happen?

The report now faces a 60-day period for public comment before being approved.

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>>> Insurers Rake In Profits as Customers Pay Soaring Premiums


The Wall Street Journal

by Jean Eaglesham

January 25, 2024


https://finance.yahoo.com/m/422624f8-879a-33ab-ae1a-6c8e2cc0d00d/insurers-rake-in-profits-as.html


The pain for home- and auto-insurance customers is quickly becoming investors’ gain. Insurance giants’ shares and profits are hitting records, thanks in part to steep rate hikes. The jump came after the company reported a record profit for its fourth quarter, boosted by double-digit rate increases in its business and personal insurance units...

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>>> Tap Into the Insurance Industry's Momentum With These ETFs


Zacks

by Yashwardhan Jain

January 23, 2024


https://finance.yahoo.com/news/tap-insurance-industrys-momentum-etfs-212500904.html


The rising frequency and seriousness of potential global challenges, ranging from climate change to cybercrime, secures the insurance industry’s ability to act as a financial cushion. According to Deloitte, insurers realizing the need to proactively prevent losses from occurring in the initial stages is driving the industry’s growth.

After experiencing a positive shift in its trend in the second half of last year, the U.S. property and casualty industry has continued with its robust momentum entering 2024. Significant premium increases, a slowdown in the growth of claims costs and improved investment returns have all had a beneficial effect on the sector, giving a boost to profitability.

The S&P Insurance Select Industry Index has gained 8.54% over the past year, as of 17 Jan 2024, compared to the broader S&P 500 Financials Index, which added about 3.82% over the past year.

Growth in Digits

According to Swiss Re, the industry ROE is estimated to surge to 9.5% in 2024 and reach 10% in 2025, hinting at a substantial increase from the 5% recorded in 2023, backed by robust premium growth and reduced inflationary pressures. Estimates for ROE are supported by solid premium growth expectations of 7% and 4.5% for 2024 and 2025, respectively.

Combined ratio, a comprehensive measure of an insurance company’s profitability, used to evaluate how well the company is operating on a daily basis, is anticipated to improve significantly. The ratio is projected to be 98.5% for both 2024 and 2025, implying a notable improvement from the estimated 103% for 2023. A ratio below 100% signifies that the company is realizing an underwriting profit.

Direct premium written (DPW), which represents the growth of a company’s insurance business during a particular period, is forecast to grow at 7% in 2024, indicating an upward revision from 5.5% in 2023.

Industry’s Anticipated Earnings Success

According to Factset, the insurance industry is expected to be the primary driver of positive year-over-year earnings growth for the financial sector, growing by a staggering 26%. Year-on-year earnings growth at the sub-industry level is led by the property & casualty insurance, growing at 48%, followed by reinsurance (30%) and multi-line insurance (17%).

Seventeen out of the top 20 insurers trading on major U.S. exchanges experienced an uptick in market capitalization during the fourth quarter of 2023, per S&P Global Market Intelligence, with most insurers exhibiting increases of 6% or more.

According to Zacks Earnings Trend, Insurance - Multi Line and Insurance - Property And Casualty have a growth rate of 8.04% and 8.02%, respectively.

ETFs in Focus

Below, we highlight a few insurance ETFs for investors to capitalize on the industry’s continuing momentum.

SPDR S&P Insurance ETF (KIE)

SPDR S&P Insurance ETF seeks to track the performance of the S&P Insurance Select Industry Index with a basket of 48 securities. The fund has amassed an asset base of $738.17 million and charges an annual fee of 0.35%.

SPDR S&P Insurance ETF has a major exposure of 50.43% in property and casualty insurance, followed by life and health insurance, with a share of 24.84% of its assets. The fund has gained 6.78% over the past three months and 12.12% over the past year.

iShares U.S. Insurance ETF (IAK)

iShares U.S. Insurance ETF seeks to track the performance of the Dow Jones U.S. Select Insurance Index, with a basket of 55 securities. The fund has gathered an asset base of $476.5 million and charges an annual fee of 0.40%.

iShares U.S. Insurance ETF has major exposure of 67.88% in property and casualty insurance, followed by life and health insurance, with a share of 24.13% of its assets. The fund has gained 9.67% over the past three months and 11.22% over the past year.

Invesco KBW Property & Casualty Insurance ETF (KBWP)

Invesco KBW Property & Casualty Insurance ETF seeks to track the KBW Nasdaq Property & Casualty Index, with a basket of 26 securities. The fund has amassed an asset base of $200.9 million and charges an annual fee of 0.35%.

Invesco KBW Property & Casualty Insurance ETF has an exposure of 60.09% in large-cap securities. The fund has gained 8.01% over the past three months and 7.06% over the past year.

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>>> SEC ends crypto drama by giving the green light to 11 bitcoin ETFs


Yahoo Finance

by David Hollerith and Jennifer Schonberger

January 10, 2024


https://finance.yahoo.com/news/sec-ends-crypto-drama-by-giving-the-green-light-to-11-bitcoin-etfs-165408349.html


The moment the crypto world wanted finally happened Wednesday. And this time it was for real.

Regulators on Wednesday gave money managers the green light to launch 11 spot bitcoin exchange-traded funds, allowing everyday investors to get exposure to the world’s largest cryptocurrency without having to own it.

The ETFs, which begin trading Thursday, could make bitcoin a potential staple in 401(k)s, IRAs, and pension plans and give it mainstream acceptance.

The Securities and Exchange Commission made the announcement roughly 24 hours after a fake social media post claimed those approvals had already been granted.

The chaos triggered by that unauthorized post on X reverberated from Wall Street to Washington while attracting new scrutiny to the SEC, a longtime foe of the industry that is still in the middle of a widespread crackdown on some of crypto’s major players.

The price of bitcoin seesawed Tuesday and Wednesday as investors tried to make sense of the mishap, which erased tens of billions in market value in just minutes.

SEC Chair Gary Gensler made it clear in a statement Wednesday that his agency "did not approve or endorse bitcoin" when it signed off on the new products and called Wednesday's announcement "the most sustainable path forward" following a key court defeat on this issue last summer.

"Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto," he said in his statement.

One SEC commissioner, Caroline Crenshaw, published a dissenting opinion that called the agency's actions "unsound and ahistorical."

"I am concerned that these products will flood the markets and land squarely in the retirement accounts of US households who can least afford to lose their savings to the fraud and manipulation that appears prevalent in the spot bitcoin markets," she said in her statement.

The SEC has rejected such applications in the past, arguing the products were vulnerable to market manipulation.

The list of applicants approved by the SEC Wednesday included some of the biggest names on Wall Street, from BlackRock (BLK) to Franklin Templeton (BEN), as well as a number of firms better known in the crypto world.

These issuers competed with one another in the run-up to their launches to offer the lowest fees, hoping to attract as many investors as possible once ETFs begin trading.

Other big Wall Street players plan to be part of the action, as well. JPMorgan Chase (JPM) and Goldman Sachs (GS) are among the giant banks that have offered to help some of these money managers create and redeem shares of their new funds.

Optimism about these approvals helped bitcoin surge 164% in 2023 and start 2024 by rising above $47,000, its highest level in nearly two years.

A decade in the making

The crypto industry has been waiting more than a decade for this moment.

The first application to create a spot bitcoin ETF came in 2013 from crypto entrepreneurs and twins Tyler and Cameron Winklevoss, famous for their early role in the creation of Facebook.

Since then, the SEC has denied more than 30 similar applications.

A key turnaround moment came last year in June when the world’s biggest money manager, BlackRock, filed for a spot bitcoin ETF. The interest from one of Wall Street’s biggest names sparked other asset managers to follow suit.

Another important development came last August when one of the ETF applicants, Grayscale Investments, won a key legal victory over the SEC. Grayscale had sued the SEC in 2022 after it wasn't allowed to convert its Grayscale Bitcoin Trust (GBTC) into a spot bitcoin offering.

Its core argument was that the agency had already approved exchange-traded products that held bitcoin futures contracts and thus had "acted arbitrarily and capriciously."

A three-judge panel of the District of Columbia Court of Appeals in Washington sided with Grayscale, saying the firm had "advanced substantial evidence" its product was similar to bitcoin futures ETFs previously approved by the SEC.

That forced the SEC to reconsider Grayscale’s spot bitcoin ETF application, along with others filed by rival money managers.

"We are now faced with a new set of filings similar to those we have disapproved in the past," Gensler said in his statement Wednesday. "Circumstances, however, have changed."

One of the applicants, Ark Investment Management CEO Cathie Wood, told Yahoo Finance that the dominant providers of spot bitcoin ETFs will be those that take in the most money from investors right out of the gate.

The winners "will be a few and it will be the most liquid," she said.

Historically, launches for other bitcoin products have sent bitcoin’s price on a wild ride.

It happened in 2017 with the launch of the country’s first bitcoin futures contracts and then in 2021 with the SEC’s approval of the first bitcoin futures ETFs. Prices soared and then fell by large amounts in the year following the launches.

In recent weeks, much debate has raged over whether bitcoin will rise or fall once the lauded moment of approval comes to pass.

Gautam Chhugani, managing director of the research arm for Bernstein, said his team estimates such financial products will garner $10 billion or more in investment flows through the end of 2024 and "hundreds of billions of dollars" over a two-year period.

That, he added, will help push bitcoin’s price even higher.

"We do think that bitcoin goes to $150,000 by 2025," Chhugani added.

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>>> Solar stocks poised for comeback in 2024


Yahoo Finance

by Ines Ferré

Dec 8, 2023


https://finance.yahoo.com/news/solar-stocks-poised-for-comeback-in-2024-193803917.html


Solar stocks have gotten decimated this year amid high interest rates spurred by the Federal Reserve to tame inflation. Customers have been reluctant to spend on installations, and companies' investment projects have gotten more expensive.

A policy change that lowered solar energy incentives in California also impacted the industry in the US. The state slashed the subsidy awarded to rooftop panel owners sending excess power to the grid.

The solar and wind energy benchmarks Invesco Solar ETF (TAN) is down 36% year to date, and Global X Solar ETF (RAYS) has lost more than 40% during the same period.

However, Wall Street sees tailwinds next year that could help turn the tide for the clean energy industry.

On Friday Morgan Stanley analysts upgraded First Solar (FSLR), a solar panel maker, to Overweight, raising their price target from $214 to $237 per share.

“After the 20% sell-off in the past three months, we see an attractive risk-reward profile for the stock,” Morgan Stanley equity analyst Andrew Percoco and his team wrote in a note to clients this week.

“We believe First Solar offers one of the strongest risk-adjusted earnings profiles within our US Clean Tech coverage with its sold-out position through 2026,” they added, referring to the thin-film module manufacturer's backlog.

The note also reiterated renewable energy giant NextEra (NEE) and solar company Altus Power (AMPS) as names on their high conviction Overweight list. The analysts have a $76 price target on NextEra and $9 price target on Altus Power. Year to date, those stocks are down 29% and 17%, respectively.

'Improvement in clean energy valuations'

One of the tailwinds for renewables going into 2024 is the market expectation of lower interest rates at some point during the year. Investors are betting the Fed can start to cut rates as inflation eases and the labor market normalizes.

“If rates fall in 2024, as our economists and strategists are predicting, we could see a meaningful improvement in clean energy valuations,” wrote Morgan Stanley's analysts.

The prices of solar panels, battery storage, and inverters, which increased over the last couple of years, are also showing signs of deflation ahead.

“We see some evidence that supports a more optimistic view (for developers) of the cost trend for these technologies moving into 2024,” said the note. “Prices for solar panels and components have declined meaningfully since peak levels in the summer of 2023.”

Citi analysts also recently noted the global solar space is dominated by equipment manufactured in China, but US companies are poised to increase market share next year.

“With rising importance of emission cuts and opportunities from solar equipment production, more countries are implementing trade policy protectionism to ensure local supply," Citi managing director Pierre Lau and his team wrote in a note to clients.

An example is the Inflation Reduction Act (IRA) passed last year, aimed at incentivizing the use of solar power via subsidy support for local manufacturing.

"Our analysis shows that outside of China, the US and India appear the most feasible for solar equipment production,” said the note.

Citi’s Buy recommendations include Altus Power and solar and storage company SunPower (SPWR), which is currently down about 70% year to date.

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>>> Metaverse ETFs to consider


https://www.fool.com/investing/stock-market/market-sectors/information-technology/metaverse-stocks/


Maybe you can’t decide which metaverse stock to buy, or maybe you want broader exposure than a single stock. Consider buying a metaverse-focused exchange-traded fund (ETF). One option is the Roundhill Ball Metaverse ETF (METV -0.1%), which includes all five of the stocks already listed here plus dozens more, providing instant diversification for shareholders.

Another possibility is the ProShares Metaverse ETF (VERS 0.58%). Of the five stocks listed here, Cloudflare is the only one the ProShares Metaverse ETF doesn't hold shares of. It has fewer holdings than the Roundhill Ball Metaverse ETF. But its expense ratio (fee) is a smidge lower, which might make it more attractive to some investors.

Yes, unlike stocks, ETFs are subject to ongoing fees, and these two ETFs are no exception. Therefore, investors need to be sure they know how to invest in ETFs before buying shares.

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