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Cintas - >>> One of Wall Street's Highest-Flying Stocks -- a Nearly 125,000%-Gainer Since Its IPO -- Has Officially Completed Its Latest Stock Split
Motley Fool
by Sean Williams
September 13, 2024
https://finance.yahoo.com/news/one-wall-streets-highest-flying-085100349.html
While it's perfectly normal for a hot trend to be captivating the attention of Wall Street and investors, two buzzy trends at the same time are somewhat rare. In addition to investors piling into stocks associated with the artificial intelligence (AI) revolution, they seemingly can't get enough of companies announcing stock splits.
A stock split is a tool on the proverbial utility belt for publicly traded companies that allows them to adjust their share price and outstanding share count by the same magnitude. Despite these nominal changes, stock splits are purely cosmetic and have no impact on a company's market cap or its operating performance.
Although stock splits can occur in both directions — reverse-stock splits increase a company's share price, while forward-stock splits reduce it — a majority of investors favor companies completing forward splits. Businesses undertaking forward splits are usually outperforming their peers in every respect, which is what propels their underlying stock higher.
In 2024, 13 leading companies have announced or completed a stock split, all but one of which is a forward-stock split. Today just happens to be the day one of these phenomenal businesses will be trading at its post-split price for the first time.
This nearly 125,000%-gainer just completed its sixth split since going public
Earlier this week, satellite-radio operator Sirius XM Holdings enjoyed its time in the sun as the only prominent reverse-stock split of 2024. But today, Sept. 12, it's all about recognizing corporate identity uniform and business services provider Cintas (NASDAQ: CTAS).
Back on May 2, the company's board announced plans to complete a 4-for-1 split following the close of trading on Sept. 11. With the company's shares closing at north of $816 on Sept. 10, the largest split in the company's history will reduce its share price to a shade over $200.
Since its initial public offering (IPO) in 1983, Cintas has delivered a total return (i.e., factoring in dividend payments along with the cumulative return of its shares) of almost 125,000% and completed a half-dozen stock splits:
April 1987: 2-for-1 forward split
April 1991: 3-for-2
April 1992: 2-for-1
November 1997: 2-for-1
March 2000: 3-for-2
September 2024: 4-for-1
The catalyst fueling this growth is, first and foremost, the growth of the U.S. economy. Although recessions are a perfectly normal and inevitable aspect of the economic cycle, history tells us that these downturns tend to be short-lived. Only three of 12 U.S. recessions since the end of World War II have lasted at least 12 months.
On the other hand, most periods of growth endure for multiple years. An expanding economy tends to lead to higher demand for corporate uniforms and the various products and services Cintas provides, such as towels, floor mats, and safety kits.
Beyond macroeconomic catalysts, Cintas has also benefited from a steady diet of bolt-on acquisitions. Purchasing Zee Medical and G&K Services are perfect examples of Cintas expanding its product and service ecosystem, dangling a carrot for new clients, and providing itself the opportunity to cross-sell more of its products to existing clients.
Innovation is another key puzzle piece for Cintas. Ongoing product development for its line of rental uniforms, as well as its various business product lines, tends to keep customers loyal.
Last but not least, Cintas has more than 1 million corporate clients. This level of diversification all but ensures that no one single business is paramount to its success or capable of sinking the proverbial ship.
Despite Cintas's long-term success, additional near-term upside could be a tough ask
While Cintas has a pretty clear path to long-term growth, thanks largely to being tied at the hip to the U.S. economy, additional upside for shares of the company over the next couple of years could be a tough ask.
For one, there are mounting concerns that a U.S. recession is brewing. A couple of data points and predictive metrics, including the first notable decline in U.S. M2 money supply since the Great Depression, as well as the longest yield-curve inversion in history, suggest coming weakness for the economy and stock market.
Though stocks don't move in-tandem with the U.S. economy, Cintas is undeniably cyclical. Most of its clients are liable to feel some degree of pain if economic growth slows or contracts, which would, in turn, be expected to slow down its own growth rate.
To build on this point, both the broader market and Cintas are historically expensive.
According to the S&P 500's Shiller price-to-earnings (P/E) ratio, which is also commonly referred to as the cyclically adjusted price-to-earnings ratio (CAPE ratio), the stock market has only been as pricey as it is now two other times, when back-tested to January 1871.
On Sept. 10, the S&P 500's Shiller P/E, which is based on average inflation-adjusted earnings from the prior 10 years, closed at 35.33, or more than double than 153-year average of 17.16. More importantly, previous instances where the S&P 500's Shiller P/E topped 30 during a bull market rally were, eventually (key word!), followed by declines of at least 20%.
Cintas ended Sept. 10 at roughly 54 times its trailing-12-month (TTM) earnings per share (EPS) and a nosebleed 44 times forward-year EPS. You'd have to go back to the late 20th century to find the last time Cintas was valued at 54 times TTM EPS.
While a forecast sales growth rate of 7% in the current and upcoming year is admirable for a company of its size, it doesn't come to close to justifying a forward P/E ratio of 44.
This is a rare instance of a rock-solid business whose stock simply isn't worth buying at the moment.
<<<
---
Cintas - >>> One of Wall Street's Highest-Flying Stocks -- a Nearly 125,000%-Gainer Since Its IPO -- Has Officially Completed Its Latest Stock Split
Motley Fool
by Sean Williams
September 13, 2024
https://finance.yahoo.com/news/one-wall-streets-highest-flying-085100349.html
While it's perfectly normal for a hot trend to be captivating the attention of Wall Street and investors, two buzzy trends at the same time are somewhat rare. In addition to investors piling into stocks associated with the artificial intelligence (AI) revolution, they seemingly can't get enough of companies announcing stock splits.
A stock split is a tool on the proverbial utility belt for publicly traded companies that allows them to adjust their share price and outstanding share count by the same magnitude. Despite these nominal changes, stock splits are purely cosmetic and have no impact on a company's market cap or its operating performance.
Although stock splits can occur in both directions — reverse-stock splits increase a company's share price, while forward-stock splits reduce it — a majority of investors favor companies completing forward splits. Businesses undertaking forward splits are usually outperforming their peers in every respect, which is what propels their underlying stock higher.
In 2024, 13 leading companies have announced or completed a stock split, all but one of which is a forward-stock split. Today just happens to be the day one of these phenomenal businesses will be trading at its post-split price for the first time.
This nearly 125,000%-gainer just completed its sixth split since going public
Earlier this week, satellite-radio operator Sirius XM Holdings enjoyed its time in the sun as the only prominent reverse-stock split of 2024. But today, Sept. 12, it's all about recognizing corporate identity uniform and business services provider Cintas (NASDAQ: CTAS).
Back on May 2, the company's board announced plans to complete a 4-for-1 split following the close of trading on Sept. 11. With the company's shares closing at north of $816 on Sept. 10, the largest split in the company's history will reduce its share price to a shade over $200.
Since its initial public offering (IPO) in 1983, Cintas has delivered a total return (i.e., factoring in dividend payments along with the cumulative return of its shares) of almost 125,000% and completed a half-dozen stock splits:
April 1987: 2-for-1 forward split
April 1991: 3-for-2
April 1992: 2-for-1
November 1997: 2-for-1
March 2000: 3-for-2
September 2024: 4-for-1
The catalyst fueling this growth is, first and foremost, the growth of the U.S. economy. Although recessions are a perfectly normal and inevitable aspect of the economic cycle, history tells us that these downturns tend to be short-lived. Only three of 12 U.S. recessions since the end of World War II have lasted at least 12 months.
On the other hand, most periods of growth endure for multiple years. An expanding economy tends to lead to higher demand for corporate uniforms and the various products and services Cintas provides, such as towels, floor mats, and safety kits.
Beyond macroeconomic catalysts, Cintas has also benefited from a steady diet of bolt-on acquisitions. Purchasing Zee Medical and G&K Services are perfect examples of Cintas expanding its product and service ecosystem, dangling a carrot for new clients, and providing itself the opportunity to cross-sell more of its products to existing clients.
Innovation is another key puzzle piece for Cintas. Ongoing product development for its line of rental uniforms, as well as its various business product lines, tends to keep customers loyal.
Last but not least, Cintas has more than 1 million corporate clients. This level of diversification all but ensures that no one single business is paramount to its success or capable of sinking the proverbial ship.
Despite Cintas's long-term success, additional near-term upside could be a tough ask
While Cintas has a pretty clear path to long-term growth, thanks largely to being tied at the hip to the U.S. economy, additional upside for shares of the company over the next couple of years could be a tough ask.
For one, there are mounting concerns that a U.S. recession is brewing. A couple of data points and predictive metrics, including the first notable decline in U.S. M2 money supply since the Great Depression, as well as the longest yield-curve inversion in history, suggest coming weakness for the economy and stock market.
Though stocks don't move in-tandem with the U.S. economy, Cintas is undeniably cyclical. Most of its clients are liable to feel some degree of pain if economic growth slows or contracts, which would, in turn, be expected to slow down its own growth rate.
To build on this point, both the broader market and Cintas are historically expensive.
According to the S&P 500's Shiller price-to-earnings (P/E) ratio, which is also commonly referred to as the cyclically adjusted price-to-earnings ratio (CAPE ratio), the stock market has only been as pricey as it is now two other times, when back-tested to January 1871.
On Sept. 10, the S&P 500's Shiller P/E, which is based on average inflation-adjusted earnings from the prior 10 years, closed at 35.33, or more than double than 153-year average of 17.16. More importantly, previous instances where the S&P 500's Shiller P/E topped 30 during a bull market rally were, eventually (key word!), followed by declines of at least 20%.
Cintas ended Sept. 10 at roughly 54 times its trailing-12-month (TTM) earnings per share (EPS) and a nosebleed 44 times forward-year EPS. You'd have to go back to the late 20th century to find the last time Cintas was valued at 54 times TTM EPS.
While a forecast sales growth rate of 7% in the current and upcoming year is admirable for a company of its size, it doesn't come to close to justifying a forward P/E ratio of 44.
This is a rare instance of a rock-solid business whose stock simply isn't worth buying at the moment.
<<<
---
NVDA, SMCI, AVGO - >>> Step Aside, Nvidia: Billionaires Are Selling It in Favor of 2 Other High-Growth Stock-Split Stocks
by Sean Williams
Motley Fool
September 13, 2024
https://finance.yahoo.com/news/step-aside-nvidia-billionaires-selling-085100760.html
Although artificial intelligence (AI) has been all the rage on Wall Street since 2023 began, excitement surrounding stock splits has given AI a run for its money this year.
A stock split gives publicly traded companies the ability to superficially alter their share price and outstanding share count by the same magnitude. Splits are surface-scratching in the sense that they don't change a company's market cap or in any way affect underlying operating performance.
Although there are two types of stock splits -- forward and reverse -- investors usually gravitate to companies conducting forward splits. This type of split is designed to lower a company's share price to make it more nominally affordable for investors who are unable to purchase fractional shares through their broker. Companies enacting forward splits are usually outpacing their competition from an execution and innovation standpoint.
Since 2024 began, a little over a dozen leading businesses have announced or completed a stock split -- all but one of which was of the forward-split variety.
However, the outlook for some of these premier stock-split stocks is mixed among Wall Street's brightest and richest investors. Based on the latest round of form 13F filings with the Securities and Exchange Commission, billionaires were decisive sellers of cutting-edge AI stock Nvidia (NASDAQ: NVDA) in the second quarter, but were avid buyers of two other high-growth stock-split stocks.
Billionaires continue to reduce their stakes in Wall Street's AI darling
For three consecutive quarters, dating back to the start of October 2023, no fewer than seven billionaire money managers have reduced their respective stakes in Nvidia. The June-ended quarter featured seven billionaire sellers, including (total shares sold in parenthesis):
Ken Griffin of Citadel (9,282,018 shares)
David Tepper of Appaloosa Management (3,730,000 shares)
Stanley Druckenmiller of Duquesne Family Office (1,545,370 shares)
Cliff Asness of AQR Capital Management (1,360,215 shares)
Israel Englander of Millennium Management (676,242 shares)
Steven Cohen of Point72 Asset Management (409,042 shares)
Philippe Laffont of Coatue Management (96,963 shares)
With Nvidia completing its largest-ever forward split (10 for 1) in June, these billionaires might have chosen to ring the register and diversify their respective portfolios. But there looks to be more to this story than simple profit taking.
Although Nvidia has undeniably benefited from its first-mover advantages as the standout supplier of AI graphics processing units (GPUs), competition is now coming at it from all angles.
With the debut of Nvidia's Blackwell chip delayed by at least three months due to reported design flaws and supply chain issues, and the company's prized H100 GPU backlogged, it should be relatively easy for external competitors like Advanced Micro Devices to find strong demand for their AI GPUs.
Moreover, Nvidia's top customers are signaling an eventual reduced reliance on the AI kingpin. Its four largest clients by net sales are all developing AI GPUs that they plan to use in their data centers. Even with Nvidia's chips maintaining their computing advantage, the writing is on the wall that these customers intend to use their cheaper internally developed hardware.
Billionaires might also be spooked by the persistent insider selling at Nvidia. While not all insider selling is necessarily nefarious (e.g., insiders sometimes sell stock to pay their tax bill), it is noteworthy that not one executive or board member has purchased shares on the open market since December 2020.
Lastly, billionaire asset managers might be concerned about what history tells us. Since the advent of the internet roughly three decades ago, every next-big-thing trend has worked its way through an early-stage bubble. It's unlikely that AI is going to be the exception.
But while billionaires were showing Nvidia to the door, they were busy scooping up shares of two other high-growth stock-split stocks.
Super Micro Computer
The first stock-split stock that struck the fancy of six billionaire money managers during the second quarter is Super Micro Computer (NASDAQ: SMCI), a specialist in customizable rack server and storage solutions. These billionaire buyers were:
Israel Englander of Millennium Management (553,323 shares)
Jeff Yass of Susquehanna International Group (508,814 shares)
Ken Griffin of Citadel (98,752 shares)
Steven Cohen of Point72 Asset Management (45,066 shares)
Ray Dalio of Bridgewater Associates (15,777 shares)
Cliff Asness of AQR Capital Management (1,040 shares)
With the stock catapulting to north of $1,200 during the first quarter, it's not in the least bit surprising to see Supermicro's board approving a 10-for-1 forward split, to take effect after trading ends on Sept. 30.
However, the prospect of a stock split isn't the primary draw for billionaires to Supermicro. The lure is the seemingly insatiable demand from businesses wanting to be among the first to capitalize on the AI revolution by training large language models and running generative Ai solutions. To do so, they'll need the necessary infrastructure in place, which Supermicro can provide.
The company's operating results have also given billionaires reason to be excited. Net sales jumped 110% to $14.9 billion in fiscal 2024 (the company's fiscal year ends on June 30), and the midpoint of its guidance calls for $28 billion in net revenue for the current year. This forecast screams that demand is exceptional at the moment.
But it won't be an easy ride. With its use of Nvidia's H100 GPUs in its customizable data-center rack servers, and the H100 backlogged, Supermicro finds itself at the mercy of its suppliers.
Furthermore, the company is the target of a short-seller report from Hindenburg Research, which has alleged accounting manipulation. Despite denying these allegations, management did delay the annual filing of its operating results, which did little to soothe investor concerns.
Despite its relatively inexpensive valuation, Super Micro Computer has a lot to prove to Wall Street and investors.
Broadcom
The other stock-split stock that billionaires very clearly favored over Nvidia in the June-ended quarter is AI networking solutions and services providers Broadcom (NASDAQ: AVGO). Seven billionaire investors took the plunge in the second quarter, including:
Ole Andreas Halvorsen of Viking Global Investors (2,930,970 shares)
Jeff Yass of Susquehanna International Group (2,347,500 shares)
Israel Englander of Millennium Management (2,096,440 shares)
Ken Griffin of Citadel (1,880,740 shares)
John Overdeck and David Siegel of Two Sigma Investments (1,332,230 shares)
Ken Fisher of Fisher Investments (865,090 shares)
Keeping with the theme of this list, Broadcom also announced a 10-for-1 forward split (the first in the company's history), which was completed in mid-July.
Broadcom's AI ties have certainly been the fuel behind its recent uptick in growth. In particular, the company's networking solutions are responsible for connecting large numbers of AI GPUs in order to reduce tail latency and maximize the computing potential of AI-accelerating hardware. Presumably, demand for its AI networking solutions will remain robust as long as businesses keep gobbling up AI GPUs.
However, billionaires might be equally excited about Broadcom having a solid foundation that extends well beyond artificial intelligence. It generates a significant amount of revenue and profits from the wireless chips and accessories it provides for next-generation smartphones. And it's a key provider of optical components used in automated industrial equipment, as well as networking solutions for next-gen vehicles.
Lastly, billionaires might be impressed with the company's track record of earnings-accretive acquisitions. For example, the $69 billion purchase of cloud-based virtualization software company VMware in November 2023 perfectly positions Broadcom to be an important player in helping businesses with their private- and hybrid-cloud needs.
With a more diverse revenue stream than Nvidia or Super Micro Computer, Broadcom would be best-positioned to navigate an AI bubble-bursting event, should one occur.
<<<
---
NVDA, SMCI, AVGO - >>> Step Aside, Nvidia: Billionaires Are Selling It in Favor of 2 Other High-Growth Stock-Split Stocks
by Sean Williams
Motley Fool
September 13, 2024
https://finance.yahoo.com/news/step-aside-nvidia-billionaires-selling-085100760.html
Although artificial intelligence (AI) has been all the rage on Wall Street since 2023 began, excitement surrounding stock splits has given AI a run for its money this year.
A stock split gives publicly traded companies the ability to superficially alter their share price and outstanding share count by the same magnitude. Splits are surface-scratching in the sense that they don't change a company's market cap or in any way affect underlying operating performance.
Although there are two types of stock splits -- forward and reverse -- investors usually gravitate to companies conducting forward splits. This type of split is designed to lower a company's share price to make it more nominally affordable for investors who are unable to purchase fractional shares through their broker. Companies enacting forward splits are usually outpacing their competition from an execution and innovation standpoint.
Since 2024 began, a little over a dozen leading businesses have announced or completed a stock split -- all but one of which was of the forward-split variety.
However, the outlook for some of these premier stock-split stocks is mixed among Wall Street's brightest and richest investors. Based on the latest round of form 13F filings with the Securities and Exchange Commission, billionaires were decisive sellers of cutting-edge AI stock Nvidia (NASDAQ: NVDA) in the second quarter, but were avid buyers of two other high-growth stock-split stocks.
Billionaires continue to reduce their stakes in Wall Street's AI darling
For three consecutive quarters, dating back to the start of October 2023, no fewer than seven billionaire money managers have reduced their respective stakes in Nvidia. The June-ended quarter featured seven billionaire sellers, including (total shares sold in parenthesis):
Ken Griffin of Citadel (9,282,018 shares)
David Tepper of Appaloosa Management (3,730,000 shares)
Stanley Druckenmiller of Duquesne Family Office (1,545,370 shares)
Cliff Asness of AQR Capital Management (1,360,215 shares)
Israel Englander of Millennium Management (676,242 shares)
Steven Cohen of Point72 Asset Management (409,042 shares)
Philippe Laffont of Coatue Management (96,963 shares)
With Nvidia completing its largest-ever forward split (10 for 1) in June, these billionaires might have chosen to ring the register and diversify their respective portfolios. But there looks to be more to this story than simple profit taking.
Although Nvidia has undeniably benefited from its first-mover advantages as the standout supplier of AI graphics processing units (GPUs), competition is now coming at it from all angles.
With the debut of Nvidia's Blackwell chip delayed by at least three months due to reported design flaws and supply chain issues, and the company's prized H100 GPU backlogged, it should be relatively easy for external competitors like Advanced Micro Devices to find strong demand for their AI GPUs.
Moreover, Nvidia's top customers are signaling an eventual reduced reliance on the AI kingpin. Its four largest clients by net sales are all developing AI GPUs that they plan to use in their data centers. Even with Nvidia's chips maintaining their computing advantage, the writing is on the wall that these customers intend to use their cheaper internally developed hardware.
Billionaires might also be spooked by the persistent insider selling at Nvidia. While not all insider selling is necessarily nefarious (e.g., insiders sometimes sell stock to pay their tax bill), it is noteworthy that not one executive or board member has purchased shares on the open market since December 2020.
Lastly, billionaire asset managers might be concerned about what history tells us. Since the advent of the internet roughly three decades ago, every next-big-thing trend has worked its way through an early-stage bubble. It's unlikely that AI is going to be the exception.
But while billionaires were showing Nvidia to the door, they were busy scooping up shares of two other high-growth stock-split stocks.
Super Micro Computer
The first stock-split stock that struck the fancy of six billionaire money managers during the second quarter is Super Micro Computer (NASDAQ: SMCI), a specialist in customizable rack server and storage solutions. These billionaire buyers were:
Israel Englander of Millennium Management (553,323 shares)
Jeff Yass of Susquehanna International Group (508,814 shares)
Ken Griffin of Citadel (98,752 shares)
Steven Cohen of Point72 Asset Management (45,066 shares)
Ray Dalio of Bridgewater Associates (15,777 shares)
Cliff Asness of AQR Capital Management (1,040 shares)
With the stock catapulting to north of $1,200 during the first quarter, it's not in the least bit surprising to see Supermicro's board approving a 10-for-1 forward split, to take effect after trading ends on Sept. 30.
However, the prospect of a stock split isn't the primary draw for billionaires to Supermicro. The lure is the seemingly insatiable demand from businesses wanting to be among the first to capitalize on the AI revolution by training large language models and running generative Ai solutions. To do so, they'll need the necessary infrastructure in place, which Supermicro can provide.
The company's operating results have also given billionaires reason to be excited. Net sales jumped 110% to $14.9 billion in fiscal 2024 (the company's fiscal year ends on June 30), and the midpoint of its guidance calls for $28 billion in net revenue for the current year. This forecast screams that demand is exceptional at the moment.
But it won't be an easy ride. With its use of Nvidia's H100 GPUs in its customizable data-center rack servers, and the H100 backlogged, Supermicro finds itself at the mercy of its suppliers.
Furthermore, the company is the target of a short-seller report from Hindenburg Research, which has alleged accounting manipulation. Despite denying these allegations, management did delay the annual filing of its operating results, which did little to soothe investor concerns.
Despite its relatively inexpensive valuation, Super Micro Computer has a lot to prove to Wall Street and investors.
Broadcom
The other stock-split stock that billionaires very clearly favored over Nvidia in the June-ended quarter is AI networking solutions and services providers Broadcom (NASDAQ: AVGO). Seven billionaire investors took the plunge in the second quarter, including:
Ole Andreas Halvorsen of Viking Global Investors (2,930,970 shares)
Jeff Yass of Susquehanna International Group (2,347,500 shares)
Israel Englander of Millennium Management (2,096,440 shares)
Ken Griffin of Citadel (1,880,740 shares)
John Overdeck and David Siegel of Two Sigma Investments (1,332,230 shares)
Ken Fisher of Fisher Investments (865,090 shares)
Keeping with the theme of this list, Broadcom also announced a 10-for-1 forward split (the first in the company's history), which was completed in mid-July.
Broadcom's AI ties have certainly been the fuel behind its recent uptick in growth. In particular, the company's networking solutions are responsible for connecting large numbers of AI GPUs in order to reduce tail latency and maximize the computing potential of AI-accelerating hardware. Presumably, demand for its AI networking solutions will remain robust as long as businesses keep gobbling up AI GPUs.
However, billionaires might be equally excited about Broadcom having a solid foundation that extends well beyond artificial intelligence. It generates a significant amount of revenue and profits from the wireless chips and accessories it provides for next-generation smartphones. And it's a key provider of optical components used in automated industrial equipment, as well as networking solutions for next-gen vehicles.
Lastly, billionaires might be impressed with the company's track record of earnings-accretive acquisitions. For example, the $69 billion purchase of cloud-based virtualization software company VMware in November 2023 perfectly positions Broadcom to be an important player in helping businesses with their private- and hybrid-cloud needs.
With a more diverse revenue stream than Nvidia or Super Micro Computer, Broadcom would be best-positioned to navigate an AI bubble-bursting event, should one occur.
<<<
---
NVDA, SMCI, AVGO - >>> Step Aside, Nvidia: Billionaires Are Selling It in Favor of 2 Other High-Growth Stock-Split Stocks
by Sean Williams
Motley Fool
September 13, 2024
https://finance.yahoo.com/news/step-aside-nvidia-billionaires-selling-085100760.html
Although artificial intelligence (AI) has been all the rage on Wall Street since 2023 began, excitement surrounding stock splits has given AI a run for its money this year.
A stock split gives publicly traded companies the ability to superficially alter their share price and outstanding share count by the same magnitude. Splits are surface-scratching in the sense that they don't change a company's market cap or in any way affect underlying operating performance.
Although there are two types of stock splits -- forward and reverse -- investors usually gravitate to companies conducting forward splits. This type of split is designed to lower a company's share price to make it more nominally affordable for investors who are unable to purchase fractional shares through their broker. Companies enacting forward splits are usually outpacing their competition from an execution and innovation standpoint.
Since 2024 began, a little over a dozen leading businesses have announced or completed a stock split -- all but one of which was of the forward-split variety.
However, the outlook for some of these premier stock-split stocks is mixed among Wall Street's brightest and richest investors. Based on the latest round of form 13F filings with the Securities and Exchange Commission, billionaires were decisive sellers of cutting-edge AI stock Nvidia (NASDAQ: NVDA) in the second quarter, but were avid buyers of two other high-growth stock-split stocks.
Billionaires continue to reduce their stakes in Wall Street's AI darling
For three consecutive quarters, dating back to the start of October 2023, no fewer than seven billionaire money managers have reduced their respective stakes in Nvidia. The June-ended quarter featured seven billionaire sellers, including (total shares sold in parenthesis):
Ken Griffin of Citadel (9,282,018 shares)
David Tepper of Appaloosa Management (3,730,000 shares)
Stanley Druckenmiller of Duquesne Family Office (1,545,370 shares)
Cliff Asness of AQR Capital Management (1,360,215 shares)
Israel Englander of Millennium Management (676,242 shares)
Steven Cohen of Point72 Asset Management (409,042 shares)
Philippe Laffont of Coatue Management (96,963 shares)
With Nvidia completing its largest-ever forward split (10 for 1) in June, these billionaires might have chosen to ring the register and diversify their respective portfolios. But there looks to be more to this story than simple profit taking.
Although Nvidia has undeniably benefited from its first-mover advantages as the standout supplier of AI graphics processing units (GPUs), competition is now coming at it from all angles.
With the debut of Nvidia's Blackwell chip delayed by at least three months due to reported design flaws and supply chain issues, and the company's prized H100 GPU backlogged, it should be relatively easy for external competitors like Advanced Micro Devices to find strong demand for their AI GPUs.
Moreover, Nvidia's top customers are signaling an eventual reduced reliance on the AI kingpin. Its four largest clients by net sales are all developing AI GPUs that they plan to use in their data centers. Even with Nvidia's chips maintaining their computing advantage, the writing is on the wall that these customers intend to use their cheaper internally developed hardware.
Billionaires might also be spooked by the persistent insider selling at Nvidia. While not all insider selling is necessarily nefarious (e.g., insiders sometimes sell stock to pay their tax bill), it is noteworthy that not one executive or board member has purchased shares on the open market since December 2020.
Lastly, billionaire asset managers might be concerned about what history tells us. Since the advent of the internet roughly three decades ago, every next-big-thing trend has worked its way through an early-stage bubble. It's unlikely that AI is going to be the exception.
But while billionaires were showing Nvidia to the door, they were busy scooping up shares of two other high-growth stock-split stocks.
Super Micro Computer
The first stock-split stock that struck the fancy of six billionaire money managers during the second quarter is Super Micro Computer (NASDAQ: SMCI), a specialist in customizable rack server and storage solutions. These billionaire buyers were:
Israel Englander of Millennium Management (553,323 shares)
Jeff Yass of Susquehanna International Group (508,814 shares)
Ken Griffin of Citadel (98,752 shares)
Steven Cohen of Point72 Asset Management (45,066 shares)
Ray Dalio of Bridgewater Associates (15,777 shares)
Cliff Asness of AQR Capital Management (1,040 shares)
With the stock catapulting to north of $1,200 during the first quarter, it's not in the least bit surprising to see Supermicro's board approving a 10-for-1 forward split, to take effect after trading ends on Sept. 30.
However, the prospect of a stock split isn't the primary draw for billionaires to Supermicro. The lure is the seemingly insatiable demand from businesses wanting to be among the first to capitalize on the AI revolution by training large language models and running generative Ai solutions. To do so, they'll need the necessary infrastructure in place, which Supermicro can provide.
The company's operating results have also given billionaires reason to be excited. Net sales jumped 110% to $14.9 billion in fiscal 2024 (the company's fiscal year ends on June 30), and the midpoint of its guidance calls for $28 billion in net revenue for the current year. This forecast screams that demand is exceptional at the moment.
But it won't be an easy ride. With its use of Nvidia's H100 GPUs in its customizable data-center rack servers, and the H100 backlogged, Supermicro finds itself at the mercy of its suppliers.
Furthermore, the company is the target of a short-seller report from Hindenburg Research, which has alleged accounting manipulation. Despite denying these allegations, management did delay the annual filing of its operating results, which did little to soothe investor concerns.
Despite its relatively inexpensive valuation, Super Micro Computer has a lot to prove to Wall Street and investors.
Broadcom
The other stock-split stock that billionaires very clearly favored over Nvidia in the June-ended quarter is AI networking solutions and services providers Broadcom (NASDAQ: AVGO). Seven billionaire investors took the plunge in the second quarter, including:
Ole Andreas Halvorsen of Viking Global Investors (2,930,970 shares)
Jeff Yass of Susquehanna International Group (2,347,500 shares)
Israel Englander of Millennium Management (2,096,440 shares)
Ken Griffin of Citadel (1,880,740 shares)
John Overdeck and David Siegel of Two Sigma Investments (1,332,230 shares)
Ken Fisher of Fisher Investments (865,090 shares)
Keeping with the theme of this list, Broadcom also announced a 10-for-1 forward split (the first in the company's history), which was completed in mid-July.
Broadcom's AI ties have certainly been the fuel behind its recent uptick in growth. In particular, the company's networking solutions are responsible for connecting large numbers of AI GPUs in order to reduce tail latency and maximize the computing potential of AI-accelerating hardware. Presumably, demand for its AI networking solutions will remain robust as long as businesses keep gobbling up AI GPUs.
However, billionaires might be equally excited about Broadcom having a solid foundation that extends well beyond artificial intelligence. It generates a significant amount of revenue and profits from the wireless chips and accessories it provides for next-generation smartphones. And it's a key provider of optical components used in automated industrial equipment, as well as networking solutions for next-gen vehicles.
Lastly, billionaires might be impressed with the company's track record of earnings-accretive acquisitions. For example, the $69 billion purchase of cloud-based virtualization software company VMware in November 2023 perfectly positions Broadcom to be an important player in helping businesses with their private- and hybrid-cloud needs.
With a more diverse revenue stream than Nvidia or Super Micro Computer, Broadcom would be best-positioned to navigate an AI bubble-bursting event, should one occur.
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Bigworld, I'm wondering if the miners are starting to play catch up with bullion in earnest? They've lagged a lot, but have the 'leverage' aspect to their bottom line earnings as bullion rises, so could really fly at some point. Might be starting?
Looking at the broader S+P 500, from a TA perspective it needs to put in a new high in this move in order to re-confirm the longer term uptrend. The high was in July, and the August move fell slightly short, so a new high now would allay any fear of a market roll over. I figure 5700 would do the trick.
With the DJIA, it already beat the July high in August, so is less of a worry TA-wise. But if we get into a recession, the industrials would be vulnerable due to their cyclicality.
Chart-wise, the Nasdaq is currently the worst of the 3 main indices in the near term, and needs to at least get above the Aug high (18000). Then will come the July high ~ 18,650, which might take a while. Seeing so much emphasis on one stock (NVDA) and sector (AI) likely contributed to Buffett reducing exposure to the market.
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Bigworld, Thanks for the Kunstler and Rinear updates. With the debate, I only watched bit and pieces, but didn't think Harris came off very well. But not surprisingly, the media spin machine kicked in with a glowing appraisal, lol. Figures, but Harris was basically invisible to news coverage the last 4 years, so I guess any exposure that isn't disastrous is considered a plus.
I thought the woman doing the questioning (Linsey Davis) was way more intelligent and articulate than Harris, so why not make her President? The Dem convention last month demonstrated that delegates and the democratic process don't matter, and if they are going to fix the election anyway, why not upgrade to a higher IQ candidate?
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Bigworld, Looking at Buffett's aggressive stock selling this year -
Beyond the stock market being overvalued, the likelihood of higher tax rates coming next year from the Harris administration may have been the clincher. Same with Ajit Jain, who is 72 and has been passed over as Buffett's chosen successor in favor of the younger Greg Abel (who is 62). He is sitting on huge gains from his Berkshire holdings, so might as well take the profits now and get the lower tax rate.
That's one explanation, but Buffett and Jain may also be privy to other info, or they see big problems likely for the banking sector, a repeat of last year's regional bank crisis, a coming recession, etc. Who knows, but the bottom line is it's a bad sign to see these guys aggressively bailing.
Big insider selling also happened in spring / summer of 1929, when numerous Wall St insiders got out of the market. We now know the Oct 1929 crash was triggered deliberately by suddenly calling in all the margin loans. The idea was to consolidate the US banking industry under Fed control, since most smaller banks were not part of the Federal Reserve System. But today it seems unlikely that they want to deliberately induce a crisis. On the contrary, they will be increasingly hard pressed to hold together the dollar reserve system in the face of - 1) the rising BRICS juggernaut and - 2) the worsening US Debt Bomb. So a deliberate crisis doesn't seem likely, but an unwanted unraveling will be a growing risk. But with the Fed now going dovish, that should reduce the stresses within the financial system, at least in the near / mid term.
I guess we'll see what happens. Fwiw, on the stock side I'm sitting with a 27% allocation (15% individual stocks, 12% in S+P 500). It's easy to bail on the S+P 500 portion, so that will be first to go if things start to unravel.
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Myth, Here's more from that band. The Last Minute Jam Band was in the '80s, so a little after my time. I see they also played at the Khyber Pass, which in the '70s was an after hours type club, but in the '80s started having bands -
Bigworld, Another bearish factor for stocks is the growing reality that regardless of who wins the election, things are going to suck. If Harris wins, we are stuck with the same disastrous crew of 'Team B' incompetents running domestic and foreign policy. If Trump wins, the media and most of the 'powers that be' will go into permanent freak out mode, with another impeachment attempt starting even before inauguration day. The vibe in the US will be even more toxic and dysfunctional (if that's possible).
Also on the 'Trump wins' side will be the large tariffs he intends to levy on most imports. This will raise prices and inflation, and thus interfere with the Fed's easing plans. Getting % rates down is essential for delaying the Debt Bomb crisis (50 trillion tipping point). Another risk with broad tariffs is a repeat of the Smoot Hawley debacle of the 1930s, which deepened and prolonged the Great Depression.
Ending the Ukraine war is more than enough for me to vote for Trump, but it's becoming apparent that we're in for a rough time regardless of who wins the election. Harris at least doesn't have the Biden blackmail aspect (VP payola) that Zelensky is using to keep US aid flowing to Ukraine. But without a change in the foreign policy wing, these incompetents like Blinken will continue bumbling right into WW 3. So Trump is probably the only realistic way to extricate ourselves from Ukraine, and as I see that's Job #1 and everything else is secondary. The current path likely leads to WW 3, which is what Kissinger was warning about prior to his death last year.
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Bigworld, When combined with Buffett's big stock sales this year, this new development (below) could be ominous -
>>> Berkshire Hathaway’s Jain Sells Over Half of Class A Shares
Bloomberg
by Alexandre Rajbhandari
September 12, 2024
https://finance.yahoo.com/news/berkshire-hathaway-jain-sells-over-143854442.html
(Bloomberg) -- Berkshire Hathaway Inc.’s vice chair of insurance operations, Ajit Jain, sold $139 million worth of his Class A shares in Warren Buffett’s conglomerate.
Jain, one of Buffett’s top lieutenants, disposed of 200 of the Class A shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the longterm executive is left with control of 166 such shares, 61 of which he directly owns...
<<<
Full article -
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=175076974
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Shiller P/E ratio - >>> The Oracle of Omaha's $56 billion silent warning foreshadows potential trouble for Wall Street
https://finance.yahoo.com/news/warren-buffetts-56-billion-silent-092100169.html
Although Warren Buffett has consistently shied away from offering negative takes on the U.S. economy and/or stock market during his nearly six-decade tenure as CEO of Berkshire Hathaway, $56 billion of net-equity security sales over an 18-month stretch speaks volumes without the Oracle of Omaha having to say a word.
The culprit for this consistent net-selling activity looks to be a historically pricey stock market and the irrational behavior of some of its participants.
In Buffett's annual letter to shareholders that was released in February, he had this to say about the "casino-like behavior" he wants no part of:
Though the stock market is massively larger than it was in our early years, today's active participants are neither more emotionally stable nor better taught than I was in school. For whatever reasons, markets now exhibit far more casino-like behaviors than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
At the end of the day, Warren Buffett and his team want a fair deal on a great business, and they aren't willing to waiver from this ideal. As the S&P 500's Shiller price-to-earnings (P/E) ratio shows, there simply aren't many good deals at the moment.
The Shiller P/E ratio, which is also known as the cyclical adjusted price-to-earnings ratio (CAPE ratio), is based on average inflation-adjusted earnings from the last 10 years. This differs from the traditional P/E ratio which only examines trailing-12-month earnings. The beauty of the Shiller P/E averaging earnings over a 10-year period is that it minimizes the impact of one-off events (e.g., the COVID-19 lockdowns).
As of the closing bell on May 3, the S&P 500's Shiller P/E stood at 34.05. This is nearly double its average reading of 17.11 when back-tested to 1871, and it's the third-highest reading during a bull market in over 150 years.
Perhaps the bigger concern is what's historically followed the five previous instances where the Shiller P/E ratio surpassed 30 during a bull market rally. Following all five prior instances, the S&P 500 or Dow Jones Industrial Average went on to lose between 20% and 89% of their respective value. Though the Shiller P/E ratio isn't a timing tool -- i.e., stocks can stay pricey for multiple quarters, if not years -- readings above 30 tend to be a precursor to big moves lower in the stock market.
The lack of desire by Buffett and his team to buy stocks during an 18-month stretch suggests they expect valuations to contract.
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Shiller P/E ratio - >>> The Oracle of Omaha's $56 billion silent warning foreshadows potential trouble for Wall Street
https://finance.yahoo.com/news/warren-buffetts-56-billion-silent-092100169.html
Although Warren Buffett has consistently shied away from offering negative takes on the U.S. economy and/or stock market during his nearly six-decade tenure as CEO of Berkshire Hathaway, $56 billion of net-equity security sales over an 18-month stretch speaks volumes without the Oracle of Omaha having to say a word.
The culprit for this consistent net-selling activity looks to be a historically pricey stock market and the irrational behavior of some of its participants.
In Buffett's annual letter to shareholders that was released in February, he had this to say about the "casino-like behavior" he wants no part of:
Though the stock market is massively larger than it was in our early years, today's active participants are neither more emotionally stable nor better taught than I was in school. For whatever reasons, markets now exhibit far more casino-like behaviors than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
At the end of the day, Warren Buffett and his team want a fair deal on a great business, and they aren't willing to waiver from this ideal. As the S&P 500's Shiller price-to-earnings (P/E) ratio shows, there simply aren't many good deals at the moment.
The Shiller P/E ratio, which is also known as the cyclical adjusted price-to-earnings ratio (CAPE ratio), is based on average inflation-adjusted earnings from the last 10 years. This differs from the traditional P/E ratio which only examines trailing-12-month earnings. The beauty of the Shiller P/E averaging earnings over a 10-year period is that it minimizes the impact of one-off events (e.g., the COVID-19 lockdowns).
As of the closing bell on May 3, the S&P 500's Shiller P/E stood at 34.05. This is nearly double its average reading of 17.11 when back-tested to 1871, and it's the third-highest reading during a bull market in over 150 years.
Perhaps the bigger concern is what's historically followed the five previous instances where the Shiller P/E ratio surpassed 30 during a bull market rally. Following all five prior instances, the S&P 500 or Dow Jones Industrial Average went on to lose between 20% and 89% of their respective value. Though the Shiller P/E ratio isn't a timing tool -- i.e., stocks can stay pricey for multiple quarters, if not years -- readings above 30 tend to be a precursor to big moves lower in the stock market.
The lack of desire by Buffett and his team to buy stocks during an 18-month stretch suggests they expect valuations to contract.
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>>> Berkshire Hathaway’s Jain Sells Over Half of Class A Shares
Bloomberg
by Alexandre Rajbhandari
September 12, 2024
https://finance.yahoo.com/news/berkshire-hathaway-jain-sells-over-143854442.html
(Bloomberg) -- Berkshire Hathaway Inc.’s vice chair of insurance operations, Ajit Jain, sold $139 million worth of his Class A shares in Warren Buffett’s conglomerate.
Jain, one of Buffett’s top lieutenants, disposed of 200 of the Class A shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the longterm executive is left with control of 166 such shares, 61 of which he directly owns.
When reached by phone, Jain declined to comment. Berkshire Hathaway didn’t immediately respond to a request for comment.
The move marks a shift for Jain, who added 50 Class A shares to his holding between March 2023 and March this year. Still, he has been trimming his Class B stake in the conglomerate over the years, selling more than 70,000 such shares from March 2020 to March 2024, according to past proxy filings.
The executive joined Berkshire Hathaway in 1986 to work on the conglomerate’s insurance operations, which include car insurer GEICO.
Buffett has long praised Jain, saying in 2017 that he’s probably made more money for Berkshire than Buffett has. In 2018, Jain and Greg Abel were named vice chairmen of the firm, with Abel, who’s a decade younger than Jain, eventually being tapped as Buffett’s successor.
Investors have questioned whether Jain would stick around to help Abel run things once Buffett, now 94, leaves the firm. Jain still owns more Class B shares than Abel.
“We continue to be comfortable that the interests of Mr. Jain and Mr. Abel are aligned with shareholders,” James Shanahan, an analyst at Edward Jones who covers Berkshire Hathaway, told Bloomberg.
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>>> Berkshire Hathaway’s Jain Sells Over Half of Class A Shares
Bloomberg
by Alexandre Rajbhandari
September 12, 2024
https://finance.yahoo.com/news/berkshire-hathaway-jain-sells-over-143854442.html
(Bloomberg) -- Berkshire Hathaway Inc.’s vice chair of insurance operations, Ajit Jain, sold $139 million worth of his Class A shares in Warren Buffett’s conglomerate.
Jain, one of Buffett’s top lieutenants, disposed of 200 of the Class A shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the longterm executive is left with control of 166 such shares, 61 of which he directly owns.
When reached by phone, Jain declined to comment. Berkshire Hathaway didn’t immediately respond to a request for comment.
The move marks a shift for Jain, who added 50 Class A shares to his holding between March 2023 and March this year. Still, he has been trimming his Class B stake in the conglomerate over the years, selling more than 70,000 such shares from March 2020 to March 2024, according to past proxy filings.
The executive joined Berkshire Hathaway in 1986 to work on the conglomerate’s insurance operations, which include car insurer GEICO.
Buffett has long praised Jain, saying in 2017 that he’s probably made more money for Berkshire than Buffett has. In 2018, Jain and Greg Abel were named vice chairmen of the firm, with Abel, who’s a decade younger than Jain, eventually being tapped as Buffett’s successor.
Investors have questioned whether Jain would stick around to help Abel run things once Buffett, now 94, leaves the firm. Jain still owns more Class B shares than Abel.
“We continue to be comfortable that the interests of Mr. Jain and Mr. Abel are aligned with shareholders,” James Shanahan, an analyst at Edward Jones who covers Berkshire Hathaway, told Bloomberg.
<<<
---
>>> Berkshire Hathaway’s Jain Sells Over Half of Class A Shares
Bloomberg
by Alexandre Rajbhandari
September 12, 2024
https://finance.yahoo.com/news/berkshire-hathaway-jain-sells-over-143854442.html
(Bloomberg) -- Berkshire Hathaway Inc.’s vice chair of insurance operations, Ajit Jain, sold $139 million worth of his Class A shares in Warren Buffett’s conglomerate.
Jain, one of Buffett’s top lieutenants, disposed of 200 of the Class A shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the longterm executive is left with control of 166 such shares, 61 of which he directly owns.
When reached by phone, Jain declined to comment. Berkshire Hathaway didn’t immediately respond to a request for comment.
The move marks a shift for Jain, who added 50 Class A shares to his holding between March 2023 and March this year. Still, he has been trimming his Class B stake in the conglomerate over the years, selling more than 70,000 such shares from March 2020 to March 2024, according to past proxy filings.
The executive joined Berkshire Hathaway in 1986 to work on the conglomerate’s insurance operations, which include car insurer GEICO.
Buffett has long praised Jain, saying in 2017 that he’s probably made more money for Berkshire than Buffett has. In 2018, Jain and Greg Abel were named vice chairmen of the firm, with Abel, who’s a decade younger than Jain, eventually being tapped as Buffett’s successor.
Investors have questioned whether Jain would stick around to help Abel run things once Buffett, now 94, leaves the firm. Jain still owns more Class B shares than Abel.
“We continue to be comfortable that the interests of Mr. Jain and Mr. Abel are aligned with shareholders,” James Shanahan, an analyst at Edward Jones who covers Berkshire Hathaway, told Bloomberg.
<<<
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Bigworld, Anything new from Rinear? Thanks.
Buffett's big selling activity this year makes you wonder what it is that he sees coming? He sold over half of the huge Apple position, and also a large part of the Bank of America position. Berkshire's cash hoard has zoomed to a massive $277 billion. Some observers are pointing to an increase in tax rates as a key motivation for Buffett to take profits now, but he might also be expecting a big market decline, recession, crisis of some kind? In the aftermath of the regional bank crisis last year, Buffett talked about having less faith in the US banking system, and then this year he's been unloading Bank of America stock.
You also have to wonder what happens after the election is over? The 'powers that be' have been motivated to keep things buoyant in the lead up to the election, but after Nov 5th, that motivation may be greatly reduced. Then there is the deteriorating geopolitical side, which the media has been largely ignoring.
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Btw, that Philly venue on South Street for bar bands was JC Dobbs, not the TLA, which is a bigger venue down the street, a converted movie theater. JC Dobbs is basically just a long bar, with a band stage at the end. That place was pretty dangerous, with all the booze being consumed, but exciting to venture into until the inevitable fights and brawls would start around midnight. Eventually they had punk bands in there, so a younger crowd and mostly hooligans, lol. JC Dobbs became pretty famous, with early Pearl Jam and Nirvana shows, indie bands, even some fusion -
Bigworld, That's a great summary by Kunstler on why US elections can now be largely 'fixed' at will. The changes made during the Covid pandemic made it much easier to cook the results, and it looks like most of those changes have been made permanent. Add in the biased media, which swoons and praises one candidate while demonizing the other, and the public will soon see the futility of voting at all.
Btw, the stock market's sudden reversal yesterday at ~ 10:40 sure seemed suspicious. It looked like the PPT / Plunge Protection kicked in. Just a guess, but with the media creating the narrative that the previous night's debate was won by Harris, they couldn't have the stock market crumble the next day.
Fwiw, I've been figuring the 'powers that be' would need to keep the financial markets fairly buoyant leading up to the election. So they downplay the many geopolitical risks, the Fed goes into dovish kumbaya mode, and when stocks start to waver, they provide an artificial boost. Makes sense anyway.
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Bigworld, While the miners have lagged bullion for some time, it looks like they could be starting to catch up.
Also, silver has lagged gold. Both formed Cup + Handles over the last decade, but gold broke out strong, while silver is taking longer.
I figure as the US 'Debt Bomb' worsens, people will increasingly turn to hard assets, gold, and silver. Also, while the gold-linked BRICS currency will take time to get established, it's an ominous development for the US dollar system.
>>> De-Dollarization Is Happening at a ‘Stunning’ Pace, Jen Says
Bloomberg
by Matthew Burgess
April 18, 2023
https://finance.yahoo.com/news/dollarization-happening-stunning-pace-jen-082144378.html
(Bloomberg) -- The dollar is losing its reserve status at a faster pace than generally accepted as many analysts have failed to account for last year’s wild exchange rate moves, according to Stephen Jen.
The greenback’s share in global reserves slid last year at 10 times the average speed of the past two decades as a number of countries looked for alternatives after Russia’s invasion of Ukraine triggered sanctions, Jen and his Eurizon SLJ Capital Ltd. colleague Joana Freire wrote in a note. Adjusting for exchange rate movements, the dollar has lost about 11% of its market share since 2016 and double that amount since 2008, they said.
“The dollar suffered a stunning collapse in 2022 in its market share as a reserve currency, presumably due to its muscular use of sanctions,” Jen and Freire wrote. “Exceptional actions taken by the US and its allies against Russia have startled large reserve-holding countries,” most of which are emerging economies from the so-called Global South, they said.
Jen is the former Morgan Stanley currency guru who coined the dollar smile theory.
Last year, Bloomberg’s gauge of the greenback surged as much as 16% as the conflict helped fuel a rise in global inflation that triggered widespread interest rate hikes which sank bond and currency markets alike. It finished the year up 6%.
Biden’s Dollar Weaponization Supercharges Hunt for Alternatives
Smaller nations are experimenting with de-dollarization while China and India are pushing to internationalize their currencies for trade settlement after the US and Europe cut Russian banks from the global financial messaging system known as SWIFT. There’s also concern the dollar may become a permanent political tool, or be used as a form of economic statecraft to put extra pressure on countries to enforce sanctions that they may disagree with.
The US currency now represents about 58% of total global official reserves, down from 73% in 2001 when it was the “indisputable hegemonic reserve,” the Eurizon pair said.
That said, the dollar’s role as an international currency won’t be challenged anytime soon as developing countries don’t yet have the ability to divest from the greenback for transactions due to its large, liquid and well-functioning financial markets, Jen and Freire wrote.
Still, the persistence of those conditions “is not preordained” and there may come a time when the rest of the world actively avoids using the dollar, they wrote.
“The prevailing view of ‘nothing-to-see-here’ on the US dollar as a reserve currency seems too innocuous and complacent,” the two wrote. “What needs to be appreciated by investors is that, while the Global South is unable to totally avoid using the dollar, much of it has already become unwilling to do so.”
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>> Spectrum <<
Yes, a lot of great memories there, though for loud rock music the acoustics in the Spectrum were pretty bad. Sound-wise, the Wells Fargo Center seems much better. I saw the Who at the new facility in 1996 (then the CoreStates Center), and the sound was phenomenal. Also lots of memories from the Tower Theater and Keswick, and the Mann Music Center. The one across the river in Camden also seemed pretty good.
The best venue for bar type bands was the TLA on South Street. We'd go there for an hour or two, but eventually a fight would break out so you had to be ready to head for the exits, lol. The one night I didn't go, and a relatively unknown band was there -- George Thorogood and the Destroyers (!), and my friends were all raving about how great it was. Not long after, the band became huge, and all over the radio. Those were sure some great days.
>> Ian Anderson <<
I saw Tull several times in the 1970s, and also a 1996 show in Phila where Ian played in a wheel chair with a cast on his leg (fell off the stage the previous night). Some great concerts back in the day -- the Who, SRV, Yes, ELP, a bunch more. Sure do miss those days..
>> Gold chart <<
Yes, looking good. It took 12 years for the full 'Cup + Handle' to develop, but the big breakout finally came this year. According to traditional 'chart rules', after a C+H breakout, it should rise an amount equal to the depth of the 'Cup', which was $1000 (1000 --> 2000). So the upside to expect is the 3000 level, based on chart rules anyway.
The new BRICS currency will reportedly have a partial gold backing, and central banks around the world increasingly see gold as a desirable reserve asset. So the US dollar system will be under increasing pressure as time goes on.
Meanwhile the ominous US 'Debt Bomb' continues to grow exponentially. Currently $35 trillion and rising fast. A tipping point in global confidence in the US dollar will arrive eventually, possibly $50 trillion (?) which would be in ~ 5 years. Hopefully that timeline can be extended, but either way, it looks like prudent investors will need to gradually shift more into hard assets like real estate, land, gold, etc. As a general strategy I'm figuring on fewer bonds, and more hard assets, over the next 3-5 years.
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>>> The last Monet: Almost blind, abstract and undervalued
El Pais
by Caio Ruvenal
Oct 2023
https://www.msn.com/en-us/travel/tripideas/the-last-monet-almost-blind-abstract-and-undervalued/ar-AA1h0ZEk?cvid=c54f359f988b46a39528bc5a45369819&ei=55
Curator Aurélie Gavoille and restorer Mónica Ruiz Trilleros examine a painting from Monet’s ‘Nenúfares’ series upon its arrival at CentroCentro.
Formless yellow, blue and green strokes create spots of color across three meters of canvas. There is little distinction between above and below in the painting Wisteria (1919-1920), by Claude Monet (1840-1926), which is much more abstract than other works he created during the Impressionist period in the last three decades of the 19th century. The oil painting belongs to his last period, when the artist suffered cataracts, which required surgery and affected the production of pieces that were not valued until long after his death.
The painting ‘Wisteria’ (1919-1920) by Claude Monet.
Wisteria is one of the works that best represents the last phase of the French painter. It is one of more than 40 that will be exhibited starting next Thursday at Madrid’s CentroCentro in the exhibition Monet: Masterpieces from the Musée Marmottan Monet. They come from the Marmottan, a 16th century mansion located eight kilometers from the center of Paris, which contains the largest and most important collection of the French painter, thanks largely to the donation of his son, Michel, in 1966. Michel, who did not have direct descendants, enriched the Marmottan collection with his father’s personal collection, made up largely of those final works that testify to his continued painting despite the ailment in his eyes.
The cataracts arrived in the midst of the artist’s research in his gardens in Giverny. The impressionist, increasingly distant from the human figure, was fascinated by his new surroundings, according to Aurélie Gavoille, one of the curators of the exhibition and conservation assistant at the Marmottan. The art historian Philippe Piguet comments that this rural town, where the Seine and Epta rivers meet and where Monet arrived in 1883, impressed him by “the quality of its light, due to the kind of microclimate that is created in the area by its topography and the great presence of water.”
The symptoms of cataracts — loss of clarity in vision, alteration in the perception of colors — did not stop Monet’s work, but they did affect both Monet’s practice and the results. “It was organized when he began to have problems with the tones in 1912. The palette always had the colors in the same order,” says Gavoille. The curator says that the artist’s color range was reduced and was dominated by browns, reds and yellows, “more violent, daring colors.” Several paintings from that period, now on display, feature those pigments with filmy, gestural brushstrokes, as in Rose Path (1920-1922), Japanese Bridges (1918-1924), Weeping Willow (1918-1919) and The Garden of Giverny (1922-1926).
The historian Emmanuelle Amiot-Saulnier writes in a text for the exhibition that the advance of the disease is very evident in the Japanese Bridges series. “The right eye loses the natural perception of depth typical of binocular vision, as reflected in the series, which is notable for its lack of depth.”
One of the paintings from the ‘Japanese Bridges’ series (1918-1924).
Monet was reluctant to have surgery. “It scared him because he was a painter, and he thought he was going to lose the intensity of the colors,” says Gavoille. He finally underwent the operation in 1923, “thanks to his friend Georges Clémenceau, who was also then president of the Council of France.” Gavoille says that Monet was never at risk of going blind: “Perhaps he was terrified of not being able to see anything and finding himself in blackness. Black was also a color that he totally refused to use in his paintings, but the operations went very well.” Amiot-Saulnier has a more dramatic interpretation: “He experienced all the restlessness of a progressive and unequal blindness in both eyes, to the point that in 1922 he had a tenth of vision left in the left, while on the right he only perceived movement.”
The ocular condition made Monet distance himself from contours, vanishing points, details, and other academic precepts, even though he rejected the abstract movement, says Gavoille. “There is a change in his way of painting, in the technique. The end of the exhibition is dedicated to that search for a more refined style of painting.” His Water Lilies series (1916-1919) is one of the most popular works of that final period: in 2014 one of these canvases was auctioned for 40 million euros. They are the apotheosis of his career after studying and reproducing the aquatic plants in small formats. They dispense with any perspective and eliminate the horizon so that the viewer is immersed in the mirror of water.
The painting ‘Rose Path’ (1920-1922).
The general curator of the exhibition and curator of the Marmottan, Sylvie Carlier, notes that Monet’s last production was little understood and appreciated by his contemporaries. It was revalued in the second half of the 20th century and highlighted mainly in the United States with exhibitions at the MoMA and the recognition of the abstract expressionists, “in particular Jackson Pollock (1912-1956), who was greatly inspired by it for his own technique,” says Carlier. Amiot-Saulnier agrees: “Monet, in short, granted Jackson Pollock the right to exist and to allow himself to be absorbed by his dripping like a shaman in a trance. It gave the painters of the Color Field movement the possibility of considering the canvas as a field of colors, not of shapes, as Mark Rothko (1903-1970) predicted, to absorb the viewer.”
Monet’s final period went from being the least valued — the six-meter panels went for the same price as a small Cézanne or Renoir, around €209,000 (around $223,600), according to historian Marianne Mathieu — to being the focus of exhibitions in the US. The MoMA not only exhibited works from this period but also acquired them, and critics such as William C. Seitz described them as the starting point of a new pictorial trend that paved the way for the avant-garde of the 20th century.
Staff unwrap the painting 'Parliament. Reflections in the Thames’ to hang it at CentroCentro.
The exhibition does not only include Monet’s last works: jewels such as Portrait of Poly (1886), which the impressionist made for a lobster fisherman who helped him carry his materials, are also on display. “Poly wanted to have the painting as a kind of reward, but Monet always refused to give it to him because he thought it was a very good portrait, and he didn’t make many. He even hung it in his living room,” says Gavoille. There is also Parliament. Reflections in the Thames (1905), in which he uses the structure as an excuse to paint the reflection of the water, and The Promenade, Argenteuil (1870-1875), which depicts Monet’s wife with one of his sons. But they all lead up to his later years’ exploration of the light that, paradoxically, cost him his eyes. As Cezanne said of him: “Monet is only an eye, but my God, what an eye!”
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>>> From attic to auction: A Rembrandt painting sells for $1.4M in Maine
Associated Press
9-4-24
https://www.msn.com/en-us/money/realestate/from-attic-to-auction-a-rembrandt-painting-sells-for-1-4m-in-maine/ar-AA1pZrWa?cvid=af7057756e5d46a0cd210a141f5cb8be&ei=27
THOMASTON, Maine (AP) — A Rembrandt discovered in an attic sold for $1.4 million.
The 17th century painting, “Portrait of a Girl,” by Dutch artist Rembrandt Harmenszoon van Rijn was discovered by art appraiser and auctioneer Kaja Veilleux in an attic in an estate in Camden, Maine. A label on the back of the frame noted that it was loaned to the Philadelphia Museum of Art for an exhibition in 1970.
“On house calls, we often go in blind, not knowing what we’ll find,” said Veilleux, from Thomaston Place Auction Galleries. “The home was filled with wonderful pieces but it was in the attic, among stacks of art, that we found this remarkable portrait.”
The painting had been in private family ownership since the 1920s, and the painting stayed with the family after being displayed in Philadelphia, the business said. The owner was not identified.
As to how it ended up in the attic, that, too, was a mystery.
Rembrandt, born in 1606, was a prolific artist who focused on a variety of subjects, from portraits to landscapes to historical and biblical scenes.
“Portrait of a Girl” was painted on an oak panel and mounted in a hand-carved gold Dutch frame, said Veilleux.
An auction by Thomaston Place Auction Galleries yielded a fierce competition on Aug. 24, he said. In the end, a European collector paid $1.41 million for the painting.
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>>> Unseen for 30 Years, Van Gogh Harbor Scene Is Poised to Shatter Auction Records in Asia
ArtNews
by Tessa Solomon
9-11-24
https://www.msn.com/en-us/travel/news/unseen-for-30-years-van-gogh-harbor-scene-is-poised-to-shatter-auction-records-in-asia/ar-AA1qpdX6?cvid=fcb4ccb31a6d43dab1f0e5e5d8b1052c&ei=15
For the first time in 30 years, Vincent van Gogh's Les canots amarrés (Moored Boats) is set to hit the auction block.
The 1887 painting will appear at Christie's Hong Kong on September 26 with an estimate of HKD $230 million–HKD $380 million (roughly $30 million to $50 million in US dollars). If the high estimate is met, Les canots amarrés will become the most expensive work by a Western artist sold at auction in Asia, beating the present record-holder, Jean-Michel Basquiat's 1982 painting Warrior, which fetched HK$323.6 million ($41.7 million) at Christie's in 2021.
Per the auction house, the painting was originally held in the collection of the Royal Family of Bourbon-Two Sicilies, descendants of the historic rulers of Sicily and southern Italy. It was purchased by Italian actress Edy Vessel at Sotheby's London in 1991, and is now being offered at Christie's by Vessel's daughter, Princess Camilla, who acquired it via a family trust.
The work is part of a trio of landscapes painted by the artist in Asnières during his two-year travels in France. The picturesque Asnières, located along the Seine to the northwest of Paris, was a popular weekend retreat for boaters. The two works believed to complete the trio, Ponts sur la Seine à Asnières and Restaurant de la Sirène, Asnières, are owned by the Emil Bührle Collection and Ashmolean Museum, respectively.
Max Carter, vice chairman of 20th/21st Century Art at Christie's Americas, said in a statement, "In the final years of his brief life, Vincent achieved perfect artistic freedom from narrowly prescribed colors, techniques, and subjects. Here, in 1887, he revels in these dearly won freedoms as he loosens his brush, brightens his palette, and celebrates the subtle harmonies of an exquisite summer day."
The painting is tentatively scheduled to be exhibited at Christie's new Asia Pacific Headquarters in Hong Kong from September 22 through 26.
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BAC - >>> Warren Buffett Just Sold Another $3.1 Billion Worth of One of Berkshire Hathaway's Largest Holdings. Here's Why.
Decoding Warren Buffett's stake reductions in Apple, BofA
Motley Fool
by Adam Levy
Sep 9, 2024
https://finance.yahoo.com/news/warren-buffett-just-sold-another-220100936.html
Warren Buffett hasn't seen a lot to like in the stock market in quite some time. In each of the last seven quarters, Buffett sold more stock from Berkshire Hathaway's equity portfolio than new purchases. And it looks like he's about to make it a full two years.
Last quarter, Buffett cut his company's massive position in Apple nearly in half. It was, by far, the biggest stock sale in the history of Berkshire Hathaway, amounting to roughly $72.6 billion. This quarter, Buffett has turned his attention to Berkshire's second-largest holding. At least, it used to be.
While we normally have to wait until Berkshire's quarterly filings with the SEC to see what moves the Oracle of Omaha and his team are making in the company's portfolio, there are some special exceptions. When an investor owns more than 10% of a publicly traded company, it must publicly report every stock purchase or sale within three days. That's why we know Buffett's been selling Berkshire's stake in Bank of America.
After selling $3.8 billion worth of the stock between July 17 and Aug. 1, Buffett sold another $3.1 billion in late August and early September. The value of Berkshire's holding has gone from $41.1 billion at the end of the second quarter to about $34 billion today.
Here's why Buffett may be selling Bank of America stock.
Making a bank withdrawal
At last year's Berkshire Hathaway shareholder meeting, Buffett expressed his concerns about the banking industry. This was right after the Silicon Valley Bank collapse, and Buffett expressed the idea that banking has changed substantially over the decades and will continue to change. The Silicon Valley bank run demonstrates that in the digital age, a bank run can happen in a matter of seconds. "If people think that deposits are sticky anymore, they're just living in a different era," he said.
Later, Buffett explained it's impossible to predict how the banking industry will change due to competing incentives from politicians, big bankers, consumers, and practically any other economic actor. But he said he does like one bank — Bank of America. "I like the management," he said.
He added a note about Berkshire's stock holding as well. "I proposed the deal with them, so I stick with it."
It's one thing to stick with a stock because you like the business and the management. It's another to stick with it out of loyalty to a decision made over a decade ago. Perhaps Buffett recognized that fallacy earlier this year as he turned his focus to taking gains on some of his biggest investments
As mentioned, Buffett sold a huge amount of Apple stock earlier this year. His reasoning, as he explained at this year's shareholder meeting, was his expectation that corporate tax rates will increase in the near future. It's better to take the gains now and pay the tax bill.
Of course, that only makes sense if the stock is trading for what Buffett asserts is its intrinsic value (or greater). So, he wouldn't liquidate everything Berkshire holds. He may have sold Bank of America stock this quarter as its valuation has climbed, and he holds a significant gain on the stock. He bought a good portion of Berkshire's Bank of America holdings for just $7.14 per share. The average sales price so far this quarter has been $41.25. On 150 million shares, that's over $5 billion in realized gains.
Should investors sell with Buffett?
Bank of America stock has performed well this year amid expectations that the Federal Reserve will start cutting rates. It looks like those rate cuts are finally coming to fruition, with the Fed expected to announce its first rate cut since 2020 later this month.
The bank suffered amid rising interest rates due to holding bonds on its balance sheet with longer-than-average durations. As such, the value of those bonds declined as the Fed raised rates. Meanwhile, Bank of America was stuck holding low-interest bonds while the market forced it to pay higher short-term interest rates. As a result, net interest income declined considerably.
But management believes it's hit a trough on net interest income, and the metric should start turning around next year. Bank of America should see an outsized benefit from declining interest rates as it still holds many long-duration bonds.
Furthermore, Buffett's concern about how "sticky" deposits are with the bank is less of a factor for Bank of America, considering its one of the biggest banks in the country, making it a Global Systemically Important Bank, G-SIB. That status gives depositors much more confidence in the bank and the systems protecting it.
The stock currently trades around its five-year average price to tangible book value, indicating it's probably fairly valued. Thus, it makes sense for Buffett to take advantage of the currently low tax rate, but investors interested in bank stocks may have a good opportunity to buy a great bank well positioned for declining interest rates.
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BAC - >>> Warren Buffett Just Sold Another $3.1 Billion Worth of One of Berkshire Hathaway's Largest Holdings. Here's Why.
Decoding Warren Buffett's stake reductions in Apple, BofA
Motley Fool
by Adam Levy
Sep 9, 2024
https://finance.yahoo.com/news/warren-buffett-just-sold-another-220100936.html
Warren Buffett hasn't seen a lot to like in the stock market in quite some time. In each of the last seven quarters, Buffett sold more stock from Berkshire Hathaway's equity portfolio than new purchases. And it looks like he's about to make it a full two years.
Last quarter, Buffett cut his company's massive position in Apple nearly in half. It was, by far, the biggest stock sale in the history of Berkshire Hathaway, amounting to roughly $72.6 billion. This quarter, Buffett has turned his attention to Berkshire's second-largest holding. At least, it used to be.
While we normally have to wait until Berkshire's quarterly filings with the SEC to see what moves the Oracle of Omaha and his team are making in the company's portfolio, there are some special exceptions. When an investor owns more than 10% of a publicly traded company, it must publicly report every stock purchase or sale within three days. That's why we know Buffett's been selling Berkshire's stake in Bank of America.
After selling $3.8 billion worth of the stock between July 17 and Aug. 1, Buffett sold another $3.1 billion in late August and early September. The value of Berkshire's holding has gone from $41.1 billion at the end of the second quarter to about $34 billion today.
Here's why Buffett may be selling Bank of America stock.
Making a bank withdrawal
At last year's Berkshire Hathaway shareholder meeting, Buffett expressed his concerns about the banking industry. This was right after the Silicon Valley Bank collapse, and Buffett expressed the idea that banking has changed substantially over the decades and will continue to change. The Silicon Valley bank run demonstrates that in the digital age, a bank run can happen in a matter of seconds. "If people think that deposits are sticky anymore, they're just living in a different era," he said.
Later, Buffett explained it's impossible to predict how the banking industry will change due to competing incentives from politicians, big bankers, consumers, and practically any other economic actor. But he said he does like one bank — Bank of America. "I like the management," he said.
He added a note about Berkshire's stock holding as well. "I proposed the deal with them, so I stick with it."
It's one thing to stick with a stock because you like the business and the management. It's another to stick with it out of loyalty to a decision made over a decade ago. Perhaps Buffett recognized that fallacy earlier this year as he turned his focus to taking gains on some of his biggest investments
As mentioned, Buffett sold a huge amount of Apple stock earlier this year. His reasoning, as he explained at this year's shareholder meeting, was his expectation that corporate tax rates will increase in the near future. It's better to take the gains now and pay the tax bill.
Of course, that only makes sense if the stock is trading for what Buffett asserts is its intrinsic value (or greater). So, he wouldn't liquidate everything Berkshire holds. He may have sold Bank of America stock this quarter as its valuation has climbed, and he holds a significant gain on the stock. He bought a good portion of Berkshire's Bank of America holdings for just $7.14 per share. The average sales price so far this quarter has been $41.25. On 150 million shares, that's over $5 billion in realized gains.
Should investors sell with Buffett?
Bank of America stock has performed well this year amid expectations that the Federal Reserve will start cutting rates. It looks like those rate cuts are finally coming to fruition, with the Fed expected to announce its first rate cut since 2020 later this month.
The bank suffered amid rising interest rates due to holding bonds on its balance sheet with longer-than-average durations. As such, the value of those bonds declined as the Fed raised rates. Meanwhile, Bank of America was stuck holding low-interest bonds while the market forced it to pay higher short-term interest rates. As a result, net interest income declined considerably.
But management believes it's hit a trough on net interest income, and the metric should start turning around next year. Bank of America should see an outsized benefit from declining interest rates as it still holds many long-duration bonds.
Furthermore, Buffett's concern about how "sticky" deposits are with the bank is less of a factor for Bank of America, considering its one of the biggest banks in the country, making it a Global Systemically Important Bank, G-SIB. That status gives depositors much more confidence in the bank and the systems protecting it.
The stock currently trades around its five-year average price to tangible book value, indicating it's probably fairly valued. Thus, it makes sense for Buffett to take advantage of the currently low tax rate, but investors interested in bank stocks may have a good opportunity to buy a great bank well positioned for declining interest rates.
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>>> Robot controlled by a king oyster mushroom blends living organisms and machines
by Katie Hunt
CNN
September 4, 2024
https://www.yahoo.com/news/scientists-build-robot-part-fungus-080020874.html
A wheeled bot rolls across the floor. A soft-bodied robotic star bends its five legs, moving with an awkward shuffle.
Powered by conventional electricity via plug or battery, these simple robotic creations would be unremarkable, but what sets these two robots apart is that they are controlled by a living entity: a king oyster mushroom.
By growing the mushroom’s mycelium, or rootlike threads, into the robot’s hardware, a team led by Cornell University researchers has engineered two types of robots that sense and respond to the environment by harnessing electrical signals made by the fungus and its sensitivity to light.
The robots are the latest accomplishment of scientists in a field known as biohybrid robotics who seek to combine biological, living materials such as plant and animal cells or insects with synthetic components to make partly living and partly engineered entities.
Biohybrid robots have yet to venture beyond the lab, but researchers hope one day robot jellyfish may explore oceans, sperm-powered bots may be able to deliver fertility treatments and cyborg cockroaches could search for survivors in the wake of an earthquake.
“Mechanisms, including computing, understanding and action as a response, are done in the biological world and in the artificial world that humans have created, and biology most of the time is better at it than our artificial systems are,” said Robert Shepherd, a senior author of a study detailing the robots published August 28 in the journal Science Robotics.
“Biohybridization is an attempt to find components in the biological world that we can harness, understand, and control to help our artificial systems work better,” added Shepherd, a professor of mechanical and aerospace engineering at Cornell University who leads the institution’s Organic Robotics Lab.
Part fungus, part machine
The team began by growing king oyster mushrooms (Pleurotus eryngii) in the lab from a simple kit ordered online. The researchers chose this species of mushroom because it grows easily and quickly.
They cultivated the mushroom’s threadlike structures or mycelium, which can form networks that, according to the study, can sense, communicate and transport nutrients — functioning a little like neurons in a brain. (Alas, it’s not strictly accurate to call the creations shroom bots. The mushroom is the fruit of the fungi — the robots are powered by the rootlike mycelium.)
Mycelium produces small electrical signals and can be connected to electrodes.
Andrew Adamatzky, a professor of unconventional computing at the University of the West of England in Bristol who builds fungal computers, said it isn’t clear how fungi produce electrical signals.
“No one knows for sure,” said Adamatzky, who wasn’t involved in the research but reviewed it before publication.
“Essentially, all living cells produce action-potential-like spikes, and fungi are no exception.”
The study team found it challenging to engineer a system that could detect and use the small electrical signals from the mycelia to command the robot.
“You have to make sure that your electrode touches in the right position because the mycelia are very thin. There is not a lot of biomass there,” said lead author Anand Mishra, a postdoctoral research associate in Cornell’s Organic Robotics Lab. “Then you culture them, and when the mycelia start growing, they wrap around the electrode.”
Mishra engineered an electrical interface that accurately reads the mycelia’s raw electrical activity, then processes and converts it into digital information that can activate the robot’s actuators or moving parts.
The robots were able to walk and roll as a response to the electrical spikes generated by the mycelia, and when Mishra and his colleagues stimulated the robots with ultraviolet light, they changed their gait and trajectory, showing that they were able to respond to their environment.
“Mushrooms don’t really like light,” Shepherd said. “Based on the difference in the intensities (of the light) you can get different functions of the robot. It will move faster or move away from the light.”
‘Exciting’ work
It’s exciting to see more work in biohybrid robotics that moves beyond human, animal and insect tissues, said Victoria Webster-Wood, an associate professor at Carnegie Mellon University’s Biohybrid and Organic Robotics Group in Pittsburgh.
“Fungi may have advantages over other biohybrid approaches in terms of the conditions required to keep them alive,” said Webster-Wood, who wasn’t involved in the research.
“If they are more robust to environmental conditions this could make them an excellent candidate for biohybrid robots for applications in agriculture and marine monitoring or exploration.”
The study noted that fungi can be cultivated in large quantities and can thrive in many different environments.
The researchers operated the rolling robot without a tether connecting it to the electrical hardware — a feat that Webster-Wood called particularly noteworthy.
“Truly tether-free biohybrid robots are a challenge in the field,” she said via email, “and seeing them achieve this with the mycelium system is quite exciting.”
Biohybrid robotics in the real world
Fungi-controlled technology could have applications in agriculture, Shepherd said.
“In this case we used light as the input, but in the future it will be chemical. The potential for future robots could be to sense soil chemistry in row crops and decide when to add more fertilizer, for example, perhaps mitigating downstream effects of agriculture like harmful algal blooms,” he told the Cornell Chronicle.
Fungi-controlled robots, and fungal computing more broadly, have huge potential, according to Adamatzky.
He said his lab has produced more than 30 sensing and computing devices using live fungi, including growing a self-healing skin for robots that can react to light and touch.
“When an adequate drivetrain (transmission system) is provided, the robot can, for example, monitor the health of ecological systems. The fungal controller would react to changes, such as air pollution, and guide the robot accordingly,” Adamatzky said via email.
“The emergence of yet another fungal device — a robotic controller — excitingly demonstrates the remarkable potential of fungi.”
Rafael Mestre, a lecturer at the School of Electronics and Computer Science at the University of Southampton in the United Kingdom who works on the social, ethical and policy implications of emergent technologies, said that if biohybrid robots become more sophisticated and are deployed in the ocean or another ecosystem it could disrupt the habitat, challenging the traditional distinction between life and machine.
“You are putting these things into the trophic chain of an ecosystem in a place where it shouldn’t be,” said Mestre, who was not involved in the new study. “If you release in big numbers it could be disruptive. I don’t see at this moment this particular research has strong ethical concerns … but if it continues to develop I think it’s quite crucial to consider what happens when we release this in the open.”
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>>> Robot controlled by a king oyster mushroom blends living organisms and machines
by Katie Hunt
CNN
September 4, 2024
https://www.yahoo.com/news/scientists-build-robot-part-fungus-080020874.html
A wheeled bot rolls across the floor. A soft-bodied robotic star bends its five legs, moving with an awkward shuffle.
Powered by conventional electricity via plug or battery, these simple robotic creations would be unremarkable, but what sets these two robots apart is that they are controlled by a living entity: a king oyster mushroom.
By growing the mushroom’s mycelium, or rootlike threads, into the robot’s hardware, a team led by Cornell University researchers has engineered two types of robots that sense and respond to the environment by harnessing electrical signals made by the fungus and its sensitivity to light.
The robots are the latest accomplishment of scientists in a field known as biohybrid robotics who seek to combine biological, living materials such as plant and animal cells or insects with synthetic components to make partly living and partly engineered entities.
Biohybrid robots have yet to venture beyond the lab, but researchers hope one day robot jellyfish may explore oceans, sperm-powered bots may be able to deliver fertility treatments and cyborg cockroaches could search for survivors in the wake of an earthquake.
“Mechanisms, including computing, understanding and action as a response, are done in the biological world and in the artificial world that humans have created, and biology most of the time is better at it than our artificial systems are,” said Robert Shepherd, a senior author of a study detailing the robots published August 28 in the journal Science Robotics.
“Biohybridization is an attempt to find components in the biological world that we can harness, understand, and control to help our artificial systems work better,” added Shepherd, a professor of mechanical and aerospace engineering at Cornell University who leads the institution’s Organic Robotics Lab.
Part fungus, part machine
The team began by growing king oyster mushrooms (Pleurotus eryngii) in the lab from a simple kit ordered online. The researchers chose this species of mushroom because it grows easily and quickly.
They cultivated the mushroom’s threadlike structures or mycelium, which can form networks that, according to the study, can sense, communicate and transport nutrients — functioning a little like neurons in a brain. (Alas, it’s not strictly accurate to call the creations shroom bots. The mushroom is the fruit of the fungi — the robots are powered by the rootlike mycelium.)
Mycelium produces small electrical signals and can be connected to electrodes.
Andrew Adamatzky, a professor of unconventional computing at the University of the West of England in Bristol who builds fungal computers, said it isn’t clear how fungi produce electrical signals.
“No one knows for sure,” said Adamatzky, who wasn’t involved in the research but reviewed it before publication.
“Essentially, all living cells produce action-potential-like spikes, and fungi are no exception.”
The study team found it challenging to engineer a system that could detect and use the small electrical signals from the mycelia to command the robot.
“You have to make sure that your electrode touches in the right position because the mycelia are very thin. There is not a lot of biomass there,” said lead author Anand Mishra, a postdoctoral research associate in Cornell’s Organic Robotics Lab. “Then you culture them, and when the mycelia start growing, they wrap around the electrode.”
Mishra engineered an electrical interface that accurately reads the mycelia’s raw electrical activity, then processes and converts it into digital information that can activate the robot’s actuators or moving parts.
The robots were able to walk and roll as a response to the electrical spikes generated by the mycelia, and when Mishra and his colleagues stimulated the robots with ultraviolet light, they changed their gait and trajectory, showing that they were able to respond to their environment.
“Mushrooms don’t really like light,” Shepherd said. “Based on the difference in the intensities (of the light) you can get different functions of the robot. It will move faster or move away from the light.”
‘Exciting’ work
It’s exciting to see more work in biohybrid robotics that moves beyond human, animal and insect tissues, said Victoria Webster-Wood, an associate professor at Carnegie Mellon University’s Biohybrid and Organic Robotics Group in Pittsburgh.
“Fungi may have advantages over other biohybrid approaches in terms of the conditions required to keep them alive,” said Webster-Wood, who wasn’t involved in the research.
“If they are more robust to environmental conditions this could make them an excellent candidate for biohybrid robots for applications in agriculture and marine monitoring or exploration.”
The study noted that fungi can be cultivated in large quantities and can thrive in many different environments.
The researchers operated the rolling robot without a tether connecting it to the electrical hardware — a feat that Webster-Wood called particularly noteworthy.
“Truly tether-free biohybrid robots are a challenge in the field,” she said via email, “and seeing them achieve this with the mycelium system is quite exciting.”
Biohybrid robotics in the real world
Fungi-controlled technology could have applications in agriculture, Shepherd said.
“In this case we used light as the input, but in the future it will be chemical. The potential for future robots could be to sense soil chemistry in row crops and decide when to add more fertilizer, for example, perhaps mitigating downstream effects of agriculture like harmful algal blooms,” he told the Cornell Chronicle.
Fungi-controlled robots, and fungal computing more broadly, have huge potential, according to Adamatzky.
He said his lab has produced more than 30 sensing and computing devices using live fungi, including growing a self-healing skin for robots that can react to light and touch.
“When an adequate drivetrain (transmission system) is provided, the robot can, for example, monitor the health of ecological systems. The fungal controller would react to changes, such as air pollution, and guide the robot accordingly,” Adamatzky said via email.
“The emergence of yet another fungal device — a robotic controller — excitingly demonstrates the remarkable potential of fungi.”
Rafael Mestre, a lecturer at the School of Electronics and Computer Science at the University of Southampton in the United Kingdom who works on the social, ethical and policy implications of emergent technologies, said that if biohybrid robots become more sophisticated and are deployed in the ocean or another ecosystem it could disrupt the habitat, challenging the traditional distinction between life and machine.
“You are putting these things into the trophic chain of an ecosystem in a place where it shouldn’t be,” said Mestre, who was not involved in the new study. “If you release in big numbers it could be disruptive. I don’t see at this moment this particular research has strong ethical concerns … but if it continues to develop I think it’s quite crucial to consider what happens when we release this in the open.”
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OXY, MA, ULTA - >>> 3 Value Stocks to Buy as Berkshire Hathaway Hit an All-Time High on Warren Buffett's Birthday
by Daniel Foelber
Motley Fool
Sep 9, 2024
https://finance.yahoo.com/news/3-value-stocks-buy-berkshire-083000492.html
Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) stock price hit an all-time high on Aug. 30 -- Warren Buffett's 94th birthday -- before proceeding to rise even higher on Sept. 3 despite a 2.1% sell-off in the S&P 500. The shares of the giant conglomerate are now up more than 27% year to date, outperforming both the S&P 500 and Nasdaq Composite by a wide margin.
Its portfolio managers have been on something of a selling spree lately -- making a large reduction in its Apple stake earlier this year and trimming its Bank of America position by 14.5% since mid-July.
However, Berkshire has maintained a sizable holding in oil and natural gas exploration and production company Occidental Petroleum (NYSE: OXY), owns American Express, Visa, and Mastercard (NYSE: MA), and initiated a position in Ulta Beauty (NASDAQ: ULTA) earlier this summer.
Here's why Occidental Petroleum, Mastercard, and Ulta stand out as three top value stocks to buy now.
Oxy can rake in the cash even at mediocre oil prices
Berkshire Hathaway owns 27.3% of Occidental Petroleum -- commonly referred to as Oxy. That stake, Berkshire's sixth-largest public equity holding, is worth more than $14 billion. But Oxy hasn't been a very good investment of late. The stock is hovering around a 52-week low.
Oil prices affect the fortunes of the entire oil and natural gas value chain, but especially exploration and production companies like Oxy that build their businesses around selling hydrocarbons for more than it costs to get those resources out of the ground. Unfortunately for Oxy and its peers, the price of West Texas Intermediate (WTI) crude oil -- the U.S. benchmark -- just fell below $70 a barrel to its lowest level so far this year.
Although Oxy can break even at a much lower oil price, $70 is significant because Oxy has based some of its key decisions around the assumption that prices will be at or above that level. In its fourth-quarter 2023 investor presentation, it used that threshold to predict year-one free cash flow (FCF) from its $12 billion acquisition of CrownRock. The lower the oil price, the lower the FCF, and the worse the acquisition will look -- at least in the short term. The good news is that CrownRock has plenty of acreage where the estimated breakeven levels are below $60 per barrel for WTI.
Oxy has also done an excellent job improving the health of its balance sheet by paying down debt. It's also aggressively investing in carbon capture and storage projects that could have long-term benefits for the company, both from an ESG (environmental, social, and governance) perspective and as a potential revenue stream in the form of carbon credits.
Oxy today trades at a dirt-cheap price-to-earnings (P/E) ratio of 13.5 and a price-to-FCF ratio of 13 -- meaning its earnings and FCF could fall and the stock would still be cheap. Now is a great time to scoop up shares of Berkshire's top energy company on sale.
Mastercard has a powerful moat
Credit card companies have proven to be phenomenal long-term investments. Mastercard and its closest peer, Visa, now have a combined market cap of nearly $1 trillion. And yet, they aren't necessarily overvalued.
Mastercard trades now at a forward P/E ratio of 33.3. That's higher than the S&P 500's trailing P/E ratio of 28.8, so even if Mastercard generates the earnings analysts expect over the next 12 months, it will still be more expensive than the S&P 500. With Mastercard, though, the value isn't just in the earnings, but the quality of the company and its growth trajectory.
Mastercard is an incredibly efficient business, with a 58.6% operating margin. It also has just $8.2 billion in total net long-term debt on its balance sheet, which is very small for a company of its size. Few companies in the S&P 500 can compete with Mastercard's profitability and financial health.
It also benefits from a huge network effect. Mastercard and Visa process the majority of credit card transactions in the U.S., and both are growing internationally. Fees are collected on both the number of transactions and the payment volume of total transactions. The more Mastercard debit and credit cards are in circulation, and the greater the partnerships with financial institutions like banks and credit unions, the more useful the network becomes to all participants, and the more incentive other customers and businesses have to join it.
Mastercard is expanding its value-added services business as consumers and merchants seek fraud prevention tools, better analytics, and cybersecurity solutions. This segment grew faster than Mastercard's core business last quarter.
Add it all up, and Mastercard stands out as a quality company that can continue delivering strong returns for investors.
Ulta is a catch-all way to play a recovery in cosmetics spending
Ulta is a new addition to Berkshire's portfolio. Although the position is valued at about a quarter-billion dollars -- much less than its other holdings -- Berkshire Hathaway now owns 1.5% of the retailer.
Ulta checks a lot of the boxes that Buffett and his team look for when searching for quality value stocks. The stock's valuation is significantly below historical median levels.
As you can see, Ulta's forward P/E ratio is above its current P/E -- meaning that analysts expect earnings to shrink in the next 12 months. There's no sugarcoating that Ulta's second-quarter 2024 earnings call was bleak, with management cutting the outlook for the second time this year. Competition and weak consumer spending were the headline concerns. But taking a step back, a slowdown in Ulta's growth is completely understandable.
The cosmetic industry boomed in recent years. And consumer trends toward more value-focused products -- like those sold by e.l.f. Beauty -- and away from premium-priced products like those sold by Estee Lauder or L'Oreal means lower margins and fewer reasons for customers to shop in its stores, try new products, or use Ulta's salon services.
That all adds up to a sluggish near-term outlook for the retailer. However, for investors with the patience to hold on as they wait for the industry to turn around, Ulta's dirt-cheap valuation and market position make it worth considering now.
<<<
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OXY, MA, ULTA - >>> 3 Value Stocks to Buy as Berkshire Hathaway Hit an All-Time High on Warren Buffett's Birthday
by Daniel Foelber
Motley Fool
Sep 9, 2024
https://finance.yahoo.com/news/3-value-stocks-buy-berkshire-083000492.html
Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) stock price hit an all-time high on Aug. 30 -- Warren Buffett's 94th birthday -- before proceeding to rise even higher on Sept. 3 despite a 2.1% sell-off in the S&P 500. The shares of the giant conglomerate are now up more than 27% year to date, outperforming both the S&P 500 and Nasdaq Composite by a wide margin.
Its portfolio managers have been on something of a selling spree lately -- making a large reduction in its Apple stake earlier this year and trimming its Bank of America position by 14.5% since mid-July.
However, Berkshire has maintained a sizable holding in oil and natural gas exploration and production company Occidental Petroleum (NYSE: OXY), owns American Express, Visa, and Mastercard (NYSE: MA), and initiated a position in Ulta Beauty (NASDAQ: ULTA) earlier this summer.
Here's why Occidental Petroleum, Mastercard, and Ulta stand out as three top value stocks to buy now.
Oxy can rake in the cash even at mediocre oil prices
Berkshire Hathaway owns 27.3% of Occidental Petroleum -- commonly referred to as Oxy. That stake, Berkshire's sixth-largest public equity holding, is worth more than $14 billion. But Oxy hasn't been a very good investment of late. The stock is hovering around a 52-week low.
Oil prices affect the fortunes of the entire oil and natural gas value chain, but especially exploration and production companies like Oxy that build their businesses around selling hydrocarbons for more than it costs to get those resources out of the ground. Unfortunately for Oxy and its peers, the price of West Texas Intermediate (WTI) crude oil -- the U.S. benchmark -- just fell below $70 a barrel to its lowest level so far this year.
Although Oxy can break even at a much lower oil price, $70 is significant because Oxy has based some of its key decisions around the assumption that prices will be at or above that level. In its fourth-quarter 2023 investor presentation, it used that threshold to predict year-one free cash flow (FCF) from its $12 billion acquisition of CrownRock. The lower the oil price, the lower the FCF, and the worse the acquisition will look -- at least in the short term. The good news is that CrownRock has plenty of acreage where the estimated breakeven levels are below $60 per barrel for WTI.
Oxy has also done an excellent job improving the health of its balance sheet by paying down debt. It's also aggressively investing in carbon capture and storage projects that could have long-term benefits for the company, both from an ESG (environmental, social, and governance) perspective and as a potential revenue stream in the form of carbon credits.
Oxy today trades at a dirt-cheap price-to-earnings (P/E) ratio of 13.5 and a price-to-FCF ratio of 13 -- meaning its earnings and FCF could fall and the stock would still be cheap. Now is a great time to scoop up shares of Berkshire's top energy company on sale.
Mastercard has a powerful moat
Credit card companies have proven to be phenomenal long-term investments. Mastercard and its closest peer, Visa, now have a combined market cap of nearly $1 trillion. And yet, they aren't necessarily overvalued.
Mastercard trades now at a forward P/E ratio of 33.3. That's higher than the S&P 500's trailing P/E ratio of 28.8, so even if Mastercard generates the earnings analysts expect over the next 12 months, it will still be more expensive than the S&P 500. With Mastercard, though, the value isn't just in the earnings, but the quality of the company and its growth trajectory.
Mastercard is an incredibly efficient business, with a 58.6% operating margin. It also has just $8.2 billion in total net long-term debt on its balance sheet, which is very small for a company of its size. Few companies in the S&P 500 can compete with Mastercard's profitability and financial health.
It also benefits from a huge network effect. Mastercard and Visa process the majority of credit card transactions in the U.S., and both are growing internationally. Fees are collected on both the number of transactions and the payment volume of total transactions. The more Mastercard debit and credit cards are in circulation, and the greater the partnerships with financial institutions like banks and credit unions, the more useful the network becomes to all participants, and the more incentive other customers and businesses have to join it.
Mastercard is expanding its value-added services business as consumers and merchants seek fraud prevention tools, better analytics, and cybersecurity solutions. This segment grew faster than Mastercard's core business last quarter.
Add it all up, and Mastercard stands out as a quality company that can continue delivering strong returns for investors.
Ulta is a catch-all way to play a recovery in cosmetics spending
Ulta is a new addition to Berkshire's portfolio. Although the position is valued at about a quarter-billion dollars -- much less than its other holdings -- Berkshire Hathaway now owns 1.5% of the retailer.
Ulta checks a lot of the boxes that Buffett and his team look for when searching for quality value stocks. The stock's valuation is significantly below historical median levels.
As you can see, Ulta's forward P/E ratio is above its current P/E -- meaning that analysts expect earnings to shrink in the next 12 months. There's no sugarcoating that Ulta's second-quarter 2024 earnings call was bleak, with management cutting the outlook for the second time this year. Competition and weak consumer spending were the headline concerns. But taking a step back, a slowdown in Ulta's growth is completely understandable.
The cosmetic industry boomed in recent years. And consumer trends toward more value-focused products -- like those sold by e.l.f. Beauty -- and away from premium-priced products like those sold by Estee Lauder or L'Oreal means lower margins and fewer reasons for customers to shop in its stores, try new products, or use Ulta's salon services.
That all adds up to a sluggish near-term outlook for the retailer. However, for investors with the patience to hold on as they wait for the industry to turn around, Ulta's dirt-cheap valuation and market position make it worth considering now.
<<<
---
OXY, MA, ULTA - >>> 3 Value Stocks to Buy as Berkshire Hathaway Hit an All-Time High on Warren Buffett's Birthday
by Daniel Foelber
Motley Fool
Sep 9, 2024
https://finance.yahoo.com/news/3-value-stocks-buy-berkshire-083000492.html
Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) stock price hit an all-time high on Aug. 30 -- Warren Buffett's 94th birthday -- before proceeding to rise even higher on Sept. 3 despite a 2.1% sell-off in the S&P 500. The shares of the giant conglomerate are now up more than 27% year to date, outperforming both the S&P 500 and Nasdaq Composite by a wide margin.
Its portfolio managers have been on something of a selling spree lately -- making a large reduction in its Apple stake earlier this year and trimming its Bank of America position by 14.5% since mid-July.
However, Berkshire has maintained a sizable holding in oil and natural gas exploration and production company Occidental Petroleum (NYSE: OXY), owns American Express, Visa, and Mastercard (NYSE: MA), and initiated a position in Ulta Beauty (NASDAQ: ULTA) earlier this summer.
Here's why Occidental Petroleum, Mastercard, and Ulta stand out as three top value stocks to buy now.
Oxy can rake in the cash even at mediocre oil prices
Berkshire Hathaway owns 27.3% of Occidental Petroleum -- commonly referred to as Oxy. That stake, Berkshire's sixth-largest public equity holding, is worth more than $14 billion. But Oxy hasn't been a very good investment of late. The stock is hovering around a 52-week low.
Oil prices affect the fortunes of the entire oil and natural gas value chain, but especially exploration and production companies like Oxy that build their businesses around selling hydrocarbons for more than it costs to get those resources out of the ground. Unfortunately for Oxy and its peers, the price of West Texas Intermediate (WTI) crude oil -- the U.S. benchmark -- just fell below $70 a barrel to its lowest level so far this year.
Although Oxy can break even at a much lower oil price, $70 is significant because Oxy has based some of its key decisions around the assumption that prices will be at or above that level. In its fourth-quarter 2023 investor presentation, it used that threshold to predict year-one free cash flow (FCF) from its $12 billion acquisition of CrownRock. The lower the oil price, the lower the FCF, and the worse the acquisition will look -- at least in the short term. The good news is that CrownRock has plenty of acreage where the estimated breakeven levels are below $60 per barrel for WTI.
Oxy has also done an excellent job improving the health of its balance sheet by paying down debt. It's also aggressively investing in carbon capture and storage projects that could have long-term benefits for the company, both from an ESG (environmental, social, and governance) perspective and as a potential revenue stream in the form of carbon credits.
Oxy today trades at a dirt-cheap price-to-earnings (P/E) ratio of 13.5 and a price-to-FCF ratio of 13 -- meaning its earnings and FCF could fall and the stock would still be cheap. Now is a great time to scoop up shares of Berkshire's top energy company on sale.
Mastercard has a powerful moat
Credit card companies have proven to be phenomenal long-term investments. Mastercard and its closest peer, Visa, now have a combined market cap of nearly $1 trillion. And yet, they aren't necessarily overvalued.
Mastercard trades now at a forward P/E ratio of 33.3. That's higher than the S&P 500's trailing P/E ratio of 28.8, so even if Mastercard generates the earnings analysts expect over the next 12 months, it will still be more expensive than the S&P 500. With Mastercard, though, the value isn't just in the earnings, but the quality of the company and its growth trajectory.
Mastercard is an incredibly efficient business, with a 58.6% operating margin. It also has just $8.2 billion in total net long-term debt on its balance sheet, which is very small for a company of its size. Few companies in the S&P 500 can compete with Mastercard's profitability and financial health.
It also benefits from a huge network effect. Mastercard and Visa process the majority of credit card transactions in the U.S., and both are growing internationally. Fees are collected on both the number of transactions and the payment volume of total transactions. The more Mastercard debit and credit cards are in circulation, and the greater the partnerships with financial institutions like banks and credit unions, the more useful the network becomes to all participants, and the more incentive other customers and businesses have to join it.
Mastercard is expanding its value-added services business as consumers and merchants seek fraud prevention tools, better analytics, and cybersecurity solutions. This segment grew faster than Mastercard's core business last quarter.
Add it all up, and Mastercard stands out as a quality company that can continue delivering strong returns for investors.
Ulta is a catch-all way to play a recovery in cosmetics spending
Ulta is a new addition to Berkshire's portfolio. Although the position is valued at about a quarter-billion dollars -- much less than its other holdings -- Berkshire Hathaway now owns 1.5% of the retailer.
Ulta checks a lot of the boxes that Buffett and his team look for when searching for quality value stocks. The stock's valuation is significantly below historical median levels.
As you can see, Ulta's forward P/E ratio is above its current P/E -- meaning that analysts expect earnings to shrink in the next 12 months. There's no sugarcoating that Ulta's second-quarter 2024 earnings call was bleak, with management cutting the outlook for the second time this year. Competition and weak consumer spending were the headline concerns. But taking a step back, a slowdown in Ulta's growth is completely understandable.
The cosmetic industry boomed in recent years. And consumer trends toward more value-focused products -- like those sold by e.l.f. Beauty -- and away from premium-priced products like those sold by Estee Lauder or L'Oreal means lower margins and fewer reasons for customers to shop in its stores, try new products, or use Ulta's salon services.
That all adds up to a sluggish near-term outlook for the retailer. However, for investors with the patience to hold on as they wait for the industry to turn around, Ulta's dirt-cheap valuation and market position make it worth considering now.
<<<
---
Sirius XM - >>> The Most-Anticipated Reverse Stock Split of the Year Has Arrived -- and This Company Is a Screaming Bargain
by Sean Williams
Motley Fool
Sep 10, 2024
https://finance.yahoo.com/news/most-anticipated-reverse-stock-split-084100466.html
Since 2024 began, hype surrounding the artificial intelligence (AI) revolution has played a major role in lifting Wall Street's three major stock indexes to multiple record-closing highs. But AI isn't the only trend pushing the broader market higher. The euphoria surrounding stock splits has played an equally important role.
A stock split allows publicly traded companies to adjust their share price and outstanding share count by the same factor, without altering their market cap or underlying operating performance. It's a purely cosmetic maneuver that can have important consequences.
There are two varieties of stock splits, with investors decisively favoring one over the other. A reverse-stock split is geared at increasing a company's nominal share price, usually with the goal of ensuring it meets minimum continued listing standards for a major stock exchange. Conversely, a forward-stock split is designed to reduce a company's share price to make it more nominally affordable for everyday investors who can't purchase fractional shares through their broker.
Generally speaking, reverse splits are conducted by struggling businesses whose share price is floundering. Comparatively, companies completing forward splits are typically out-innovating and out-executing their peers. Unsurprisingly, most investors tend to focus on high-flying companies enacting forward splits.
Since late January, 13 prominent businesses have announced or completed a stock split -- 12 of which are of the forward-split variety -- including AI darlings Nvidia, Broadcom, and Super Micro Computer.
But it's the lone high-profile reverse-stock split that deserves the attention of Wall Street and investors today.
The most-awaited reverse-stock split of 2024 is now complete
In mid-December, Sirius XM Holdings (NASDAQ: SIRI) and Liberty Media's Sirius XM tracking stock, Liberty Sirius XM Group (NASDAQ: LSXMA)(NASDAQ: LSXMB)(NASDAQ: LSXMK), announced their intention to merge into a single class of shares. Liberty Media is the majority stakeholder in Sirius XM, and the variance in the price between Liberty Sirius XM Group's three classes of shares and the share price for Sirius XM stock has been head-scratching at times.
Last week, the final exchange ratio for this merger was announced, with Liberty Sirius XM Group stakeholders redeeming their shares "in exchange for 0.8375 of a share of common stock of New Sirius." Liberty Sirius XM Group stopped trading after the close of business yesterday, Sept. 9, which means today, Sept. 10, marks the first day of a single, non-confusing, class of Sirius XM shares.
But there's more to this combination than just getting the exchange ratio correct and ending the confusion of multiple shares classes.
In mid-June, Sirius XM announced that, upon consummation of the merger with Liberty Sirius XM Group, a 1-for-10 reverse-stock split would be conducted. This reverse split, which is now complete, has reduced the company's outstanding share count from well over 3 billion to an estimated 339.1 million shares.
What makes this reverse-stock split so unique is that it's not being executed out of weakness. In other words, Sirius XM was in no danger of delisting from the Nasdaq stock exchange.
Instead, it was enacted to increase its share price from the $3 to $6 range that it's hovered around for years to one that's more likely to attract institutional investors. Some money managers will avoid stocks priced below $5 for fear of increased volatility. Sirius XM's 1-for-10 reverse split eliminates this minor concern and should put the company back on the radar of top-tier money managers.
Sirius XM is a screaming bargain for opportunistic long-term investors
In addition to being Wall Street's only high-profile reverse-stock split of 2024, Sirius XM Holdings is, arguably, the top bargain among the 13 companies to have announced or completed a split this year.
Though I'll get to the figures that qualify Sirius XM as a "screaming bargain" in a moment, let me walk you through a few of the competitive advantages that make it a stock you can safely own for years to come.
To begin with, it's the only licensed satellite-radio operator. While this doesn't mean it's devoid of competition, it does convey that Sirius XM is a legal monopoly. As such, it affords the company exceptional pricing power with its monthly and annual subscriptions.
Another advantage to Sirius XM's operating model is its cost structure. While some of its expenses, such as royalties and talent acquisition, are going to fluctuate from quarter to quarter, transmission and equipment expenses typically don't change, regardless of how many subscribers the company has. If Sirius XM can expand its subscriber base, it should have a clear path to improve its operating margin over time, largely thanks to some of its costs being highly transparent and predictable.
A third competitive edge Sirius XM holds over traditional radio operators is the path by which revenue is generated. Online and terrestrial radio providers are overwhelmingly reliant on advertising to pay the bills. While this strategy works well during lengthy periods of economic expansion, it can lead to some big question marks when recessions inevitably occur.
Sirius XM has brought in less than 20% of its sales through the first six months from advertising. Comparatively, almost 77% of its revenue can be traced to subscriptions. There's a considerably lower likelihood of satellite-radio subscribers cancelling their service during a recession than there is of businesses cutting their ad spending. This tends to lead to more predictable cash flow for Sirius XM in any economic climate.
With these competitive advantages in mind, let me now address how historically cheap Sirius XM's stock is. Based on where shares closed on Sept. 6, Sirius XM can be scooped up by opportunistic long-term investors for 8.3 times forward-year earnings. This represents a 53% discount to its average forward price-to-earnings (P/E) multiple over the trailing-five-year period, and is a stone's throw away from its lowest forward P/E multiples since going public in September 1994.
Sirius XM is historically cheap relative to its cash flow generation, too. Its multiple of 5.6 times forecast operating cash flow in the current year (2024) equates to a 43% discount to its average price-to-cash-flow multiple over the last five years.
Tack on a sustainable 3.9% yield for good measure, and you have a screaming bargain that also happens to be Wall Street's most-anticipated reverse-stock split of 2024.
<<<
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Sirius XM - >>> The Most-Anticipated Reverse Stock Split of the Year Has Arrived -- and This Company Is a Screaming Bargain
by Sean Williams
Motley Fool
Sep 10, 2024
https://finance.yahoo.com/news/most-anticipated-reverse-stock-split-084100466.html
Since 2024 began, hype surrounding the artificial intelligence (AI) revolution has played a major role in lifting Wall Street's three major stock indexes to multiple record-closing highs. But AI isn't the only trend pushing the broader market higher. The euphoria surrounding stock splits has played an equally important role.
A stock split allows publicly traded companies to adjust their share price and outstanding share count by the same factor, without altering their market cap or underlying operating performance. It's a purely cosmetic maneuver that can have important consequences.
There are two varieties of stock splits, with investors decisively favoring one over the other. A reverse-stock split is geared at increasing a company's nominal share price, usually with the goal of ensuring it meets minimum continued listing standards for a major stock exchange. Conversely, a forward-stock split is designed to reduce a company's share price to make it more nominally affordable for everyday investors who can't purchase fractional shares through their broker.
Generally speaking, reverse splits are conducted by struggling businesses whose share price is floundering. Comparatively, companies completing forward splits are typically out-innovating and out-executing their peers. Unsurprisingly, most investors tend to focus on high-flying companies enacting forward splits.
Since late January, 13 prominent businesses have announced or completed a stock split -- 12 of which are of the forward-split variety -- including AI darlings Nvidia, Broadcom, and Super Micro Computer.
But it's the lone high-profile reverse-stock split that deserves the attention of Wall Street and investors today.
The most-awaited reverse-stock split of 2024 is now complete
In mid-December, Sirius XM Holdings (NASDAQ: SIRI) and Liberty Media's Sirius XM tracking stock, Liberty Sirius XM Group (NASDAQ: LSXMA)(NASDAQ: LSXMB)(NASDAQ: LSXMK), announced their intention to merge into a single class of shares. Liberty Media is the majority stakeholder in Sirius XM, and the variance in the price between Liberty Sirius XM Group's three classes of shares and the share price for Sirius XM stock has been head-scratching at times.
Last week, the final exchange ratio for this merger was announced, with Liberty Sirius XM Group stakeholders redeeming their shares "in exchange for 0.8375 of a share of common stock of New Sirius." Liberty Sirius XM Group stopped trading after the close of business yesterday, Sept. 9, which means today, Sept. 10, marks the first day of a single, non-confusing, class of Sirius XM shares.
But there's more to this combination than just getting the exchange ratio correct and ending the confusion of multiple shares classes.
In mid-June, Sirius XM announced that, upon consummation of the merger with Liberty Sirius XM Group, a 1-for-10 reverse-stock split would be conducted. This reverse split, which is now complete, has reduced the company's outstanding share count from well over 3 billion to an estimated 339.1 million shares.
What makes this reverse-stock split so unique is that it's not being executed out of weakness. In other words, Sirius XM was in no danger of delisting from the Nasdaq stock exchange.
Instead, it was enacted to increase its share price from the $3 to $6 range that it's hovered around for years to one that's more likely to attract institutional investors. Some money managers will avoid stocks priced below $5 for fear of increased volatility. Sirius XM's 1-for-10 reverse split eliminates this minor concern and should put the company back on the radar of top-tier money managers.
Sirius XM is a screaming bargain for opportunistic long-term investors
In addition to being Wall Street's only high-profile reverse-stock split of 2024, Sirius XM Holdings is, arguably, the top bargain among the 13 companies to have announced or completed a split this year.
Though I'll get to the figures that qualify Sirius XM as a "screaming bargain" in a moment, let me walk you through a few of the competitive advantages that make it a stock you can safely own for years to come.
To begin with, it's the only licensed satellite-radio operator. While this doesn't mean it's devoid of competition, it does convey that Sirius XM is a legal monopoly. As such, it affords the company exceptional pricing power with its monthly and annual subscriptions.
Another advantage to Sirius XM's operating model is its cost structure. While some of its expenses, such as royalties and talent acquisition, are going to fluctuate from quarter to quarter, transmission and equipment expenses typically don't change, regardless of how many subscribers the company has. If Sirius XM can expand its subscriber base, it should have a clear path to improve its operating margin over time, largely thanks to some of its costs being highly transparent and predictable.
A third competitive edge Sirius XM holds over traditional radio operators is the path by which revenue is generated. Online and terrestrial radio providers are overwhelmingly reliant on advertising to pay the bills. While this strategy works well during lengthy periods of economic expansion, it can lead to some big question marks when recessions inevitably occur.
Sirius XM has brought in less than 20% of its sales through the first six months from advertising. Comparatively, almost 77% of its revenue can be traced to subscriptions. There's a considerably lower likelihood of satellite-radio subscribers cancelling their service during a recession than there is of businesses cutting their ad spending. This tends to lead to more predictable cash flow for Sirius XM in any economic climate.
With these competitive advantages in mind, let me now address how historically cheap Sirius XM's stock is. Based on where shares closed on Sept. 6, Sirius XM can be scooped up by opportunistic long-term investors for 8.3 times forward-year earnings. This represents a 53% discount to its average forward price-to-earnings (P/E) multiple over the trailing-five-year period, and is a stone's throw away from its lowest forward P/E multiples since going public in September 1994.
Sirius XM is historically cheap relative to its cash flow generation, too. Its multiple of 5.6 times forecast operating cash flow in the current year (2024) equates to a 43% discount to its average price-to-cash-flow multiple over the last five years.
Tack on a sustainable 3.9% yield for good measure, and you have a screaming bargain that also happens to be Wall Street's most-anticipated reverse-stock split of 2024.
<<<
---
Sirius XM - >>> The Most-Anticipated Reverse Stock Split of the Year Has Arrived -- and This Company Is a Screaming Bargain
by Sean Williams
Motley Fool
Sep 10, 2024
https://finance.yahoo.com/news/most-anticipated-reverse-stock-split-084100466.html
Since 2024 began, hype surrounding the artificial intelligence (AI) revolution has played a major role in lifting Wall Street's three major stock indexes to multiple record-closing highs. But AI isn't the only trend pushing the broader market higher. The euphoria surrounding stock splits has played an equally important role.
A stock split allows publicly traded companies to adjust their share price and outstanding share count by the same factor, without altering their market cap or underlying operating performance. It's a purely cosmetic maneuver that can have important consequences.
There are two varieties of stock splits, with investors decisively favoring one over the other. A reverse-stock split is geared at increasing a company's nominal share price, usually with the goal of ensuring it meets minimum continued listing standards for a major stock exchange. Conversely, a forward-stock split is designed to reduce a company's share price to make it more nominally affordable for everyday investors who can't purchase fractional shares through their broker.
Generally speaking, reverse splits are conducted by struggling businesses whose share price is floundering. Comparatively, companies completing forward splits are typically out-innovating and out-executing their peers. Unsurprisingly, most investors tend to focus on high-flying companies enacting forward splits.
Since late January, 13 prominent businesses have announced or completed a stock split -- 12 of which are of the forward-split variety -- including AI darlings Nvidia, Broadcom, and Super Micro Computer.
But it's the lone high-profile reverse-stock split that deserves the attention of Wall Street and investors today.
The most-awaited reverse-stock split of 2024 is now complete
In mid-December, Sirius XM Holdings (NASDAQ: SIRI) and Liberty Media's Sirius XM tracking stock, Liberty Sirius XM Group (NASDAQ: LSXMA)(NASDAQ: LSXMB)(NASDAQ: LSXMK), announced their intention to merge into a single class of shares. Liberty Media is the majority stakeholder in Sirius XM, and the variance in the price between Liberty Sirius XM Group's three classes of shares and the share price for Sirius XM stock has been head-scratching at times.
Last week, the final exchange ratio for this merger was announced, with Liberty Sirius XM Group stakeholders redeeming their shares "in exchange for 0.8375 of a share of common stock of New Sirius." Liberty Sirius XM Group stopped trading after the close of business yesterday, Sept. 9, which means today, Sept. 10, marks the first day of a single, non-confusing, class of Sirius XM shares.
But there's more to this combination than just getting the exchange ratio correct and ending the confusion of multiple shares classes.
In mid-June, Sirius XM announced that, upon consummation of the merger with Liberty Sirius XM Group, a 1-for-10 reverse-stock split would be conducted. This reverse split, which is now complete, has reduced the company's outstanding share count from well over 3 billion to an estimated 339.1 million shares.
What makes this reverse-stock split so unique is that it's not being executed out of weakness. In other words, Sirius XM was in no danger of delisting from the Nasdaq stock exchange.
Instead, it was enacted to increase its share price from the $3 to $6 range that it's hovered around for years to one that's more likely to attract institutional investors. Some money managers will avoid stocks priced below $5 for fear of increased volatility. Sirius XM's 1-for-10 reverse split eliminates this minor concern and should put the company back on the radar of top-tier money managers.
Sirius XM is a screaming bargain for opportunistic long-term investors
In addition to being Wall Street's only high-profile reverse-stock split of 2024, Sirius XM Holdings is, arguably, the top bargain among the 13 companies to have announced or completed a split this year.
Though I'll get to the figures that qualify Sirius XM as a "screaming bargain" in a moment, let me walk you through a few of the competitive advantages that make it a stock you can safely own for years to come.
To begin with, it's the only licensed satellite-radio operator. While this doesn't mean it's devoid of competition, it does convey that Sirius XM is a legal monopoly. As such, it affords the company exceptional pricing power with its monthly and annual subscriptions.
Another advantage to Sirius XM's operating model is its cost structure. While some of its expenses, such as royalties and talent acquisition, are going to fluctuate from quarter to quarter, transmission and equipment expenses typically don't change, regardless of how many subscribers the company has. If Sirius XM can expand its subscriber base, it should have a clear path to improve its operating margin over time, largely thanks to some of its costs being highly transparent and predictable.
A third competitive edge Sirius XM holds over traditional radio operators is the path by which revenue is generated. Online and terrestrial radio providers are overwhelmingly reliant on advertising to pay the bills. While this strategy works well during lengthy periods of economic expansion, it can lead to some big question marks when recessions inevitably occur.
Sirius XM has brought in less than 20% of its sales through the first six months from advertising. Comparatively, almost 77% of its revenue can be traced to subscriptions. There's a considerably lower likelihood of satellite-radio subscribers cancelling their service during a recession than there is of businesses cutting their ad spending. This tends to lead to more predictable cash flow for Sirius XM in any economic climate.
With these competitive advantages in mind, let me now address how historically cheap Sirius XM's stock is. Based on where shares closed on Sept. 6, Sirius XM can be scooped up by opportunistic long-term investors for 8.3 times forward-year earnings. This represents a 53% discount to its average forward price-to-earnings (P/E) multiple over the trailing-five-year period, and is a stone's throw away from its lowest forward P/E multiples since going public in September 1994.
Sirius XM is historically cheap relative to its cash flow generation, too. Its multiple of 5.6 times forecast operating cash flow in the current year (2024) equates to a 43% discount to its average price-to-cash-flow multiple over the last five years.
Tack on a sustainable 3.9% yield for good measure, and you have a screaming bargain that also happens to be Wall Street's most-anticipated reverse-stock split of 2024.
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>>> Sirius XM Stock Has a Good Debut as Independent Company. Berkshire Hathaway Becomes Top Shareholder.
Bloomberg
by Andrew Bary
Sept 10, 2024
https://www.barrons.com/articles/sirius-xm-stock-berkshire-hathaway-buffett-ca45b84c
An independent Sirius XM Holdings had an encouraging debut Tuesday, as Berkshire Hathaway emerged as the largest shareholder with an estimated 25% stake—replacing Liberty Media (FWONA) and its control holder, media mogul John Malone.
Sirius XM Holdings stock gained 2.6% Tuesday to $27.38, after trading as low as $24.43 earlier in the session.
A combination occurred late Monday of Sirius XM with Liberty Sirius XM Holdings, a tracking stock that held about 83% of Sirius XM shares. Sirius XM, the satellite radio company, also did a one-for-10 reverse stock split.
The merger caps what has been a poor year for the Sirius XM, which is down about 50% so far in 2024. The stock is off over 10% since the start of September.
The company provided updated financial guidance late Monday in conjunction with the merger. It reduced its projection for 2024 free cash flow by $200 million to $1 billion, reflecting several factors, including higher interest costs and year-to-date cash outflows at Liberty Sirius XM. That amounted to a modest disappointment, although revenue and Ebitda, or earnings before interest, taxes, depreciation, and amortization, projections were unchanged at $8.75 billion and $2.7 billion, respectively.
The combination between the two companies had been sought for years by Malone and Liberty CEO Greg Maffei to simplify Sirius XM’s structure, broaden its investor base to those who couldn’t hold tracking stocks, and potentially pave the way for its entry into some equity indexes.
Berkshire was the largest holder of the Liberty Sirius tracking stock, and now becomes the biggest investor in Sirius XM. The $2.3 billion stake in the company is believed to be managed by Ted Weschler; he is one of two investment managers that works with CEO Warren Buffett, who oversees Berkshire’s $300 billion equity portfolio. There was no immediate comment from Weschler.
Buffett is a fan of the satellite radio service and regularly tunes into its Siriusly Sinatra station that plays American standards when he’s driving in his Cadillac, Maffei said last year. The station plays songs performed by Frank Sinatra, Ella Fitzgerald, Billie Holiday, and others.
Sirius XM bulls point to the company’s low valuation at less than 10 times projected 2024 earnings and a 10% free cash flow yield. The stock yields about 4% based on a dividend of about 27 cents per share quarterly. The company’s share count fell about 12% in conjunction with the merger to 339 million shares.
The merger may wash out arbitragers who had been long Liberty Sirius XM and short Sirius XM to capture a spread that recently stood at more than 20%. In other words, these traders bought the tracking stock and sold short Sirius XM.
That could be a good setup for the stock if fundamental investors emerge to replace them. Free cash flow is expected to be higher in 2025 at $1.5 billion, Sirius has projected.
Negatives are ample debt of about $10 billion, or nearly four times projected 2024 Ebitda. The company’s target leverage ratio is mid-to-low three times. Sirius XM unveiled a $1.2 billion share repurchase program Monday, but said it plans to emphasize debt reduction with free cash flow until it meets its debt ratio goal.
Sirius XM stock has been hit hard this year for several reasons. The company’s revenue was down 5% in the latest quarter while self-paid satellite radio subscribers have fallen about 400,000 in the first half of 2024 to about 31.5 million. That has prompted concerns that the subscriber count will continue to decline and put pressure on the monthly subscription fee.
Weakness in cable TV stocks also has hurt Sirius XM’s valuation, which is now about seven times this year’s estimated Ebitda, in line with the major cable stocks.
Many investors had invested in the Liberty Sirius XM tracking stock because it long traded at a 25% to 40% discount to the value of its Sirius XM stake. But that strategy didn’t pan out well because of the sharp drop in Sirius XM stock this year which offset the discount.
That may have been the motivation for Berkshire’s involvement. It’s unclear what role Berkshire will play with Sirius XM but it usually takes a hands-off approach to its major investments—although it’s possible that Weschler or another Berkshire representative could join the board.
With a cleaner structure and Liberty essentially gone from the picture, Sirius could be in a position to deliver for investors after a tough year.
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>>> Sirius XM Stock Has a Good Debut as Independent Company. Berkshire Hathaway Becomes Top Shareholder.
Bloomberg
by Andrew Bary
Sept 10, 2024
https://www.barrons.com/articles/sirius-xm-stock-berkshire-hathaway-buffett-ca45b84c
An independent Sirius XM Holdings had an encouraging debut Tuesday, as Berkshire Hathaway emerged as the largest shareholder with an estimated 25% stake—replacing Liberty Media (FWONA) and its control holder, media mogul John Malone.
Sirius XM Holdings stock gained 2.6% Tuesday to $27.38, after trading as low as $24.43 earlier in the session.
A combination occurred late Monday of Sirius XM with Liberty Sirius XM Holdings, a tracking stock that held about 83% of Sirius XM shares. Sirius XM, the satellite radio company, also did a one-for-10 reverse stock split.
The merger caps what has been a poor year for the Sirius XM, which is down about 50% so far in 2024. The stock is off over 10% since the start of September.
The company provided updated financial guidance late Monday in conjunction with the merger. It reduced its projection for 2024 free cash flow by $200 million to $1 billion, reflecting several factors, including higher interest costs and year-to-date cash outflows at Liberty Sirius XM. That amounted to a modest disappointment, although revenue and Ebitda, or earnings before interest, taxes, depreciation, and amortization, projections were unchanged at $8.75 billion and $2.7 billion, respectively.
The combination between the two companies had been sought for years by Malone and Liberty CEO Greg Maffei to simplify Sirius XM’s structure, broaden its investor base to those who couldn’t hold tracking stocks, and potentially pave the way for its entry into some equity indexes.
Berkshire was the largest holder of the Liberty Sirius tracking stock, and now becomes the biggest investor in Sirius XM. The $2.3 billion stake in the company is believed to be managed by Ted Weschler; he is one of two investment managers that works with CEO Warren Buffett, who oversees Berkshire’s $300 billion equity portfolio. There was no immediate comment from Weschler.
Buffett is a fan of the satellite radio service and regularly tunes into its Siriusly Sinatra station that plays American standards when he’s driving in his Cadillac, Maffei said last year. The station plays songs performed by Frank Sinatra, Ella Fitzgerald, Billie Holiday, and others.
Sirius XM bulls point to the company’s low valuation at less than 10 times projected 2024 earnings and a 10% free cash flow yield. The stock yields about 4% based on a dividend of about 27 cents per share quarterly. The company’s share count fell about 12% in conjunction with the merger to 339 million shares.
The merger may wash out arbitragers who had been long Liberty Sirius XM and short Sirius XM to capture a spread that recently stood at more than 20%. In other words, these traders bought the tracking stock and sold short Sirius XM.
That could be a good setup for the stock if fundamental investors emerge to replace them. Free cash flow is expected to be higher in 2025 at $1.5 billion, Sirius has projected.
Negatives are ample debt of about $10 billion, or nearly four times projected 2024 Ebitda. The company’s target leverage ratio is mid-to-low three times. Sirius XM unveiled a $1.2 billion share repurchase program Monday, but said it plans to emphasize debt reduction with free cash flow until it meets its debt ratio goal.
Sirius XM stock has been hit hard this year for several reasons. The company’s revenue was down 5% in the latest quarter while self-paid satellite radio subscribers have fallen about 400,000 in the first half of 2024 to about 31.5 million. That has prompted concerns that the subscriber count will continue to decline and put pressure on the monthly subscription fee.
Weakness in cable TV stocks also has hurt Sirius XM’s valuation, which is now about seven times this year’s estimated Ebitda, in line with the major cable stocks.
Many investors had invested in the Liberty Sirius XM tracking stock because it long traded at a 25% to 40% discount to the value of its Sirius XM stake. But that strategy didn’t pan out well because of the sharp drop in Sirius XM stock this year which offset the discount.
That may have been the motivation for Berkshire’s involvement. It’s unclear what role Berkshire will play with Sirius XM but it usually takes a hands-off approach to its major investments—although it’s possible that Weschler or another Berkshire representative could join the board.
With a cleaner structure and Liberty essentially gone from the picture, Sirius could be in a position to deliver for investors after a tough year.
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>>> Sirius XM Stock Has a Good Debut as Independent Company. Berkshire Hathaway Becomes Top Shareholder.
Bloomberg
by Andrew Bary
Sept 10, 2024
https://www.barrons.com/articles/sirius-xm-stock-berkshire-hathaway-buffett-ca45b84c
An independent Sirius XM Holdings had an encouraging debut Tuesday, as Berkshire Hathaway emerged as the largest shareholder with an estimated 25% stake—replacing Liberty Media (FWONA) and its control holder, media mogul John Malone.
Sirius XM Holdings stock gained 2.6% Tuesday to $27.38, after trading as low as $24.43 earlier in the session.
A combination occurred late Monday of Sirius XM with Liberty Sirius XM Holdings, a tracking stock that held about 83% of Sirius XM shares. Sirius XM, the satellite radio company, also did a one-for-10 reverse stock split.
The merger caps what has been a poor year for the Sirius XM, which is down about 50% so far in 2024. The stock is off over 10% since the start of September.
The company provided updated financial guidance late Monday in conjunction with the merger. It reduced its projection for 2024 free cash flow by $200 million to $1 billion, reflecting several factors, including higher interest costs and year-to-date cash outflows at Liberty Sirius XM. That amounted to a modest disappointment, although revenue and Ebitda, or earnings before interest, taxes, depreciation, and amortization, projections were unchanged at $8.75 billion and $2.7 billion, respectively.
The combination between the two companies had been sought for years by Malone and Liberty CEO Greg Maffei to simplify Sirius XM’s structure, broaden its investor base to those who couldn’t hold tracking stocks, and potentially pave the way for its entry into some equity indexes.
Berkshire was the largest holder of the Liberty Sirius tracking stock, and now becomes the biggest investor in Sirius XM. The $2.3 billion stake in the company is believed to be managed by Ted Weschler; he is one of two investment managers that works with CEO Warren Buffett, who oversees Berkshire’s $300 billion equity portfolio. There was no immediate comment from Weschler.
Buffett is a fan of the satellite radio service and regularly tunes into its Siriusly Sinatra station that plays American standards when he’s driving in his Cadillac, Maffei said last year. The station plays songs performed by Frank Sinatra, Ella Fitzgerald, Billie Holiday, and others.
Sirius XM bulls point to the company’s low valuation at less than 10 times projected 2024 earnings and a 10% free cash flow yield. The stock yields about 4% based on a dividend of about 27 cents per share quarterly. The company’s share count fell about 12% in conjunction with the merger to 339 million shares.
The merger may wash out arbitragers who had been long Liberty Sirius XM and short Sirius XM to capture a spread that recently stood at more than 20%. In other words, these traders bought the tracking stock and sold short Sirius XM.
That could be a good setup for the stock if fundamental investors emerge to replace them. Free cash flow is expected to be higher in 2025 at $1.5 billion, Sirius has projected.
Negatives are ample debt of about $10 billion, or nearly four times projected 2024 Ebitda. The company’s target leverage ratio is mid-to-low three times. Sirius XM unveiled a $1.2 billion share repurchase program Monday, but said it plans to emphasize debt reduction with free cash flow until it meets its debt ratio goal.
Sirius XM stock has been hit hard this year for several reasons. The company’s revenue was down 5% in the latest quarter while self-paid satellite radio subscribers have fallen about 400,000 in the first half of 2024 to about 31.5 million. That has prompted concerns that the subscriber count will continue to decline and put pressure on the monthly subscription fee.
Weakness in cable TV stocks also has hurt Sirius XM’s valuation, which is now about seven times this year’s estimated Ebitda, in line with the major cable stocks.
Many investors had invested in the Liberty Sirius XM tracking stock because it long traded at a 25% to 40% discount to the value of its Sirius XM stake. But that strategy didn’t pan out well because of the sharp drop in Sirius XM stock this year which offset the discount.
That may have been the motivation for Berkshire’s involvement. It’s unclear what role Berkshire will play with Sirius XM but it usually takes a hands-off approach to its major investments—although it’s possible that Weschler or another Berkshire representative could join the board.
With a cleaner structure and Liberty essentially gone from the picture, Sirius could be in a position to deliver for investors after a tough year.
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>>> US proposes requiring reporting for advanced AI, cloud providers
Reuters
by David Shepardson
https://www.msn.com/en-us/news/us/us-proposes-requiring-reporting-for-advanced-ai-cloud-providers/ar-AA1qgtTx?ocid=BingNewsSerp
WASHINGTON (Reuters) - The U.S. Commerce Department said Monday it is proposing to require detailed reporting requirements for advanced artificial intelligence developers and cloud computing providers to ensure the technologies are safe and can withstand cyberattacks.
The proposal from the department's Bureau of Industry and Security would set mandatory reporting to the federal government about development activities of "frontier" AI models and computing clusters.
It would also require reporting on cybersecurity measures as well as outcomes from so-called red-teaming efforts like testing for dangerous capabilities including the ability to assist in cyberattacks or lowering barriers to entry for non-experts to develop chemical, biological, radiological, or nuclear weapons.
External red-teaming has been used for years in cybersecurity to identify new risks, with the term referring to U.S. Cold War simulations where the enemy was termed the "red team."
Generative AI - which can create text, photos and videos in response to open-ended prompts - has spurred excitement as well as fears it could make some jobs obsolete, upend elections and potentially overpower humans and have catastrophic effects.
Commerce said the information collected under the proposal "will be vital for ensuring these technologies meet stringent standards for safety and reliability, can withstand cyberattacks, and have limited risk of misuse by foreign adversaries or non-state actors."
President Joe Biden in October 2023 signed an executive order requiring developers of AI systems that pose risks to U.S. national security, the economy, public health or safety to share the results of safety tests with the U.S. government before they are released to the public.
The rule would establish reporting requirements for advanced artificial intelligence (AI) models and computing clusters.
The regulatory push comes as legislative action in Congress on AI has stalled.
Earlier this year, the BIS conducted a pilot survey of AI developers. The Biden administration has taken a series of steps to prevent China from using U.S. technology for AI, as the burgeoning sector raises security concerns.
Top cloud providers include Amazon.com's AWS, Alphabet's Google Cloud and Microsoft's Azure unit.
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