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Good morning!
Ideas Digest
Morning Need to Know by Capital Ideas Research
Getting you ready for your investing day
May 18, 2017
Written and compiled by Mark Bunting, Publisher, Capital Ideas Research
MARKETS
Swirling uncertainty over U.S. President Donald Trump’s political future saw world stocks extend their steepest fall in over six months this morning, though there were signs of stabilization elsewhere as the U.S. dollar and gold steadied.
The allegations surrounding Trump have not only thrown doubt over the future of the pro-growth policies he promised, but they have raised the possibility he could end up leaving the White House prematurely.
TSX and U.S. stock futures are pointing to continued weakness in equities.
The volatility index or VIX often called a fear gauge, which measures the implied volatility of the market using a range of S&P 500 options, jumped 35% on Wednesday from its lowest level since 1993.
European stock indices are mostly lower following the dive on North American markets yesterday.
Overnight in Asia, Japan’s benchmark Nikkei 225 index slid 1.7%. Hong Kong’s Hang Seng shed 0.6% and the Shanghai Composite index slid 0.2%.
CURRENCIES
The Canadian dollar is down a third of a cent at $0.7329 U.S.
The U.S. dollar has stabilized around six-month lows.
The British pound is at its highest level since September as UK retail sales were stronger than expected in April. Brexit Shmexit.
COMMODITIES
Oil is unwinding some gains, down more than 1% to $48.47 a barrel.
Gold is holding steady $1,260.00.
STOCKS THAT MAY MOVE
Bombardier (BBD.B-T) U.S. government officials are set to begin investigating the Boeing's unfair trade claims against the rival Bombardier, a two-track action that could lead to U.S. duties on Bombardier's new jetliner and also pits Boeing against Delta Air Lines Inc. Boeing alleges that Bombardier's new 100-150 seat CSeries jetliners are being dumped below cost in the U.S. market and are unfairly subsidized by Canadian taxpayers. Delta agreed last year to buy dozens of CSeries planes at a price that Boeing says was well below Bombardier's cost and risks eroding future sales of its 737 and new 737 MAX narrowbodies.
iShares MSCI Brazil Capped ETF (EWZ-N) This Brazil ETF is down sharply in pre-market trading as trouble mounted for Brazilian President Michel Temer, who was recorded discussing payments to silence testimony by a potential witness in the country’s biggest-ever graft probe.
CANADIAN ANALYSTS' CALLS
This is an overview of some of today's analyst research. We'll have more details on many of these reports in the next Digest.
Condor Petroleum (CPI-T) GMP FirstEnergy reduces the price target to $3 (Canadian) from $3.50, which gives the shares 207% upside, maintains Buy.
Ivanhoe Mines Ltd (IVN-T) Canaccord Genuity raises price target to $7.00 from $6.50; rating Speculative Buy after adjusting estimates for Kakula copper project.
U.S. ANALYSTS' CALLS
Sanchez Energy (SN-N) RBC reduces the price target to $13 (U.S.) from $14, which implies 107% upside, maintains Outperform.
The Home Depot (HD-N) SunTrust RH raises the target to $157 from $142.
L Brands Inc (LB-N) JP Morgan raises price target to $54 from $50; rating Neutral saying that the company is well-positioned to consistently grow top line and earnings, driven by domestic square footage expansion and rapid international growth.
J&J (JNJ-N) Morgan Stanley raises price target to $135 from $130; rating Equal-weight citing near-term acceleration and above market pharma growth.
Stratasys Ltd (SSYS-O) Jefferies cuts rating to Hold from Buy citing the recent run up in the shares and uncertainty around the timing and magnitude of new manufacturing opportunities.
Expedia (EXPE-O) Raymond James downgraded the online travel company Market Perform from Outperform without a specified target. The consensus target is $153.30.
Shake Shack Inc. (SHAK-N) Wedbush upgrades to Outperform from Neutral and raised the target to $43 from $33.
CarMax Inc. (KMX-N) Wedbush upgrades to Outperform from Neutral and increased the target to $70 from $60.
EARNINGS
Alibaba Group Holding Ltd (BABA-N) The company reported fourth-quarter revenue above analysts' expectations, helped by strength in the Chinese e-commerce market. Alibaba's total revenue rose about 60%. Net income rose to 10.65 billion yuan, or 60 cents per share, from 5.37 billion yuan in the year-earlier quarter. Revenue from the firm's core e-commerce business unit increased 47%, above the previous quarter's 45% rise.
Cisco Systems Inc (CSCO-O) The company forecast current-quarter revenue that widely missed analysts' estimates and said it would cut 1,100 more jobs, as the world's largest networking gear maker steps up efforts to transform into a software-focused company. Excluding items, the company earned 60 cents per share. Revenue fell 0.5% to $11.94 billion. Analysts on average had expected adjusted earnings of 58 cents per share and revenue of $11.89 billion.
Wal-Mart Stores Inc (WMT-N) The company reported higher-than-expected quarterly comparable sales, helped by greater traffic at Wal-Mart and Sam's Club stores and a 69% rise in online sales. Sales at U.S. stores open at least a year rose 1.4% in the first quarter, excluding fuel.
DEALS
Lowe's Cos Inc (LOW-N) The home improvement retailer said it would buy Maintenance Supply Headquarters, a wholesale retailer of maintenance supplies, for $512 million, as it seeks to sell more to construction contractors. Lowe's is trying to better serve professional customers such as construction contractors amid fierce competition from larger rival Home Depot Inc.
What We're Reading
Why Wednesday's stock downturn proved that bonds are essential to your portfolio. theglobeandmail.com/globe-investor/investment-ideas/its-okay-to-hate-bonds-but-you-still-need-them-in-your-portfolio/article35023765/?reqid=2a02b2ed-a314-4baa-aa0d-4cc843598f5e
Blackrock says ETF investors are making this classic mistake. bloomberg.com/news/articles/2017-05-17/attention-smart-beta-shoppers-don-t-commit-this-investing-sin
How was your day, honey? World's richest lose $35 billion in market swoon. theglobeandmail.com/globe-investor/worlds-500-richest-people-lose-35-billion-from-trump-market-turmoil/article35028922/
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Have a great day!
Mark Bunting | Publisher
Capital Ideas Research
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