It’s a mega earnings day, with some big names, especially on the tech side, getting rolling. We’ll also get some housing data, and the state of that market is a hot topic for investors as mortgage rates continue to rise.
Last week, existing home sales posted an eight-month consecutive monthly decline, the first such streak since 2007. That’s like a recent UBS survey featured five major American cities highlighted as overvalued.
Our call of the day by Jeffrey Kolitch, Portfolio Manager, Baron Real Estate Fund BREFX,
which sees rare bargains among “best-in-class” related companies thanks to a big pullback in those stocks this year.
So much so, that if the current recession leads to a recession, real estate companies will be in a good starting point, Kolitch said in his recent third-quarter letter to shareholders. And while he is wary of the short term, thanks to central bank hikes and political risks, he is more bullish on the two-to-three outlook.
During the first nine months of 2022, many real estate companies have seen corrections of 30% to 60% that have taken into account low valuation multiples and expectations of slower growth, Kolitch said, adding that his fund now it is “packed with real estate”. real estate stocks that are unsustainably cheap.”
Kolitch is bullish given the strong business fundamentals and healthy balance sheets he sees for many companies, along with hopeful signs for the broader economy: subdued inflation, plentiful jobs, central bank raises likely to be completed by now, and a rally in China just beginning.
He also notes that they haven’t seen signs of the over-leveraging and overbuilding that marked the 2008 real estate crash. “We always have our watchful eye for warning signs in real estate,” he said.
In its “best-in-class” selections, which must meet criteria including: ownership of unique, well-located assets in markets with high barriers to entry, strong long-term growth prospects, industry leaders, conservative and liquid balance sheet, and management solid.
Regarding real estate investment funds (REITs), Kolitch highlights Invitation Homes INVH,
the largest institutional owner of single-family rental homes, focused on neighborhoods with decent schools and employment opportunities. Residential Equity EQR
is another, the largest apartment REIT in the US with high-quality units in select waterfront markets.
Cloud Neutral Data Center Operator and Global Carrier Equinix EQIX
and industrial REIT giant Prologis PLD
also get mentions.
Residential-related picks include some familiar names, including homebuilders Lennar LEN
and Toll Brothers TOL
and home improvement retailer Lowe’s Companies LOW,
who receive the nod for economic valuations, together with hard surface flooring specialist Floor & Decor FND.
Among Alternative Asset Managers, Kolitch Highlights Brookfield Asset Management CA:BAM
is valued at a discount of more than 50% to management’s own assessment, while Biggie Blackstone BX
it is valued at a “modest premium” to the S&P 500 index despite “far superior long-term growth prospects.”
Under the umbrella of travel-related real estate, the manager likes the MGM of the MGM Resorts International casino group.
“compelling” value, along with mountain resort giant Vail Resorts MTN.
The markets
market clock
SPX Stocks
DJIA
COMP.
they are mixed after the S&P 500 saw its best close in a month, with bond yields BX:TMUBMUSD10Y
BX:TMUBMUSD02Y
falling, the dollar DXY
drop and CL oil prices
BRN00
reverse previous losses. Bitcoin BTCUSD
it is trading around $19,360.
The buzz
Earnings are pouring in from some big names. G.E.G.E.
is down in a profit losstogether with Xerox XRX,
while Coca-Cola KO
it’s up results that exceed expectationsWith UPS
UPS
Y Raytheon
RTX
and Biogen BIIB.
3M MMM
is falling on mixed results.
After the bell, we will hear from Microsoft MSFT
(Advance), GOOGL alphabet
(Advance), TwitterTWTR
and Texas Instruments TXN
on the technological front. Elsewhere, Visa V,
CMG chipotle,
Spotify POINT
and Mattel MAT
they are also in the latest lineup.
Canopy Growth said it will create a U.S. holding company and tradable stock structure
Weber shares WEBR
are up 24% pre-market, matching the premium offered by its largest shareholder to buy the remaining shares of the grill maker at $6.25 each.
The S&P Case-Shiller home price index revealed a second consecutive decline, 1.3%, in August. The Conference Board Consumer Confidence Index will be released later.
Adidas XE: ANNOUNCEMENTS
has ended their partnership with rapper Kanye West on his recent series of antisemitic comments that has also led to his talent agency leaving him and banning him from Twitter TWTR
and Instagram.
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The graphic
How sticky is high inflation? A team of strategists at Deutsche Bank, led by Jim Reid, analyzed consumer price inflation from 1920 (where available) onwards for 50 developed and emerging market countries, when inflation reaches 8%.
german bank
“Looking at this whole story, the evidence shows that once inflation exceeds 8%,
average inflation takes about 2 years even to fall below 6%, before settling
around that level for up to 5 years after the initial 8% shock. This is about 2pp up
the median before the collision of c. 4%,” the strategists said. The US CPI came in at 8.5% in March.
As they point out, the current consensus expects inflation to be back at or even below 3% just two years after that first 8% gap. While “history never exactly repeats itself,” when inflation typically exceeds these thresholds, history shows it to be quite difficult, especially in periods after 1970, Reid and team said.
The best tickers
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security name |
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TSLA |
Tesla |
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mullen automotive |
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gamestop |
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LITTLE BOY |
LITTLE BOY |
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AMC |
AMC Entertainment |
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BOW |
AMC Entertainment Preferred Stock |
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slime |
alibaba |
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AAPL |
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