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The Financial Tune, 11 Wall St, New York, NY (2026)

03/28/2022

A record $319bn of new share buybacks have been authorised so far this year, according to Goldman Sachs data, with rising numbers of companies using “accelerated” deals to buy large volumes as quickly as possible while their share prices are depressed. There were $267bn in share buybacks at the same point in 2021.

Even recently listed companies, that traditionally spend cash to fuel growth rather than return excess to shareholders, have joined the trend after sharp drops in their stock prices make repurchases more attractive.

“The breadth of different industry groups buying stock is the highest we’ve seen in a few years, and volumes have increased,” said Michael Voris, Goldman Sachs’ head of structured equity. “That’s much more due to the market backdrop as opposed to anything else.”

Management teams use share buybacks to prop up demand for their stock and increase their profitability on an earnings per share basis by reducing the number of shares in circulation.

The average stock in the broad-based Russell 3000 index has lost more than 30 per cent of its value so far this year, allowing companies that believe their stock is undervalued to purchase more for the same price. Earnings growth is also forecast to slow as groups battle rising inflation and supply chain issues, increasing the appeal of buybacks as a way to flatter earnings.

“The buyback business ironically tends to pick up in periods of volatility because there’s a downdraft and so people who are flush with cash look at their opportunities,” said Craig McCracken, co-head of equity capital markets at Wells Fargo. “It’s a sign of the underlying strength, that companies expect things will continue to be fairly positive so they’re using their cash to buy back shares instead of keeping it on the balance sheet.”

Credits to: Constantinos Assiotis

01/06/2022

Wealth creates wealth. Have you ever heard the phrase “the rich get richer”? Dividends re-investing is one way the rich get richer and richer.
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01/06/2022

Wealth creates wealth. Have you ever heard the phrase “the rich get richer”? Dividends re-investing is a strategy used by the rich to get richer and richer.
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11/28/2021

What is short selling?

Short selling is an investment or trading strategy that speculates on the decline in a stock or other security's price. It is an advanced strategy that should only be undertaken by experienced traders and investors.

Traders may use short selling as speculation, and investors or portfolio managers may use it as a hedge against the downside risk of a long position in the same security or a related one. Speculation carries the possibility of substantial risk and is an advanced trading method. Hedging is a more common transaction involving placing an offsetting position to reduce risk exposure.

In short selling, a position is opened by borrowing shares of a stock or other asset that the investor believes will decrease in value. The investor then sells these borrowed shares to buyers willing to pay the market price. Before the borrowed shares must be returned, the trader is betting that the price will continue to decline and they can purchase them at a lower cost. The risk of loss on a short sale is theoretically unlimited since the price of any asset can climb to infinity.
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11/22/2021

🔸The Standard and Poor's 500 or simply the S&P 500, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.

🔸Total returns include two components: the return generated by dividends and the return generated by price changes in the index. While most individuals focus only on the price returns of the index, dividends play an important factor in overall investment returns.

🔸The S&P index returns start in 1926 when the index was first composed of 90 companies. The name of the index at that time was the Composite Index or S&P 90. In 1957 the index expanded to include the 500 components we now have today. The returns include both price returns and re-invested dividends.

🔸NOTE: The YTD total return for 2021 is as of the market close on 19 January 2021.
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11/17/2021

🔸Home Depot topped Wall Street’s estimates for its third-quarter earnings and revenue.

🔸Same-store sales climbed 6.1% in the quarter, beating estimates of 2.2% while consumers were spending more when they visited, raising the average ticket by 12.9% to $82.38.

🔸Net income for the fiscal third quarter ended Oct. 31 rose to $4.13 billion, or $3.92 per share, from $3.43 billion, or $3.18 per share, a year earlier. Analysts were expecting earnings per share of $3.40.

🔸Net sales rose 9.8% to $36.82 billion, topping expectations of $35.01 billion. Digital sales increased by 8% in the quarter. Executives said sales accelerated in October compared with August and September.

🔸"As evidenced by our strong performance in the quarter, our team continues to do an outstanding job of operating with flexibility and agility," said Craig Menear, chairman and CEO. "Ultimately, this is what has allowed us to respond to the elevated home improvement demand that has persisted. I would like to extend my sincere appreciation to our team, as well as our supplier, supply chain, and transportation partners, as we continue to navigate this dynamic environment together.
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11/12/2021

🔸Inflation across a broad swath of products that consumers buy every day was even worse than expected in October, hitting its highest point in more than 30 years,.

🔸The consumer price index, which is a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% from a year ago, the most since December 1990. That compared with the 5.9% Dow Jones estimate.

🔸On a monthly basis, the CPI increased 0.9% against the 0.6% estimate.

🔸Energy, shelter and vehicle costs led the gains, which more than wiped out the wage increases that workers received for the month.

🔸“Inflation is clearly getting worse before it gets better, while the significant rise in shelter prices is adding to concerning evidence of a broadening in inflation pressures,” said Seema Shah, chief strategist at Principal Global Investors.

🔸Stock market futures fell following the report and bond yields rose.

🔸Escalating inflation could cause the Fed to tighten policy more quickly than it has signalled. The central bank has indicated that it will within the next few weeks start reducing the amount of bonds it buys each month, though officials have indicated that interest rate hikes are still off in the future.
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Disclaimer: This page is for entertainment purposes only and not to be considered as financial advice.
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11/10/2021

🔸Shares of Roblox closed up 42.2% on Tuesday, a day after the video game company reported strong third-quarter financial results.

🔸Investors seem impressed with the company’s strong October results, as it could indicate what’s ahead for the fourth quarter.

🔸Roblox said average daily active users increased 43% year over year during the first 27 days of October. The company also reported strong engagement during that period. However, the game was offline between Oct. 28 and Oct. 31.

🔸Still, Roblox beat Wall Street expectations when it came to revenue, or bookings.

🔸Roblox reported bookings of $637.8 million, up 28% year over year, compared wit an estimated $636.5 million. Revenue excluding deferred revenue came in at $509.3 million, up 102% year over year.

🔸Roblox had more than 47.3 million average daily active users in the third quarter, up 31% year over year and up from 43.2 million in the second quarter.

🔸“It’s clear that even as users revert back to pre-pandemic routines and behaviours, Roblox remains an important part of their day,” executives wrote in a letter to shareholders.
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Disclaimer: This page is for entertainment purposes only and not to be considered as financial advice.
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11/08/2021

“Beginning in the third quarter of 2020, many of our businesses experienced significantly higher sales and earnings relative to the second quarter, reflecting higher customer demand,” Berkshire said in the report. “The extent of the effects over longer terms cannot be reasonably estimated at this time.”

At the end of September, Berkshire’s cash pile reached a record $149.2 billion, up from $144.1 billion in the second quarter. Buffett hasn’t made a sizable acquisition in the last few years as valuations hit record highs and the deal-making environment turned competitive.

The record amount of cash came despite Berkshire’s aggressive share buybacks. The company repurchased $7.6 billion of its own stock in the third quarter, bringing the nine month total to $20.2 billion. Berkshire bought a record $24.7 billion of its own stock last year.

Overall earnings, which reflect Berkshire’s fluctuating equity investments, fell to $10.3 billion in the third quarter, marking a more than 60% decline year over year. The return from Berkshire’s equity investments only totalled $3.8 billion last quarter, compared to a $24.8 billion gain a year ago.

Buffett stressed that investors shouldn’t put much emphasis on the quarterly changes in its investment gains or losses.

“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” the conglomerate said in the quarterly report.

Berkshire’s B shares are up more than 24% this year, sitting about 2% below its record high reached in May.

11/05/2021

Peloton shares tumbled more than 35% on Thursday, after the company reported weakening sales growth and a wider-than-expected loss in its fiscal first quarter.

The company slashed its outlook for the full fiscal year amid softened demand for its exercise equipment and ongoing supply chain challenges. More consumers are opting to return to gyms such as Planet Fitness and Equinox, or fitness junkies are purchasing another at-home option from the flurry of companies that sell everything from rowing machines to connected mirrors.

“We anticipated fiscal 2022 would be a very challenging year to forecast, given unusual year-ago comparisons, demand uncertainty amidst re-opening economies, and widely-reported supply chain constraints and commodity cost pressures,” Chief Executive Officer John Foley said in a letter to shareholders. A slower-than-expected start to the second quarter and “challenged visibility” in the near term led the company to lower its expectations, Foley said.

Sales of connected fitness products, including its Bikes and Treads, fell 17% to $501 million. Subscription revenue grew 94% to $304.1 million. Connected fitness sales accounted for 62% of Peloton’s business in the quarter.

Peloton counted 2.49 million connected fitness subscribers at the end of the three-month period, up 87% year over year. Connected fitness subscribers are people who own a Peloton product and also pay a monthly fee to access the company’s digital workout content.

Its entire member base, which includes digital-only subscribers, totalled 6.2 million.

Average net monthly connected fitness churn, which Peloton uses to measure retention of connected fitness subscribers, ticked up to 0.82% from 0.73% in the prior quarter.

Connected fitness subscribers completed 16.6 workouts per month, on average, a drop from 20.7 workouts a year earlier.

04/08/2021

Billionaire venture capitalist Peter Thiel warns bitcoin threatens U.S. dollar and is worried that China is using bitcoin to undermine the U.S.

In comments during a virtual event for the Richard Nixon Foundation, and first reported by Bloomberg News, the co-founder of PayPal, Palantir Technologies and Founders Fund said bitcoin “threatens fiat money, but it especially threatens the U.S. dollar.”

Thiel said China would like to see two global reserve currencies, rather than the dollar being the default reserve currency. But China doesn’t want its renminbi to fill that role, and in the past has used the euro “in part” as a weapon against the dollar. That hasn’t worked, so now China is trying to elevate bitcoin, Thiel argued.

“[If] China’s long bitcoin, perhaps from a geopolitical perspective, the U.S. should be asking some tougher questions about exactly how that works,” he said.

China recently launched a blockchain-enabled, digital version of its currency, the yuan, but Thiel dismissed that move. “That’s not a real cryptocurrency, that’s just some sort of totalitarian measuring device,” he said.

Bitcoin was above $56,000 on Wednesday and again approaching its record high price of $60,738. The price of bitcoin is up 95% year to date, and up a whopping 674% over the past 12 months.

Reported by MarketWatch

The Financial Tune

03/28/2022

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