🔬EV Production Is Strong, Apple Is Weak, and Much More
"Don't follow the crowd, let the crowd follow you"
- Philip Fisher
"The big money is not in the buying and the selling, but in the waiting"
- Charlie Munger
The big markets had a soft start to 2024 with the S&P 500 down -0.57% and Nasdaq off -1.63%.
6 of 11 sectors closed in the green with defensive Health Care (+1.8%) and Utilities (+1.4%) leading the way. As you might have guessed from that Nasdaq number above, Tech had a very bad day and finished down -2.6%!
Barclays’ downgrade of Apple (-3.6%) to Sell caused some of that Tech hate.
Final December Manufacturing PMIs were marked down on weak new order volume. Construction spending for November came out in-line with Wall Street estimates.
Bitcoin futures were up +6.8% and hit the $45k mark for first time in nearly two years. Probably because it’s a safe-haven asset. lol
Street Stories
THE EV KING - With both Tesla and BYD announcing their production and delivery figures for December, the gap between the two largest players in the electric yuppy market seems to be widening. Despite Tesla’s deliveries coming in ahead of Wall Street estimates (485k vs. 477k estimate), their 1.84 million deliveries this year comes well short of the 3.0 million BYD pumped out.
Before conceding victory to BYD, there are a few caveats, however: firstly, virtually all of their sales were in China, which of course comes in at a lower sticker price. That’s why in the year to Q3 Tesla had $95 billion in revenue while BYD only clocked in at around $81 billion. And secondly, in the few international markets where they are, the cars aren’t exactly screaming buys. In the UK, the ‘Coral Pink’ war crime below starts off at £32,000 - which is over 40,000 in freedom coupons.
Next, the stupidly named ‘Seal’ - their closest competitor to the Model 3 - cost roughly the same as its Tesla peer. And it’s… just trying a bit too hard.
OIL PREMIUM - The war between Israel and Hamas has had some regional spillover effects, not least of which has been the disruption to Red Sea (and Suez Canal) shipping traffic since late December by Hamas-supporting Houthi rebels. As the threat has started to wane (a US carrier group tends to have that effect), oil prices have started to come down but I thought it was worth noting that the spread between West Texas Intermediate (WTI) - the main benchmark for US oil prices - and Brent Crude - Europe’s main benchmark - is still a bit elevated. This may have a tiny bit to do with the idea that deliveries to Europe may have a ‘missile-attack’ premium baked in that US domestic supplies do not.
Anyway, this got me a bit curious as to how this spread has been over time. While it’s been volatile, since 2011 the price of Brent Crude has been on average +8.5% higher than WTI. This figure was -3.0% for the 8 years prior. While I’m sure the US Shale Boom doesn’t explain everything, it’s pretty interesting how well it matches up with this transition.
X VALUATION KEEPS FALLING - Fidelity, after helping Elon Musk buy Twitter for $44bn, has now lowered it’s internally valued peg to a paltry $12.5bn (-72%), in a move that suggests even high-stakes investment games can end in a yard sale. Amidst a boycott by major advertisers like Apple and Disney, and Twitter’s own internal valuation plummeting (last internal peg was $19bn in October), it seems Musk's strategy of telling disgruntled advertisers to "go f--- themselves" might not be the revolutionary business model it was cracked up to be. (The Telegraph has more)
Elon, please apply the below:
APPLE DOWNGRADE - Apple's stock took a nosedive to a seven-week low yesterday, losing over $100 billion in market value and adding to a weak second half of 2023. This came after Barclays handed them the financial equivalent of a 'meh' review, downgrading the stock due to anticipated weak demand for everything from iPhones to Macs. It seems even the tech giant isn't immune to the whims of analysts, as their crystal ball predicts a not-so-shiny future for Apple's hardware and services. This probably isn’t helped by the fact that Apple still trades at a significant premium to the market (29x Forward P/E vs. 20x for the S&P 500). (Reuters has more on the downgrade)
RIVIAN (AGAIN) - Since I talked about the good EV companies above, it makes sense I wrap things up with Rivian which reported its Q4 production and deliveries yesterday. The Company CRUSHED its guidance for 54k vehicles produced in 2023 by banging out 57k last year! Good work …then the stock went down 10.1%. See the Street was expecting 14.4k vehicles in Q4, not the 14.0 they produced.
Joke Of The Day
A man’s home is his castle…In a manor of speaking.
An armed man ran into a real estate agency and shouted…“Nobody move!”
Hot Headlines
Reuters | Canada's Air Transat cabin crew members reject labor deal, raising strike fears. Is it bad I have slightly less sympathy than I would if the TV or USB-chargers had ever worked on my transatlantic flights?
Harvard Crimson | Harvard President Claudine Gay resigns following the shortest tenure in the history of the university.
Reuters | Gaza war spreads to Beirut with killing of Hamas deputy leader.
CNN | Dutch semiconductor equipment maker ASML forced to suspend some China exports after US escalates tech battle.
VICE | Stop Filming in the Gym, You Weirdos.
Trivia
This week’s trivia is on ‘first year economics’.
Which is not a characteristic of a 'perfectly competitive' market?
A) Homogeneous products
B) Few barriers to entry and exit
C) Significant market power for individual firms
D) A large number of buyers and sellersWhat does the term 'Fiscal Policy' refer to?
A) The management of a country's currency
B) Government spending and taxation decisions
C) Corporate investment strategies
D) Banking regulationsThe 'Marshall Plan' was primarily aimed at:
A) Developing the agricultural sector
B) Rebuilding European economies after World War II
C) Establishing military bases in Europe
D) Promoting free trade globally
(answers at bottom)
Market Movers
Winners!
Moderna (MRNA) [+13.1%]: Upgraded to outperform at Oppenheimer due to better COVID-19 vaccine revenue prospects, a strategy to align operating expenses with sales, and promising pipeline developments.
Losers!
Corcept Therapeutics (CORT) [-25.6%]: Fell after a judge ruled that TEVA's generic Korlym didn't infringe its patents. Corcept plans to appeal, citing legal and factual errors in the decision.
GoodRx Holdings (GDRX) [-16.1%]: Downgraded to underperform by Bank of America due to increasing competition from large PBMs and retail pharmacies, potentially impacting discount card economics.
PNM Resources (PNM) [-6.0%]: Avangrid (AGR) plans to cancel its $8.3B merger due to regulatory issues, with no clear resolution timeline from the New Mexico Public Regulatory Commission.
ASML Holding (ASML) [-5.3%]: Declined following the Dutch government's revocation of export licenses for certain chipmaking equipment to China, ahead of a government ban. ASML anticipates no significant earnings impact.
Market Update
Trivia Answers
C) Significant market power for individual firms isn’t a feature of ‘Perfect Competition’.
B) Fiscal Policy refers to Government spending and taxation decisions.
B) The goals of the Marshall Plan focused on rebuilding European economies after World War II.
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