Sixth straight day in the green for the big US markets - albeit a tiny beat with the S&P 500 and Nasdaq both up just +0.1%.
7 of 11 sectors closed higher, led by Financials (+0.6%) and Health Care (+0.4%). Mats (-1.0%) and Energy (-0.9%) lower after oil shed 1.1%.
Biggest news was Fed Chair Powell appearing before the Senate Banking Committee. Nothing too significant but hinted that the weakening job market is worth keeping an eye on.
Notable companies:
BP (BP) [-4.8%]: Announced up to $2B impairment; weak refining margins and oil trading as headwinds on Q2 results; estimated impact at $500-700M.
Kymera Therapeutics (KYMR) [+23.4%]: Sanofi to expand partnered Phase 2 trials for Hidradenitis Suppurativa and Atopic Dermatitis.
Duolingo (DUOL) [-5.1%]: Announced acquisition of animation and design studio Hobbes; terms not disclosed.
Street Stories
Mine The Gap
This is part deux of a deux part series on the precious metals industry. Yesterday’s was on the metals, and today’s is on the companies. Today we’ll go over historical performance, size of the industry, top global players, and streamers. Here we go!
For those of you that skipped yesterday, the punchline was that precious metals (gold, silver, platinum, palladium) have done better than all other commodity classes in the last year or so (excluding palladium which sucks and cocoa which is up like 220%).
For the actual companies digging this stuff out of the ground, it’s been a less exciting story. Consider FactSet’s Global Precious Metals Index, which tracks the largest 206 precious metals companies. It has lagged the stock market materially over the last 10 years and even more recently despite the pop in the underlying metals.
That said, it’s been even worse for the other non-precious miners - so I guess it’s a draw…?
Having taken business in university in Canada in the late 2000s - towards the end of the commodities supercycle no less - all I ever heard about was mining. Canada is the leader in the world for mining listings, and it felt like mining, and particularly gold, was the most important sector in the world.
With a little perspective, however, it’s clear that precious metals mining may not be as economically dominant as I was led to believe. For example, in 2024 Microsoft has added $621 billion in market cap - about $52 billion more than the total size of the top 206 publicly traded precious metals companies combined.
An interesting thing about precious metals is that they aren’t dominated by the US for some reason. Sure, there isn’t a ton of gold mining in the US, but neither is there in China or the UK.
Just looking at the top 10 largest players, Canada (10) and China (7) are the biggest players. Canada is a contender due to its corporate listing rules and a history of successful mining investment. China is in the ranks because it was a national strategic imperative… with a sprinkle of bribery and ‘aggressive’ labor policies in Africa.
To each their own… I guess.
Size-wise, even though the precious metals space is relatively small compared to, say, Tech - it has actually grown quite significantly this century.
Junior miners are some of the sketchiest investments and should be avoided unless you are the guy floating the issuance. For some context, read about the Bre-X scandal (or just watch the Matthew McConaughey movie).
But looking at the blue-chip guys, the returns are ok. 8 of the top 10 are underperforming the S&P 500 - and that incorporates a bit of survivor bias.
Within the space, however, the streamers seem to have done quite well. For those unfamiliar, Streaming & Royalty companies pay a pre-agreed price to companies for a proportion of their gold or whatever, which is usually a secondary metal to what they are mining for.
For example, Wheaton may give a start-up copper miner some cash and a deal to buy any gold that gets spit out of their mines. The copper company gets funding to start things up and a nice cash stream that’s ancillary to their core business. And the streamer gets some gold at a good price. Win/win.
Considering that streamers are a very small proportion of precious metals companies, they are massively overrepresented in the return category.
Joke Of The Day
I was addicted to the hokey pokey, but then I turned myself around.
Will glass coffins be a success? Remains to be seen.
Hot Headlines
PC Magazine / The US DOJ and its partners seized two domain names and 968 accounts on X used by Russian actors to create an AI-enhanced bot farm that spread disinformation. Election season starting early!
Venture Beat / Infinite Reality, an NFT and metaverse player, raised $350M at a $5.1B valuation and acquires Roblox game developer Landvault for $450M. There are NFT companies worth $5.1B? Ya, we’re in a bubble.
NFIB / The Small Business Optimism Index hits a 2024 high but inflation remains top problem for Main Street. The National Federation of Independent Business (NFIB) index came in at 91.5 in June, up 1 point over May and the highest since December (91.9).
CNBC / Boeing deliveries hit 44 in June - a 27% increase since last year. The soft news follows Sunday’s DOJ guilty plea in criminal fraud conspiracy tied to the two 737 MAX crashes in 2018 and 2019.
CNBC / Fed Chair Powell says holding rates high for too long could jeopardize economic growth. J-Pow’s twice annual tour in front of Congress leaned a bit conciliatory and hinted at rate cuts.
CNBC / The average hedge fund is up +5% this year compared with the S&P 500 at +15%. Ahh shucks.
Trivia
Today’s trivia is on gold:
Which ancient civilization is believed to be the first to use gold as money?
A. The Egyptians
B. The Greeks
C. The Romans
D. The Chinese
What significant gold discovery occurred in 1896 in Canada, leading to a major gold rush?
A. Fraser River Gold Rush
B. Klondike Gold Rush
C. Cariboo Gold Rush
D. Great Canadian Gold Rush
What is the primary use of gold in the electronics industry?
A. Soldering
B. Conductive plating
C. Magnetic components
D. Insulation
(answers at bottom)
Market Movers
Winners!
Kymera Therapeutics (KYMR) [+23.4%]: Sanofi to expand partnered Phase 2 trials for Hidradenitis Suppurativa and Atopic Dermatitis.
Axcelis Technologies (ACLS) [+5.2%]: Guided Q2 EPS >$1.38 vs prior guidance $1.30 and FactSet $1.30; Revenue >$252M vs prior guidance ~$245M and FactSet $244.7M.
Losers!
Helen of Troy (HELE) [-27.7%]: FQ1 EPS and revenue missed due to lower replenishment orders and hair care weakness; FY25 EPS and revenue guidance lowered; Beauty & Wellness now expected to decline in net sales; guidance cut delays long-term financial strategic plan.
Helios Technologies (HLIO) [-10.9%]: Board placed CEO on paid leave amid investigation into potential violation of conduct and ethics code.
UiPath (PATH) [-6.9%]: Announced restructuring actions including ~10% global workforce reduction.
Dassault Systemes (DASTY) [-5.3%]: Negative Q2 preannouncement and lowered FY guide; flagged large transaction delays due to geopolitical concerns.
Duolingo (DUOL) [-5.1%]: Announced acquisition of animation and design studio Hobbes; terms not disclosed.
BP (BP) [-4.8%]: Announced up to $2B impairment; weak refining margins and oil trading as headwinds on Q2 results; estimated impact at $500-700M.
ArcBest (ARCB) [-3.1%]: Downgraded to neutral from overweight at JPMorgan; cited market share difficulties and concerns over rising spot rates affecting margin expansion in Asset-Light segment.
Oracle (ORCL) [-3.0%]: Reportedly ended talks with Musk's xAI on potential $10B server deal.
Werner Enterprises (WERN) [-1.9%]: Downgraded to neutral from buy at UBS; cited muted container imports and less upside to normalized earnings.
Market Update
Trivia Answers
A. The Egyptians are believed to be the first to use gold as currency.
B. Klondike Gold Rush took place in Canada in 1896.
B. Conductive plating is the main use of gold in electronics.
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