S Beware Of Neutrals

"Prices continue to run very hot, with the size of increases at levels not seen in decades. This includes a surge in energy commodities, as oil prices rise during the peak winter heating season and as geopolitical tensions between the United States and NATO allies and Russia escalate over that nation’s threatening stance toward Ukraine. The price of crude oil recently topped the $90-a-barrel mark, a level was last seen in 2014.

"Likewise, fixed-income yields are on the rise, with the latest push higher following the January jobs report. The higher borrowing costs (the yield on the 10-year Treasury bond recently moved above 1.95%, its highest level since late 2019) makes it more expensive for companies to run their businesses and to fund capital projects.

"Investors have focused on inflation as they evaluate corporate reports this earnings season. Wall Street has mostly rewarded those companies that have demonstrated the pricing power to handle the higher operating costs, while punishing those that saw their profit margins and earning power diminished by the effects of supply-chain disruptions and labor shortages. Many of the technology companies that were the beneficiaries of increased business during the height of the pandemic, including Netflix and Meta Platforms, have been sold by investors on concerns about slowing subscription growth rates."

It is no consolation to learn that British inflation in Jan. hit 5.5%, a 30-yr high.

Beware of neutrals. Ericsson's CEO today admitted that it had bribed Islamic State (ISIS) to sell its telecoms to Iran and the stock fell 14%. We sold ERIC last year.  

Retail sales are up 3.9% while online sales are down for Jan. 

Photo by Annie Spratt on Unsplash

Energy

*Following Investor's Digest of Canada we will buy into small cap Mineworx Tech which trades on the high risk Toronto Venture exchange, following Mike Kachanovsky who covers tech for them.  It makes catalytic converters to reduce emissions from diesel vehicles, using a thin layer of platinum and palladium to clean up exhaust gases. The special sauce is that Mineworx can remove the silicon carbide from the converters that cleans the residue better. It now can efficiently recover as much as 90% or more of the platinum and palladium in the recycle process. The Canadian firm now created a jv with Davis Recycling Inc., a US firm, which operates in 13 of our states and it controls 55% of Davis. The process works on cars and trucks. The recycling process is becoming more necessary as the costs of precious metals rises. It has a plant in Tennessee and a balance sheet with about $1 mn in cash at hand.  It has now been acquired by Cehegin of Spain, which produces iron ore in high quantities. This is of course a high risk share but also a very environmentally attractive one.

*Bermuda-based SFL rose 4.12% after reporting on its Q4 and full year. It redeemed its corporate notes after selling 7 dry bulk carriers and buying 4 clean energy shipping vessels. Its eps hit .63 cents and the stock dividend was upped 11% to 20 cents/sh. The stock has gained 40% in the last year. 

*BAE Systems of Britain will supply Philadelphia with hybrid bus engines with zero emissions. BAESY.

*Schlumberger Ltd is up 5.74% today, a new 52-week high. No idea why. SLB.

*Azure Power AZRE reported good earnings, 3.52/sh. Vivitrol sales were $343,9 mn vs 310.7 last quarter. Anstrada sales were 275.4 mn vs 241 mn. Lybalvi which came to market only in Oct. now has sales of $8.2 mn. However, royalties for risperdal construction are falling. 

*Atlantica Yield AY is now expected to lose 0.045/sh in the current quarter, up from 0.03 and its rating has been cut to hold from buy.

*ABB created a new turbo-charging operation called Accelleron (sic) which may be spun off. 

Drugs

*Alkermes ALK of Ireland gained 8.5% despite its new loss expected for the December quarter of 0.081 cents, vs 0.03 earlier. It has something to do with shamrocks perhaps.  It makes drugs for alcohol and opioid dependent (vivitrol) and against schizophrenia and bi-polar disease (aristada and lybalvi). Its vumerity is now sold to Biogen.             

*Womens' health care newbie Organaon bought a licenses from Bayer for oral contraceptive pills to be sold in China. OGN.

*Eli Lilly's new diabetes drug did not get approval from the FDA because it is clinically no better than existing insulins. LLY.

Chow

*Nutrien is now expected to earn $2.39 per share, up a penny. NTR.

Tech

*Vodafone VOD is up 1%. Nokia NOK is up 3.13%. Both are up on currency expectations.

 

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