S Good Times For Gold

Today I begin with a long quote from Harvey Katz of Value Line:

Inflation is becoming a concern for Wall Street, with April data on producer (wholesale) and consumer prices proving unsettling. Specifically, the Producer Price Index (PPI) rose 0.6% last month, or twice the projected increase, and 6.2% in the past year. Pressures also were building on the consumer side, as the Consumer Price Index (CPI) added 0.8% in April and 4.2% for the 12 months. These troubling reports, along with climbing oil prices, supply bottlenecks, and selective shortages (especially of gasoline after a pipeline’s operations were interrupted) have been rattling some heretofore complacent investors.

Are such price concerns transitory, as the Federal Reserve maintains, or something more serious? It’s too early to be sure. So upcoming PPI and CPI data will be critical, as will housing prices and cost trends in manufacturing activity and homebuilding (with lumber especially important here). Meanwhile, the higher inflation already seen, the heavy sums allocated for stimulus and relief payments, and the possible future spending on infrastructure projects likely will contribute to at least a moderate sustained increase in prices.

The next few weeks will be telling, both because of the release of new inflation figures, but also due to some key Federal Reserve issuances (such as the Beige Book economic summation). A mid-June Federal Open Market Committee meeting, coupled with periodic commentary from Fed officials, also will be scrutinized for a sense of where the bank stands on inflation and interest rates.

Meantime, the economy continues to ramble along, with most reports suggesting the business backdrop is neither too hot nor too cold. Highlights here include declines in jobless filings, stability in retail sales, and gains in industrial production.” 

As every week, Mr. Katz ends by recommending that readers remain invested in the US stock market because that is how Value Line gets subscriptions and funding. But it has removed some of its usefulness coverage, like convertible stocks and bonds, which saved the group some money. I have been a subscriber for decades, starting as an investor in Paris.

Business newspaper article

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Drug Dealers

*Pres. Biden has asked the CIA to determine if covid-19 was leaked from a Chinese laboratory.  The AARP has called for rules to lower drug prices. Both of these snippets of news matter. 

*Bioline RX BLRX reported on its Q1 today starting with its phase III Genesis trial of stem-cell “mobilizer” motivafortide followed by transplants which were successful. BLRX plans to get a new drug application in by early 2022. In the Mar. quarter its R&D spending fell $1.1 mn to $4.3 mn and SG & A was flat from prior reporting period. It had an operating loss of $5.5 mn down sequentially from prior year Mar. level of $6.8 mn. However non-operating expenses rose to $4.6 mn from a prior year income of $500,000. Finance expenses came to $200,000 down from $300 mn in the prior Q1. Net loss was 6.6 mn. The Israeli firm has cash on hand of $6.2 mn, down from $6.7 mn in the prior Q1. Net cash from financiing activities topped $41.9 mn vs only $400,000 a year earlier. This is a risky play but transplants are needed. BLRX fell 1.36%.

*Bausch Healthcare, spinning out its eye drug arm, presented at a Barclays Conference stressing the potential of its xifanan HIV drug bought from Salix, and its work on sickle cell disease. BHC brushed off risks from tax increases by the US explaining that its “buy and bill” system for selling dentistry products may create another alternative for expanding earnings—in addition to spinoffs via an IPO or asset sales. They call that earnings expansion but it harms patients.

*Israeli Teva rose 1% today after an article on seekingalpha.com said it can afford fines of up to $700 mn over its opioid selling misdeeds and said its p/e ratio is only 5 or 6 times the earnings it will book this year. I have no idea where these numbers came from. TEVA is down ~20% in the last year. It gains from the multiple sclerosis market which is growing 7.1%/yr according to Globes Israel, a website.

*UK drug major AstraZeneca AZN fell a half percent today in US trading. Under new FDA guidance it may not be able to apply for covid-19 jabs because it plans to skip emergency use application (writes the Wall Street Journal.) However Glaxo gained 0.3%. GSK.

*Takeda is up 0.29%. Eisai is up 1.14%, TAK and ESALY are Japanese drug majors.

*Even French Genfit rose 0.75% today. GNFT.

*However Spanish Grifols fell 0.9% in Madrid, GRFS. And Hikma Pharma in India fell 3.06%. We exited before the Covid-19 outbreak which hurt the stock, mainly over-reporting fiddles.

Environment and Materials

*Gold is rising some more, in part as an alternative to crypto. GLD.

*Johnson Matthey upped its healthcare forecasts and estimates for the year to the top of analysts' range, Dow-Jones reported from Britain with no numbers. It also saw its share price boosted by a new partnership to make advanced materials for next-generation electrolyzer tech for “green” hydrogen with US Plug Power. They may achieve a closed-loop recycling system for platinum group metals from auto exhaust. JMPLY is a 200-year-old company specializing in platinum group metals refining and sale, and now gets 50%+ of sales from environment aids. Its US share fell 2.04%. BUY at $92.56.

*China has cracked down on commodity price rises, boosted in fact by the strength of the renminbi. The main target was iron ore which China needs to import for steel-making but also copper. It cut the price locals can pay by 6% and the impact was global. Among shares falling with Antofogasta, ANFGF, a Chilean mining group (mostly copper and gold) down 6.88% today in UK trading. London gets no imput from Chile because of time zones. ANFGF was listed there a century ago.

*There is too much buy-America in tariffs. With housing tight, Canada wood tariffs trigger inflation. I am preaching from my own hymnal as I own the Weyerhaeuser lumber REIT, WY, NYSE listed. It is one of the largest US private timberland owners, with 11 mn acres of US timberland. It also holds licenses for more in Canada and operates sustainably to preserve forests. Building wood from our northern neighbor pays a 37.25% levy crossing the US border. This is supposed to protect US timber producers, including WY itself, but is inflationary. WY is up 2.21% on tariff cut hopes.

*Several of our shares were upgraded by the consensus after 1 or 2 analysts switched. Canadian Solar, a supplier of silicon-PV panels plus storage systems from China was upgraded to buy from hold today. CSIQ was tipped by environmental analyst Max Deml in German. Its p/e is 17.6x It is up 4.1%.

*After its disastrous presentation in Hong Kong last week, Make My Trip, MMYT, held a conference call with two analysts on its Q2 in India with Rajesh Magow, CEO. The share rose 2.32% but I sold after the botched presentation. The travel agency is having to change its offerings not only because of covid-19 but also because of competition from what it calls horizontals, offerings from companies selling transport or lodgings directly. This means MMYT has had to move down-market to offer bus tickets rather than rail or air ones, as railway and air companies are offering discounts it cannot match. Its air ticketing arm is beginning to recover, up 8.9% in Q4, but this may not continue. In addition to the buses it is also aiming to sell trips to Muslims, for example to Mecca for the Haj, but again it is a newcomer. It has no standing in the rich part of the Arab world. The stock rose further today and I still rate it sell. But you will do better than I did on the price.

*Mexican REIT Fibra Uno, rose 5.56% at $1.14. FBASF is tracked by Dow Jones but not my broker.

*Canada's CAE hit a 52 week high at $30.48. The pilot training stock came from Biotech Maven Patti.

*NIO saw more bearsh “unusual options activity” and the electric auto share rose 4.13%. Nio will double its electric car output in China with the provincial government's factories. It owns none itself. Its rival Li Auto quadreupled sales but lost $55 mn. LI rose 13.3% and swung to positive cashflow.

*Azure Power of Mauritius is near closing on its $73.5 mn sale of non-core solar rooftop products to Radiant Renewables of India, a private sub of Green Growth Equity Fund. This will boost our shares in this fiscal year by INR17,200-18,200 mn ($236-249 mn). It will take $40-$60 mn in a 1-time charge for sale price adjustments at the end-2021 close. KPMG advised AZRE.

*Energy Fuels (UUUU) got a $9/sh target price by Noble Capital Markets, and rated outperform. Its stock rose 9.36%, our best showing today.

*BP plc rose 0.34% and Royal Dutch Shell B RDS-B 0.6% as both are ahead of US oil firms on renewables. A Dutch court ordered Shell to do more.  We don't expect board fights in UK oil companies as they are already cutting back on carbon. The Dutch are more environmentally active because their country risks flooding from global warming. A Dutch court ruled for environmentalists who demanded that RDS-A cut carbon emissions by 45%. The case was brought by the Dutch version of Friends of the Earth. We own the B shares but are also affected. 

*Post proxy, Exxon Mobil wound up with two environmental activists on its board. XOM.

*Ormat, the part Israeli geothermal energy producer, is up 2.45%. ORA.

*Schlumberger Ltd is up 1.44%. SLB of Curacao is the outrider in Western hemisphere oil and gas diversification being mostly French-owned.

Tech and tel

*MultiChoice, MCHOY, is up 2.75% hitting a new 52 week high.

*Mercado Libre rose 2.17% today on the woes of Amazon. MELI.

*South Korea Coupang gained 3.44% and is now up a modest amount for us at $41.56. Its IPO was overpriced. CPNG.

*Dutch Prosus is down 0.72%, PROSY. South African Naspers by only 0.11%. The former is going to buy more NPSNY stock to help cut the discount because of Jo'burg rules about spreading risks.

*Vodafone fell another 0.41% today. VOD is British and its earnings are lower as sterling rises.

*Finnish Nokia fell 0.8%. It is a fave of some websites. Its rival Ericsson fell a more serious 1.75%. NOK; ERIC.

Finance

*Cosan, my stock for the year, CSAN, is up over 1% today, I know not why.

*Sampo Oyj of Finland is down 2.1% because it is selling down bank stock Nordea. SAXPY.

*Swedish Investor A/B lost 1.3% in sympathy. IVSBF.

*Mitsubishi and Sumitomo Mitsui are both lower, SMFG by 0.54% and MSBHF by 2.2%.

*CBOE gained another 1.11% today on hopes for its crypto fund.

*Hong Kongs AIA Group (an insurer building Asia-Pacific market share) rose another 1.21%. It is an easy way to exit the former Crown Colony. AAIGF.

*Banco Santander lost 2.5% in Madrid trading today, falling to euros 3.29/sh. SAN.

*Panama's Banco Latino-Americano de Comercio Exterieur rose 1% today to $15.08. BLX.

*Canada's Scotiabank gained 0.36% to $66 and change. BNS is the most multinational major bank up north and the least involved in the USA.

*New Ireland Fund, after a buyback of its shares, is up 0.41%. It is still below its year's high. IRL.

*Lazard rose 0.91% today. LAZ plans to pay fees to discounted closed-end funds in which it invests.

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William K. 1 year ago Member's comment

Always informing me, always interesting, often providing serious education.