With Monday a holiday, there is much news today from Wall Street. Today 2 of our Latin American stocks reported, from Mexico, and Panama. GE also reported but you get that elsewhere.

Mark Mobius who used to be the developing country stock picker at Templeton Funds, aruges that emerging markets will outperform once the world recovers from COVID-19. He runs the Mobius Capital Partners fund which he started 3 years ago because these countries have been lagging in growth in the past decade. The first boost will come from their lower average age. The second from technology gains, particularly in his current favorite market, India. And the third from regulatory changes in these wild market which Mark favors, even in China. He also likes Taiwan Semiconductor which produces chips in its foundry but which is sustained by little fabless Taiwan chip designers. He also likes developing country healthcare shares, most of which are obscure.

Mark insists that inflationary risks have been overstated and are based on baskets that are subject to constant adjustment, and therefore not very good indicators.

Since I know Mobius from Harvard where we both were in a seminar on growth by Barrington Moore, I know he is older than me and also richer. I cannot join his fund which has a high entry fee. But I hope that his continuing to work during his old age is not merely to keep ahead of inflation. Mark says that inflation is endemic in the system but that it is offset by income and the quality of life. For someone born in Bufallo who lived in Thailand for ages and then in Hong Kong, he has seen this first hand.

I am not the only one worried about renewed inflation from the COVID-19 spending boom. The Bundesbank in Germany issued a warning today which boosted the price of gold miners. It says tightening “will be required”. For historic reasons, Germans are more worried about inflation than other people. Since I am of 100% German (Jewish) stock, this may explain my worries about stimulus. Mark is also of part German heritage on his father's side but not Jewish. He was interviewed by Reshma Kapadia of Barron's.

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*Cemex SA de CV, CX, a multinational corporate, had a V-shaped recovery in sales volumes in 2020 which it expects to continue rising in 2021 because of rising global demand. Its Q4 net profits came in at $69.7 mn vs a loss of $238 mn the prior Q4. Sales were up 9% from prior year, at $3.54 bn, helped by mild weather (then not now) in the USA. Despite the enormous disruption of COVID-19 in its operations, CX closed 2020 with a 7% rise in earnings before interest, taxes, depreciation, and amortization, well above its 1% rise in sales, the result mainly of higher prices and lower operating expenses.

Last year CX had the lowest operating expenses as a percentage of sales in its history. But only the first two months of the year were normal in all regions. In February, however, COVID-19 hit its main markets, first Europe; then South, Central America, and the Caribbean; and lastly the Philippines. The cement business depended on the terms and severity of lockdowns in different countries. By year-end, EBITDA margins hit 91% and CX reported the highest fourth-quarter sales since 2014 and the highest Q4 EBITDA since 2016.
But while volumes are rising, the price of cement, aggregates, and clinker will be more moderate and CX expects its operating profits will go up only 10% this year. It also expects to increase is debt, to be funded in part by a sale of shares and some in developing markets. This will allow it to make acquisitions in key markets like the USA, Europe, and other regions. It will also help fund the digitization of operations and a cut in carbon emissions. By cutting the aggregates in its cement mixtures, CX is reducing contamination.

Governments devised their own individual playbooks to combat the virus and imposed lockdowns of many different shapes and sizes. The severity of those lockdowns very much determined industry performance. The U.S. and parts of Central Europe were relatively unaffected. In its Mexican homeland, CX was only allowed to sell pre-bagged cement, normally a minor product, and to supply only the most essential infrastructure projects. In developed countries, strict social rules cut demand. In the developing world, Latin America, the Caribbean, and the Philippines, the construction industry was shut down for weeks or even months. This year the recovery process will depend on aggregate demand.

2020 cement sales hit 17.6 mn metric tonnes, up 13%. But ready-mix concrete only rose 1% to 12.5 mn cu meters and aggregates were up 4% to 35.1 mn metric tonnes.

In Sept. CX announced “Operation Resilience” to address COVID risk as capital allocation was derailed. Last week CX did an asset sale for $50 mn, with more to come. It plans to chop debt and leverage and freeze costs. Its best line in 2020 was from Urbanization Solutions, up 15% y/y, which accounted for 6% of total year-end EBITDA. In part because of lockdowns, CX also was able to stabilize its net carbon emissions but could not get alternative fuels it needed. So there was a 3% drop in their use from 2019, to 25%. It also now has set its sustainability goals for 2030 and 2050, to cut carbon emissions by 35% and 55% by these dates. The 2050 goal is net-zero emissions from concrete. These targets have been validated by Carbon Trust, a third-party consulting company, notably the drop in clinker use, by 1.1% in 2020, the largest drop in 5 years thanks to retrofitting. In Europe, all CX plants now use hydrogen injection fuels and produce less heat and carbon.

The capital spending delay in 2020 will help further cuts to carbon emissions this year. Momentum is rising in most CX markets and the formal cement sector saw the largest volume increase in Mexico since 2007 or before—mainly from the USA. A lower dollar will help as CX reports in bucks. It also expects to raise money from debt markets while interest rates are low. Alas, it may also sell more stock which tends to reduce the price for shares we own. It has a $1.1 bn capex budget for this year after the modest spending last year of only $775 mn.

*Panama multilateral trade finance Banco Latino-americano de Comercio Exterieur reported a 29% drop in EPS last year, to 40¢ from 56¢. It still issued a 25¢ dividend, flat from 2019, payable Mar. 10 to shareholders on the books Feb. 23. The stock fell initially but then recouped and is only down 0.58% now. It is also a victim of COVID-19 plus Trump and should do better in a more multilateral world.

*CAE reported earnings of 22 loony ¢/sh, up from a loss last year of 2¢ and sales of C$832.4 mn, down 10% from prior Q3 today. EPS was adjusted to 18¢ for items, or $48.8 mn, and last Q3 was adjusted to $97.7 mn or 37¢/sh. Comparisons were complex across the board with adjusted operating profit $82.9 mn up from $28.2 mn in Q2 this year and $154.9 in Q3 2019. Net cash from operations was up, however, at $234.8 mn vs $45.6 mn in Q2 and $322.1 mn in Q3 2019. This is the kind of report that leaves the reader confused but the stock fell 0.82% which must be a judgment.

Drug-makers

*China did not share its earliest information on handling the COVID-19 virus in Wuhan with the WHO delegation, mainly because it probably put the country's health bureaucracy under a bad light. Bureaucrats at the British National Health Service, however, will be accountable to the public rather than drugmakers.

*Astra Zeneca beat in earnings, at $1.07 vs consensus forecast of 68¢ for Q4 and also saw eps grow from the prior-year level of 89¢. Its sales at $7.41 bn beat the forecast of $6.97 bn and were up 11.2% from last Q4. Its share price rose 1.5%.

*When Teva reports good results the stock price tends to fall. I think I have discovered the reason. Non-Israeli executives get new stock options right before the reports come out, and they trade out of their earlier options to reduce their risk. The non-Israelis then sell on the US stock market to avoid Israeli taxes, as is allowed. So this month the SEC got information that Hafrun Frediricksdottir sold 28,481 shares from her last account right after the results came in. She is executive vp for Teva Global R&D. Her colleague Nassi Gianfranco, executive VP for international markets, sold 21,635 shares. Her other colleague Brendan O'Grady, executive vp for North America commercial, sold 41,694 shares. Darnell Richard who is executive VP for Europe commercial sold even more stock 68,422 shares. Eric Drape, exec VP Global opportunities sold 17,979 shares, presumably because opportunities were scant. Sven Detlev who is executive vp for global marketing and portfolios lightened up his own TEVA portfolio by 29,657 shares. This is clearly a situation where the executives are underming the interests of Teva's shareowners and it should stop. Teva is down another 1% today when Tel Aviv is closed.

*Merck, Pfizer, and TEVA plan to use their facilities to make COVID-19 jabs under license to meet gaps in supply.

*Thermo Fisher Scientific is back over $500 today, up 2.74% to $507.56. The only news is that TMO will support black communities.

Energy Fuels

*UUUU, is up 0.8% today. Uranium is the solution to emissions from power plants burning fuels.

*Algonquin Power & Utilities of Canada was busy doing acquisitions in the last few months, growing outside Canada. AQN in Oct. bought nearly all the share out of Chilean water ute company Essal, 94%. In Nov. it bought electric power firm Ascendant Group Ltd of Bermuda. The Investment Reporter of Canada says AQN now provides utility services to a million customers, no longer solely in the USA and Canada. It is into sustainable and renewable energy, and also water supply, but also gains from old style regulated generation and transmission of energy in North America. In 2020 its operating profits at the regulated side grew 5.5% to US$428.6 mn or 43¢/sh. Its total sales were up by $1/sh to $ 238.9 mn or $1.43/sh from 43¢ the prior year. Its renewable side is being supported by the profitable classic ute business, as it fell 3.6% to $233.8 mn mainly because of a special dividend received in 2019 from Atlantic Yield Energy Solutions' Canada sub. It now expects to boost its EPS growth by 8-10% over the next 5 years with a 10% estimate for this year based on an 80-90% payout from adjusted eps. The stock is not cheap, trading for 22.7x earnings but its green side may attract more investment. It now yields 3.7% but Canadians get a tax break we don't get. Its US arm is listed on the NYSE but it also trades as AQN in Toronto. We also now get AY divies essentially tax free by owning and keeping the UK based fund shares, as our reporter Harry Geisel determined. He is looking for more such goodies.

*While US oil prices fell and hurt our majors, BP plc gained 2.38% in US trading on its green credentials, and because its earnings grew better than those of the UK overall in 2020. It is $21.88.
*Royal Dutch Shell B rose 2.46% hitting $36.28. UK oil companies are heavily invested in alternative energy and carbon-cutting. Shell was tipped today for its renewables growth by BofA-Merrill although Berenberg notes that the green side is growing by only 10%/yr while dirtier products are growing faster. But it also beat its half parent, Britain, in 2020 growth.

*Schlumberger Ltd rose 0.18% today because it is more international than the two Brits. It is incorporated in the Dutch Antilles and helps oil and gas companies find their fuels.

*Canadian Computer Modelling plummeted 6.8% however, to $4.8 US. Its modeling helps extract oil and gas efficiently from discovery sites.

*NIO last year delivered 47,000 electric vehicles, up 113% writes Bill Gunderson in SeekingAlpha. It delivered 7,225 more in Jan. of this year. Margins are improving, with operating losses down 60.7% from 2019. He is “very bullish” and owns NIO in two growth portfolios he manages.

Technologies

*Qualcomm is trying to block Nvidia buying Arm from Softbank and has objected in the US, the European Union, Britain, and China. It fears other chipmakers will be blocked from using ARM's intellectual prperty which runs about 95% of the world's smartphones.

Money

*Sumitomo Mitsui, SMFG, is up 1.9% today on yen strength, at $6.94. However, Mitsubishi Corp, MSBHF, is down 0.27%.