Merry Month Of May

Today the unhinged markets of Monday went into normal mode as the rest of the world's markets re-opened. And then some panic arose because we are in the Merry Month of May, during which smart money is supposed to sell and go away. This is a reliance of the pre-air conditioner age when Wall Street biggies got away from the hot city to travel to Europe or jump on their yachts in Newport, RI and left trading to coolies and underlings.

In fact, it has not been the dominant behavior pattern in my lifetime, because there was a way of cooling brokerage offices.

Photo by Annie Spratt on Unsplash

But when markets are over-heated, like our US markets now is, the old adage comes into play, especially if there is a guru holding forth. Today there are two, first economist Mohammed El Erian, who published a signed editorial in today's Financial Times warning that “the Fed's framework puts recovery at risk” in which he essentially attacked the US central bank's taste for permitting inflation, and for fostering higher corporate tax plans from the Pres. Biden.

The second guru was Janet Yellen, now US Treasury Secretary, but a former Fed board member, who in an interview with The Atlantic said that interest rates may need to rise, This after she mostly warned about deflation rather than inflation earlier. With a rate hike it will become harder for borrowers to raise funds also putting the recovery at risk. This reminded people of the last round of “taper tantums”.

The impact was to chop the indexes, the DJIA by 0.7%; the S&P 500 by 1%, the Nasdaq by 2.03%. Luckily our more global holdings were less affected. But there were some horror stories.

*Nutrien, the Canadian global seed, and fertilizer vendor, reported sales up to C$4.66 bn, nicely up from the consensus forecasts of C$3.99 bn at record levels. Moreover, while its eps met the forecasts but did not beat at 29¢/sh and earnings before interest, taxes, depreciation, and amortization (EBITDA) was $806 mn, NTR also upped its forecasts for the rest of the year, largely because of growing demand south of the border in the USA, and now expects to sell more crop inputs this spring and for the full year, because crop prices and cash margins are so high, so more acres are being seeded. EBITDA per US retail outlets hit 11%, another record. Despite a strong loonie, potash EBITDA rose 33% in US outlets and nitrogen by 27%. NTR reports in International Financial Reporting Standard, why I am not converting to US$s.

It raised its full-year 2021 net eps forecast to $2.55-$3.35/sh and its adjusted EBITDA for the full year to $4.4 bn to $4.9 bn. It also expects eps in it H1 to come in at $2-$2.2 per share. The stock is up 2.84% in Canada at C$ 71.56 but only up 2.185% on the US Dow Jones at US$58.145.

*Naspers, the South African media group, fell 8.36% in London, in part because it hadn't traded for 4 days. NPSNY dropped 2.67% here, at $44.83%, and now is up from there.

*Nokia NOK, which rose yesterday without much reason, turns out to have done a deal with Kuwait Ooredoo to deliver 5G fixed access wireless equipment for users who have landlines rather than cellphones. It won a buy rating from Chris Lau on today.

Drug dealers

*Novartis NVO gained in Europe because of the phase III trials of its drug for age- and diabetes-related macular degneration begun by its Sandoz sub here. Macular degeneration causes 90% of blindness in older folks. But it is down 0.81% here because that was Monday's news. And that's only the n's.

*Teva was downgraded by UBS to neutral and fell 3.7% at the opening despite the US launch of a generic of antibiotic Erythromycin from Arbor to treat bacterial infections, with espected sales of up to $49 mn/yr. TEVA is down 5.37%. Its proxy seeks votes for a new Arab board member, Abbas Hussain.

*Israeli small-cap BiolineRX rose 73% at the opening today and is now up 76.8% after results of its phase III “Genesis” trial of Mofixafortide against autologous bone marrow transplants in multiple myeloma patients worked well. BLRX is the come-back kid and also luring in former TEVA owners.

*AbCellera rose 4.5% on news that a 2nd antibody is being tested against covid-19 by Pfizer in human trials. It is now up 7.21% but it is still our worst performer YTD, halved since we bought. I averaged down at $27.25 and it is now $28.31. ABCL.

*British Astra-Zeneca thinks the Alexia deal can go through without further antitrust obstacles. AZN.

*Exelixis bought French Gama Mar's humanized antibody oncology drug targeting Muellerin hormone receptor 2. EXEL.


*Eduardo Garcia in today reports that Mexican REIT Fibra Uno will not sell either its real estate holdings or its shares because both are serious below net asset value. It the discount of 17 pesos between its NAV of 42 pesos and its price of 25 pesos erodes, then maybe there will be capital increases, according to the director-general Gonzalo Robina.

*Franklin Resources BEN, the Templeton Funds, saw its net income rise a whopping ninefold from the last Q2 to $381.8 mn from $79.1 mn. It also beat by 4¢ on eps. The fund group is not the same crittur as it took over Legg Mason last summer. It had problems in the early days of the virus because yield fund investors tried to redeem more bond shares than could be done without losses, so they were blocked by the managers, causing shareholder outrage. The funds were riskier, chasing high yields.

*AYAtlantica Sustainable Infrastructure PLC, a Q-listed UK fund part-owned by our Algonquin, fell 1.81% today. AQN fell 1.06%. I thought I had figured out a way they jumped up together but now it turns out they also fall down together.


*Larus Holding Limited (“JVCo”), a 50/50 joint venture between Leif Höegh & Co. Ltd. HMLP and Funds managed by Morgan Stanley Infrastructure Partners today announced the completion of the acquisition by way of amalgamation of all of the issued and outstanding shares of Höegh LNG Holdings Ltd. not owned by LHC or its affiliates, as referred to in previous announcements by the Company on 8 March 2021 and 19 April 2021.

The Amalgamation has been duly registered in the Bermuda Registrar of Companies, having been effected by way of an amalgamation between Larus Limited, a wholly-owned subsidiary of JVCo, and Höegh. Shareholders of the Company (other than holders of Excluded Shares, as defined in the amalgamation agreement) as at the expiry of 4 May 2021 (the cut-off date), as they appear in the Company's shareholders register with the VPS as at the expiry of 6 May 2021 (the record date), will receive the amalgamation consideration amounting to NOK 23.50 for each Company share that they held.

With the completion of the Amalgamation, JVCo intends to undertake a comprehensive review of the Company’s operational and financial strategy and that of its affiliates to strengthen the financial profile of the group and will carefully review its integrated business plan including future financial needs. 

I have no idea whether our preferred shares of Hoegh are part of this amalgamation but I suspect not. I await word from Gen. Joe Shaeffer, our Norway expert.

*Saudi Aramco, recently listed there, beat Q1 profit estimates by 30%. The news boosted other oil companies.

*The beat boosted other oil companies like BP, up ~1%. Schlumberger Ltd SLB gained 1.26% more today, as the Dutch Antillean SLB is a purveyor to energy-seeking firms. However, Royal Dutch Shell B RDS-B was down 1.3%.

*I averaged down on a Canadian small-cap oil and gas drilling support firm, Computer Modelling, which fell 5.7% at $4.35. It is now $4.31. They don't ring a bell at the bottom. CMDXF.

*Electric vehicle star Tesla TSLA lost 3.4% to $19. This affected NIO which fell 5.06% to $37.54. This is still too high to buy back, I think.

*Energy Fuels, UUUU, lost 4.4% because it has gained so much YTD that profits are being taken. I think it is a likely winner from the boost to rare earths it is working on but it is a small, risky play.

*Antofagasta rose another 0.9% today in Britain where it has its primary listing. ANFGF mines copper in Chile but the ADR is based on the London share.

Tech & Tel

*Vodafone was among the rare winners today, up 0.28%, boosted by Verizon and AT&T although their rises had nothing to do with VOD.

*Another undeserving winner was BCE, Bell Canada, up 0.3% to $47.58. Most shares were lower.

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