Monday Digest #83

#MACRO #FINANCE

The volume of loans for the Germany house purchase is now more than a third of Germany’s GDP. The danger is obvious — if the bubble bursts, it will lead to a full-blown crisis similar to that one occurred in the US in 2008. UBS experts also warn about the risk of a bubble in Swiss property market.

Additional stimulus by ECB action has caused another round of yields’ decline. Firstly, investors chose the most reliable securities (for instance, Germany), but when their yields turned negative, investors began to “hunt for yield”: to buy all assets that can bring money. Spain is an example: despite the increase in the debt burden in the country, bond yields show decrease that means an increase in demand for these assets.

Major oil companies have doubled their debt. The reason is that the companies continued to pay dividends and big salaries for top managers although there are the difficult economic situation in the world. According to Bloomberg estimates, they doubled the total debt to $138 billion in 2014, and since 2008 the indicator increased by 10 times.

CEOs do not worry about the fact that they take money for the payment of dividends.
“Money is so cheap at the moment.”
Interest rates are now at a minimum indeed, leading to cheap money. However, whether they will be cheaper when the time comes to repay the debt?

Earlier, we wrote about the fact that the Bank of England for the first time since 2009 year lowered the rate, as well as increased the program of debt assets purchase to £435 billion. After restarting the incentive program, the pound showed a decline again that led him to the worst performance of the year.

The index of currencies of developing countries MSCI EM Currency peaked 13 months maximum this week. From the beginning of 2016, the index rose by more than 14%.

#COMMODITIES

Morgan Stanley: oil quotes may fall in the area of $35 per barrel in the weeks ahead. From the fundamental point of view, the oil market has not changed and refinery processed only increases, supplying more gasoline on the oversaturated market. Therefore, any price increase will be caused by the close of speculative positions.

Oil supply on the world market (by the OPEC countries and others) increased by 800 thousand barrels per day in July. Despite production growth in recent years, supply decreased by 215,000 barrels per day compared to the previous year, according to the IEA. In the III quarter, according to its calculations, the supply will be 1 million barrels lower than demand.

ICE Futures Europe: During the week from July 27 to August 2, hedge funds increased bets on Brent crude oil price decline by 36 thousand 727 contracts. This is a record weekly increase of “short” Brent positions speculators from 2011 when ICE started publishing these statistics.

Goldman Sachs warned “supply storm” may have a significant impact on the global market of copper. Copper prices could fall to $4,000 per metric ton during the next 12 months after increased volume of proposals, which will be contributed by the cost reduction from the producers, as well as slowing demand.

#INTERESTING

According to the data of American Enterprise Institute (AEI), the proportion of new agreements on foreign direct investment in China in the transport and tourism sector, the entertainment industry, and the high-tech sector increased from 17.4% in Y2005–2014 to 46% in Y2015–2016.

Investors are cyclical and invest in assets that show profitability. Considering the problems in the commodity sector the past few years, technologies seem as a “safe haven.”

Wealth-X consultancy has published its report on billionaires. The main conclusion is that the rich got reacher. The world’s billionaires are holding more than $1.7 trillion in cash — the highest amount since one firm began recording the measure in 2010.

However, it’s important to notice some manipulation of residency billionaires statistics: most European billionaires are Asians and Americans.

Japanese software company MandelDuck released an application called Takara, created by analogy with the popular game Pokemon GO. With Takara application that uses augmented reality elements, the player sees Bitcoin and tokens hidden nearby. Its mission — to get to them and pick up, and this is possible only after answering a question directly related to the location place of “treasures”.

World of Midcap and Crindex M

#recommendations

Note interesting tickers below as this week trading opportunities.

Buy: $EFII, $VSAT, $ARRS, $AZPN, $NTCT, $WWAV, $ASX, $FBHS, $VRX, $TSO, $PPC

Sell: $ACM, $GPS, $EMN, $CNP, $WFM, $CUBE, $HP, $CSGP

Weekly review of midcap news and events

#services $BNED $CECO

Barnes & Noble Education, Inc. (NYSE:BNED), one of the largest contract operators of bookstores on college and university campuses across the United States and a leading provider of digital education services, on August 9, 2016, announced it continue extending its current relationship with OpenStax, a Rice University-based nonprofit that makes college more accessible for students. Barnes & Noble Education will leverage OpenStax content through its learning analytics platform, LoudCloud, making the content not only cost-efficient, but also measurable. By tracking the effectiveness and use of OpenStax materials via the LoudCloud platform to measure learning outcomes, colleges and universities will gain affordable day-one solutions and analytical insights that help to increase student success. Additionally, the Company will offer a wider distribution of OpenStax’s cost-effective learning resources at the more than 750 Barnes & Noble College stores nationwide.

And there is additional pleasant last week news that Barnes & Noble Education, Inc. announced five additional colleges and universities have selected Barnes & Noble College to operate their campus bookstores. These schools join the colleges and universities that have already selected Barnes & Noble College as their partner of choice in Fiscal 2017. Together, 18 new contracts represent 34 new campus and virtual bookstores, and more than 200,000 students and their faculty.

Nowadays there is a trend of digitalizing of academic education and spreading the access to cheaper education. These events supports the reason of $BNED participation in Crindex. Moreover this stock was the first stock included in our portfolio because of our comprehensive analysis of further digital education services spreading and rising demand. Making relation with OpenStax will cause the continue of $BNED price increase with high probability. We surely advice to hold or to buy $BNED.

Also this opinion relates to $CECO (Career Education Corp.), another “educational stock” in Crindex, and will cause the appropriate movement of its stocks based on the same trend and tendency inherent for the educational industry.

#healthcare $OPK

Shares of Opko Health (OPK) were increasing on heavy volume in mid-afternoon trading on Tuesday, August 9th after the company reported higher-than-anticipated results for the 2016 second quarter. The Miami-based healthcare company published earnings of 2 cents per diluted share, but analysts’ estimations and predictions anticipated zero earnings. The company gathered revenue of $357.1 million for the period ($324.3 million prediction). “Our improved financial performance this quarter was fueled by continued growth in our diagnostics business through increases in patient volume at BioReference Laboratories and its GeneDx unit, as well as continued growth in the utilization of our innovative 4Kscore test for predicting the probability of aggressive prostate cancer,” CEO Phillip Frost said in a statement.

With nice financial results the company has several weaknesses such as bad operational performance with low cash flow and uncertainty of investors and traders (we can see it on the chart). We believe in further recovery of the company and recommend to hold $OPK.

#financial $FBC

Flagstar Bancorp, Inc. operates as the holding company for Flagstar Bank, a federally chartered stock savings bank. Flagstar is the largest publicly traded savings bank headquartered in the midwest United States. Flagstar is also a leading mortgage lender and a national leader in the wholesale mortgage business. Here you can study The company Files SEC form 10-Q, Quarterly Report.

On August 1, 2016, Flagstar Bancorp announced the repayment of $371 million of funds, earlier received under the Troubled Asset Relief Program (TARP). The repayment was done through the redemption of $267 million worth of company’s Fixed Rate Cumulative Perpetual Preferred Stock, which was originally issued to the U.S. Department of the Treasury, along with the payment of $104 million in accrued and unpaid dividends. The company provided this transaction by mix of its own internal sources (dividends and insurance debt interests). This announcement prompt the Zacks Investment Research upgrade Michigan-based Flagstar Bancorp, Inc. FBC to a Zacks Rank #1 (Strong Buy).

If to speak about short review of financials, mostly we see positive and stable quarter to quarter changes. Market participants reacted positively with stock price growth. Also the ability and opportunity to repay its funds is very good signal to continue the company’s growth. Recommendation is to hold $FBC stocks.

#financial $RDN

Radian Guaranty Inc., the mortgage insurance subsidiary of Radian Group Inc. and the National Association of Real Estate Brokers (NAREB) announced they prolonged their partnership relations for next two years. Radian provides nationwide training on private mortgage insurance solutions to NAREB’s 90-chapter network. It is unique case in the private mortgage insurance industry which serves to strengthen Radian’s national housing advocacy platform. NAREB, a leader of active real estate trade organizations, covers all qualified real estate practitioners connected with its “Democracy in Housing” mission.

Later the company announced that the Board of Directors approved a regular quarterly dividend on its common stock in the amount of $0.0025 per share, payable on September 7, 2016, to stockholders of record as of August 22, 2016.

At the same time the company disclosed that it would redeem all of the outstanding Radian Group Inc. 9.000% Senior Notes due 2017 on August 12, 2016. Radian announced that pursuant to the Senior Indenture for the Notes, the redemption price for the Notes will be 106.668 percent of the principal amount of Notes outstanding, plus accrued interest. The principal amount of the Notes outstanding is $195,501,000, and the aggregate redemption amount due is $211,322,895.93, including accrued interest through the redemption date. The Notes will be redeemed in full, and on and after August 12, 2016, interest on the Notes will cease to accrue, and all rights of the holders of the Notes, except the right to receive the redemption price, will cease. Payment will be made to holders of the Notes on August 12, 2016, only upon presentation and surrender of the Notes to U.S. Bank National Association, the trustee for the Notes, for cancellation.

Latest news about Radian Group Inc. subsidiary project, dividend policy, and ability to repurchase its debt, current financials reflect the entire performance of the company and give us soundly trading solution. There are very sufficiant and substantial factors to keep $RDN stocks in mind and in investment portfolio.

Strategy results and performance of Crindex M

Nowadays Crindex M covers 5 economy sectors and weights of each sector’s stocks are: Financial 20%, Services 40%, Technology 20%, Healthcare 10% and Utilities 10%. The further development and spreading of our Vision community in the nearest future will cause the more sectoral diversification. Also, Crindex M strategy will include stocks of companies belonging to all sectors and various industries.

We introduce the crowd approach of portfolio forming. Each member of Vision analysts community decides what to do with new ideas by betting on it. If an idea gets necessary amount of bets, the idea is included in Crindex M by size connected with bets of community. As you can see, on August 12, 2016, $SIG, $RDN, $JNPR and $OPK have more crowd support.

The diagram above shows the all current items of Crindex M portfolio (except $AL which has been fixed recently with loss of 6.24%). We proud of nowadays results and claim that our strategy is outperforming community’s expectations. The chart below shows the prove of our confidence.

The chart shows 3 opportunities (on July 1, 2016) to invest in 3 “indices”: S&P 500, S&P Midcap 400 and our Crindex M strategy. Nowadays relative results of such investment decisions are 3.86%, 3.84% and 5.15% accordingly. E.g. our strategy outperforms S&P indices by 1.29–1.31% which is the very subsequent excess profitability.