Barron’s Weekend Summary: Thanks to Parlay Bets, Instead of simply gambling on the winner of a game, bettors can wrap predictions for every game
Cover Story:
-Thanks to Parlay Bets, Instead of simply gambling on the winner of a game, bettors can wrap predictions for every game on the schedule into one bet, or create custom wagers that their favorite quarterback will throw three touchdowns and the defense will sack the other quarterback twice. Sports-betting websites and apps are now offering thousands of bets a day and combining the outcomes of several sporting events together into megabets that could cover four years of college tuition if they pay off. They hardly ever do.
Interview:
-Brown University economist John N. Friedman talks to Barron’s about the findings of a new study on the economic consequences of elite college degrees. While less than 1% of Americans attend these schools, their graduates account disproportionately for the nation’s wealthiest citizens, scholars, and leaders, including a quarter of US Senators, half of all Rhodes scholars, and three-fourths of the Supreme Court justices appointed in the past 50 years. Ivy and Ivy-plus graduates are also three times more likely to work for the nation’s most illustrious employers.
Tech Trader:
-Walt Disney CEO Bob Iger is trying to turn Disney around, but investors aren’t seeing much to like as the stock trails the S&P 500 by more than 10 percentage points this year. The company is set on pulling more value out of the company’s considerable entertainment assets, a potential stock catalyst that Barron’s highlighted in a recent cover story about Disney. Despite mixed quarterly results this past week, Disney shares were up after the earnings report because the company is yet again raising prices for its Disney+ streaming service. Disney+ growth in the U.S. and Canada has gone flat, ending the latest quarter with 46 million subscribers in the two countries combined. International subscriber growth was marginally better, up 2%. (That’s assuming you exclude Disney+ Hotstar, which serves the Indian market; that service saw subscribers fall 24% in the quarter, after it lost the rights to stream Indian Premier League cricket matches.)
The Trader:
August is living up to its reputation as a tough month for stocks—but it might also be setting investors up for the next opportunity. This past week was full of false breakouts and aborted breakdowns, ultimately creating a lot of noise without providing much information, particularly with trading volume low in August. But it was required if the stock market were going to be able to continue higher. “A lot of people are in a wait-and-see mode,” says CappThesis founder and market technician Frank Cappelleri. “This was needed to see more constructive bullish patterns form.” It might take a while to get to that point, and investors should use this holding pattern as an opportunity to do some pruning of stocks that have run up while adding to sectors that had been less loved. Healthcare and utilities come to mind.
-H&R Block had a tough start to the year. Its shares had dropped 23% through mid-May amid worries about the prospect of the Internal Revenue Service offering free online tax filings and a lackluster fiscal third-quarter earnings report. The stock has since recouped most of those losses and, at $36.63, is down only 2.4% in 2023 as IRS competition fears have faded. The gains can keep coming. Even with its recent advance, H&R Block shares look cheap, trading at 8.7 times forecast earnings, below its five-year average of 10.2 times. Closing that gap implies the potential for a 17% gain in the share price from recent trading levels. H&R Block has several avenues for getting there.
Features:
-AI technology isn’t yet running money on its own, but a study conducted by two academics in South Korea shows a portfolio constructed using ChatGPT outperformed random stock selection as a portfolio manager. Among other things, ChatGPT was better at picking diversified assets, producing a more efficient portfolio. In another experiment, a dummy portfolio of stocks selected by ChatGPT significantly outperformed some of the leading investment funds in the UK As of March 6 to April 28, the continuing study showed that the AI-generated portfolio increased in value by 4.9%, surpassing the 3% gains of the S&P 500 index, while major UK investment funds lost 0.8%, over the same period. As of July 27, the ChatGPT fund had racked up nearly a10% return.
-Rent, don’t buy. The higher price tags have eroded some of the financial incentive to buy a home versus renting one for most buyers, a Zillow analysis of monthly costs provided to Barron’s shows. And the math is even worse for first-time buyers. Buyers purchasing the typical home with a 20% down payment have seen their savings shrink compared with renting since 2019, while those paying with a 5% down payment are facing monthly mortgage costs that are broadly higher than rent prices. The Zillow data used the average 30-year fixed mortgage rate and two Zillow indexes, one measuring the typical home value and the other measuring the typical rent, to determine basic monthly payments.
Europe:
-Stock in Versace’s owner, Capri Holdings, surged more than 50% Thursday after it agreed to be acquired for $8.5B by Tapestry , parent of the Coach brand. Capri shareholders will receive $57 per share in cash, a 65% premium to Wednesday’s closing price. Capri’s market capitalization at Wednesday’s close was $4.06B. The merger with Tapestry would leave the combined company better placed to compete with the likes of LVMH Moet Hennessy Louis Vuitton and Gucci parent Kering. The transaction is expected to close in calendar 2024.
Capri, which also owns fashion brands Michael Kors and Jimmy Choo, was due to report fiscal-first-quarter earnings Tuesday but rescheduled to Thursday.
Emerging Markets:
No update this week
Commodities:
-Retail gasoline prices are inching up again, to a national average of $3.829 a gallon on Monday afternoon, according to AAA. Pump prices are 8.3% higher, or 29 cents a gallon more, than last month’s average of $3.537 a gallon. While lower than last year’s high of more than $5 a gallon, it’s still a blow to household budgets, especially during the summer when people are driving more for vacations and excursions. Falling energy prices earlier this year helped cut growth in the consumer price index to a 3% annual rate in June. One of the main triggers for higher gasoline prices appears to be Russia’s war in Ukraine while Saudi Arabia and Russia have also announced production cuts.