Barron’s Weekend Summary: An exclusive analysis by Barron’s shows that the profits of gas stations are actually down this year.
Cover Story:
-An exclusive analysis by Barron’s shows that the profits of gas stations are actually down this year. And that holds important implications for Washington, where President Joe Biden and his allies have suggested that drivers are being gouged by gas stations. Democrats in both houses of Congress have introduced price-gouging legislation that would put fuel sellers, both wholesale and retail, under greater scrutiny.
Interview:
Jan van Eck tries to understand the future by drawing on the past. In the summer of 2020, as Covid ravaged communities and disrupted workplaces, the CEO of VanEck, an $80.4B asset manager, decided that the firm’s summer interns needed to take a step into the past and learn some market history. He created and taught a 16-unit course on the history of finance, beginning with one of his favorite historical figures, Alexander Hamilton: “I’m always looking for disruptive, transformative trends or technologies or political developments,” says van Eck. “History can help us identify different scenarios and outcomes.”
Tech Trader:
-Aside from retailers Walmart and Amazon.com, Apple generates more revenue than any other American company. This year, the total should approach $400B. The business generates huge amounts of cash and increasingly returns it to shareholders. But investors have made Apple the country’s most highly valued company largely due to its ability to innovate—to deliver new ideas that can drive revenue even higher.
The Trader:
-Despite the S&P 500SPX’s 18% drop this year, corporations continue to buy back their shares, or announce plans to do so. Most recently, AmerisourceBergen announced a $1.0B buyback plan on June 1, while Broadcom announced a $10B plan on May 26, and Nvidia increased its plan to $15B on May 23. In fact, more than $300B of share repurchases have been announced over the past three months, according to Deutsche Bank data.
-The Federal Reserve wants to fight inflation. But it wants to observe a different measure of inflation: the personal consumption expenditure price index, which is reported by the Bureau of Economic Analysis as part of its monthly personal income and outlays report. That measure of inflation increased 0.24% in April, for a 6.3% year-over-year gain. Excluding food and energy prices, the core PCE index was up 0.34% in April and up 4.9% from a year earlier. PCE is lower than CPI, but it’s still far too hot, and the next reading, due June 30, is unlikely to give an all-clear signal.
Features:
Exxon Mobil is expected to generate about $41B of net income in 2022, up from $23B last year. But Exxon’s profits should trail well behind Apple, Microsoft, Alphabet, and JPMorgan Chase.
With gasoline prices hitting a record $5/gallon and inflation running at more than 8%, energy companies are taking political heat again with some in Washington raising the possibility of a UK-style windfall profits tax.
-The US housing sector is in the midst of the biggest slowdown in over a decade, one economist says. But don’t expect prices to fall back down to earth just yet. “The U.S. housing market is at the beginning stages of the most significant contraction in activity since 2006,’” Len Kiefer, deputy chief economist at Freddie Mac, tweeted. “It hasn’t shown up in many data series yet, but mortgage applications are pointing to a large decline over summer,” he explained.
European Trader:
Linde is one of three major industrial-gas makers, alongside Air Products & Chemicals and Air Liquide. The relative scarcity of such providers ensures that Linde is able to pass on higher raw materials costs, and the diversity of its projects makes it less susceptible to swings in the economic outlook. What’s more, despite dealing in chemicals and carbon-emitting natural resources, Linde scores highly in the MSCI environmental, social, and governance rating. That’s due to the kinds of projects Linde works on—carbon capture and storage, for example. The company also has ambitious plans to reduce the greenhouse gases it emits and to double its purchase of renewable energy by 2028.
Emerging Markets:
-In Mexico the 68-year-old President Andres Manuel Lopez Obrador, a favorite to win a second presidential term in 2024, has been surprisingly successful in combining popular social largess with a tight fiscal belt, a mixture he labels “republican austerity.” Half of Mexico’s 130M citizens have benefited from either cash transfers or minimum wage increases since AMLO took office in 2018, Wood estimates. The president found extra cash by collecting back taxes and cutting state salaries, among other means. He refrained from stimulus to counter the effects of Covid.
Commodities:
-Risk-tolerant investors should consider selling short November-dated random- length lumber futures contracts on the CME futures exchange. Alternatively, they might short stocks of lumber companies such as those held in the iShares Global Timber & Forestry ETF. Lumber prices have been on a roller-coaster over the past couple of years. In May 2021, lumber futures reached an all-time high price of $1,711, almost six-times higher than the $300 of April 2020, according to TradingEconomics.com. Prices have subdued considerably since that peak as lumber mills started to operate at full capacity and the housing market slowed.
Streetwise:
-This week Jack Hough looks at the problems of people trying to lose weight and the products they can take to facilitate their related dieting efforts: “There are powerful new medicines for weight loss. I’ll pass, for reasons I’ll explain, but Wall Street is making colossal sales projections for two key pharma players. The first is Denmark’s Novo Nordisk, the world’s top maker of insulin. For more than a decade, it has sold drugs thathelp manage blood sugar levels, with the happy side effect of weight loss, so it has won approvals for both Type 2 diabetes and obesity. The drugs are called GLP-1 agonists, meaning they mimic a certain hormone that both stimulates insulin secretion and causes a feeling of fullness.