Cover:
-The US nuclear power industry is experiencing a revival, with the government investing billions in the industry, tech luminaries like Bill Gates and OpenAI's Sam Altman backing new companies, and public support increasing. Constellation's stock price has risen 70% in the past year, indicating a rebound in the industry. Other publicly traded nuclear players, such as Canadian mining and nuclear-tech company Cameco, could also benefit as demand for uranium rises. The 94 nuclear reactors in the US generate 18.6% of the country's electricity, enough to power 72M homes. However, nuclear's share of total electricity generation has been declining for years, with a dozen reactors shutting down between 2012 and 2021. The Biden administration has announced a goal to triple the nation's nuclear capacity by 2050. The main reason for nuclear power's resurgence is the growing demand for electricity, particularly in areas like electric vehicles, artificial intelligence, and new factories
Interview:
-Chuck Royce, the founder of Royce Investment Partners, will become a senior advisor at the aforementioned firm end of September. Royce, a renowned small-cap investor, began hunting for small companies almost a decade before Russell Investments created its small-cap index. His $2B fund, now known as Royce Small-Cap, returned an average of 9% a year over the past decade, beating over three-quarters of its peers. However, the past decade has been rough for value managers and small-cap investors, as investors flocked to megacap technology stocks and paid little attention to other investments. The Russell 2000 slightly outperformed the S&P 500 over the period. Royce's recent conversation with Barron's highlighted changes in small-cap investing over his 50-plus years, the possibility of a market rotation, and the importance of management in a stock pick.
Tech Trader:
-Since the launch of ChatGPT in November 2022, Nvidia's stock has soared over six times, despite multiple short declines. The company has accounted for eight of the top 10 largest one-day market cap declines on record. As a high-growth semiconductor stock, massive market value moves are inevitable. Nvidia has also been responsible for five of the top 10 one-day market value gains, including the largest increase ever, a gain of $327B on July 31. Among the largest US companies, Nvidia stands out, with its 122% revenue growth rate in its latest quarter. Despite the drop, Nvidia remains the best-performing stock in the S&P 500 this year, up 107%, while Vistra, the No. 2 performer, is up 91%.
The Trader:
-The S&P 500 index closed the first three trading days of the month in the red, with concerns about the economy, semiconductors, and the looming presidential election affecting the market. Job openings reached 7.7M in July, a level that missed the 8.1M economists had forecast and marked a 3½-year low. Friday's jobs report did little to reassure investors, with the unemployment rate falling to 4.2% but the 140,000 increase in payrolls coming in below expectations. The mixed signals are likely to raise more questions than they answer regarding the health of the US labor market. Tech and semiconductors have turned into a source of consternation following Nvidia's post-earnings weakness and Broadcom's earnings, which delivered a better-than-expected fiscal third quarter but fell short of consensus estimates.
-Casey's General Stores reported fiscal first-quarter earnings of $4.83 a share, a 6% increase from the year-earlier period, reaching $4.1B. Analysts expected earnings of $4.50 a share on revenue of $4.15B. Same-store fuel gallons increased by 0.7%, while inside same-store sales climbed by 2.3%. However, Casey's will not provide an update for its full fiscal-year forecast until it completes the acquisition of Fikes Wholesale, which includes nearly 200 convenience stores. The company previously projected earnings before interest, taxes, depreciation, and amortization to grow by at least 8% and inside same-store sales growth of 3% to 5%. Casey's is at the center of a changing retail landscape that benefits big-chain convenience-store owners, as smaller operators are selling their locations to big players that can boost margins with fresh foods, loyalty programs, and other initiatives. Benchmark analyst John Lawrence has a Buy rating on Casey's shares, suggesting they should trade to $410, up 7.7% from Thursday's close.
Features:aal
-Starbucks' new CEO, Brian Niccol, is expected to bring significant experience to the company, as the former head of Chipotle Mexican Grill has a stellar resume in the restaurant industry. During his six years at Chipotle, Niccol led the company to success with strong store growth and unit economics, resulting in a stock surge of nearly 800%. Starbucks, facing weaker sales in recent quarters, is also facing operational, branding, and product development challenges. Starbucks has expressed confidence in Niccol, with analysts raising their target price for the stock after his appointment. TD Cowen analyst Andrew Charles has a target price of $110, while Lauren Silberman from Deutsche Bank has a $118 price target.
-Investors are enjoying the excitement of adding stocks to the S&P 500, with Palantir Technologies, Dell Technologies, and Erie Indemnity being added to the index. Palantir will replace American Airlines, Dell will replace Etsy, and Erie will replace Bio-Rad Laboratories in the S&P 500 before trading starts on September 23. The added stocks have seen a 7.8% gain in after-hours trading, while Dell has risen 6.2%. Erie, an insurer based in Erie, Pennsylvania, has advanced 3.1%. However, being removed from the index has an opposite impact, with American Airlines down just 0.7% in after-hours trading. The Research Affiliates Deletions ETF (NIXT) is set to begin trading on September 10 and includes companies that get dropped from large-cap indexes for five years. The sugar rush of the pop when a stock gets added is a favorite among investors.
European Trader:
-The European Union (EU) has introduced the Digital Services Act (DSA) and the AI Act to regulate online platforms. The DSA, which took effect for a dozen large online platforms a year ago, is being investigated by the European Commission for deceptive ads, visibility of political content, illegal content, and addictive design. The AI Act, which was recently introduced, is being scrutinized for its potential negative effects on civic discourse. The EU's plan is to become a global regulator by default, with 450M customers and an annual GDP of around $15T at stake. The DSA does not allow regulators to directly censor social media, and platforms must formalize guidelines and report on how they are moderating systemic risks.
Emerging Markets:
-No update
Commodities:
-OPEC and its allies are halting plans to increase oil production, causing crude prices to rise. This delay is a result of the agreement, which means the market is less concerned about oversupply heading into the fall. OPEC+, which includes OPEC allies like Russia, was set to resume 180,000 bpd in October, with a plan to add 2.2M barrels back into the market over the next year. Brent crude and West Texas Intermediate rose 1.3% and 1.4%, respectively. Analysts expect the oil market to be oversupplied next year due to slowing China's growth and higher production in other countries. OPEC+ has suspended over 5M barrels of production since 2022 to keep prices elevated, but is now facing the challenge of deciding when to bring those barrels back. Citi analyst Anthony Yuen warned that if OPEC+ does not provide reassurance that current output cuts would be extended more indefinitely, the market could lose faith in OPEC+ defending the $70 per barrel level.
Streetwise:
-The federal government is considering reclassifying marijuana as a Schedule 3 drug, a category with moderate to low potential for physical and psychological dependence. Currently, it is listed on Schedule 1 with heroin and other drugs. This has led to a decline in pot stocks, with AdvisorShares Pure US Cannabis losing 80% over three years. Change has consistently fallen short of expectations, with cannabis stock enthusiasm peaking in early 2021 following a Georgia runoff Senate election. Despite hopes for legalization, little progress has been made. State-approved cannabis companies cannot secure ordinary stock listings or operate across state lines, and they must pay taxes. Despite these taxes, special rules for Schedule 1 drug businesses disallow many ordinary business deductions, affecting businesses, especially retailers, with tax rates over 70%. Legalization critics argue that some states have made significant progress, leaving a small number of struggling, permitted shops among thriving, illicit ones.