Cover:
-Healthcare stocks have seen a surge in interest this year, with investors likely to remain invested in the sector due to the slowing economy and falling interest rates. The sector's lackluster performance in 2022 and '23, along with a bear market in biotech, has left many pharmaceutical, biotech, and life-sciences companies' shares alarmingly cheap. However, advances in diagnostics, drug development, and delivery are turning some once-fatal diseases into chronic conditions, offering fresh hope to millions of patients and their clinicians. The regulatory environment is also causing concern due to the introduction of Medicare drug-price negotiations, but regulators are likely to be less skeptical of mergers and acquisitions in the next administration. Lower interest rates will make financing more affordable, especially for young companies that desperately need funding. This year's Roundtable featured four healthcare investment experts, who made the case for 21 healthcare companies and their shares.
Interview:
-No update
Tech Trader:
-Intel has regained its position as the chip king for most of semiconductor history, with its latest chips for servers and mobile PCs receiving universal praise from tech experts. Intel's latest Xeon processors now appear to be market leading for the first time this decade, marking the first time in about 86 months that Intel has a leadership server x86 CPU again. The bigger story is Intel's new mobile chip called Lunar Lake, which looks like a home run in the thin-and-light laptop category. The chip enables fantastic battery life and strong computing and graphics performance. Intel's Lunar Lake should help fend off Qualcomm's recent attempts to take share in the laptop market. However, Lunar Lake also demonstrates a continued area of weakness: the chip is designed by Intel but not manufactured by the company. Intel has outsourced production for the processor to Taiwan Semiconductor Manufacturing, which is a temporary solution. Intel needs its nascent chip-making business called Intel Foundry to succeed, and it cannot build Intel's own best chips if it can't build Intel's own best chips.
The Trader:
-General Motors has seen a strong year, with its stock up nearly 30% in 2024. This is due to a share-repurchase program that has lifted investor sentiment. However, as the Big Three and other global auto makers report their September sales, concerns are growing that GM's stock may soon stall along with its peers. Industry research firm Cox Automotive expects September auto sales to tumble 16% from August and 11% from a year ago. Bernstein analyst Daniel Roeska downgraded GM to a Hold from a Buy, while Morgan Stanley analyst Adam Jonas slashed price targets on GM, Ford, and electric-vehicle maker Rivian Automotive, arguing that inventories are on an upward slope and the prices of new vehicles are still out of reach for many households.
-The market has been generally bullish in September, the worst month for stocks, with the Federal Reserve's rate cut and the promise of more easing reinforcing hopes for a soft landing for the US economy. The Dow Jones Industrial Average and the S&P 500 index are at record highs, while the Nasdaq Composite is near one. New stimulus from China has also contributed to a rebound for many top Chinese tech stocks. However, October is another volatile month with a slew of jobs numbers due out, including the Job Openings and Labor Turnover Survey, ADP's report on private-sector jobs growth, weekly jobless claims, and the September nonfarm payrolls jobs report.
Features:
-The Federal Reserve has cut its interest rate by half a point, easing the burden on consumers and particularly benefiting younger Americans. The move is part of the central bank's shift from battling high inflation to maintaining a healthy job market. Although the rate cut doesn't mean a low interest rate environment, it does mean a lower rate environment, making it easier for younger households to make large purchases like houses, cars, and education. Liz Gillette, founder and senior financial advisor with Curio Wealth, believes that most people in their 20s and 30s will be happy with the reduction in rates. Lower interest rates also help first-time home buyers, who have struggled with mortgage rates reaching their highest levels in over two decades in 2023.
-Berkshire Hathaway has reduced its stake in Bank of America by more than 20%, selling 11.7M shares for $460M. The company now holds 802.7M shares of Bank of America, worth around $31.6B. Berkshire has sold nearly $9.5B of Bank of America stock since mid-July, with 230M shares sold. CEO Warren Buffett is aiming to reduce the stake to less than 10%, allowing Berkshire to file for changes in its holding within two business days. The 10% threshold is roughly 776M shares, which Berkshire has sold on each of the past nine trading sessions. The stock has fallen about 10% since the sales began on July 17.
-Car makers are facing a decline in sales growth due to tighter consumer spending. Volkswagen has cut its full-year financial guidance, predicting 2024 sales of around EUR 320B ($356B), down from EUR 322.3B in 2023. The company expects nine million vehicles and 6% profit margins, down from 7% in 2023. This guidance falls below Wall Street estimates compiled by FactSet. The shares of VW and Mercedes-Benz have been affected by the guidance cuts. Mercedes-Benz cited a weakening Chinese market, with total new car sales down roughly 5% year over year. European car sales also dropped almost 17% year over year in August, with Volkswagen's sales dropping 13% and Mercedes sales falling 10%. However, US car sales held up better in August, rising about 7.6% year over year. The relative strength of the U.S. market is better news for Ford Motor than General Motors, as it has the potential to be dragged down by both its Chinese and European businesses.
European Trader:
-Google has filed a formal antitrust complaint with the European Union's top regulator over Microsoft's commercial practices in the cloud-computing industry. The complaint alleges anticompetitive practices that lock customers into Microsoft's Azure cloud platform. Google is the third-largest player in the cloud-computing market, behind Microsoft and Amazon's Web Services. The complaint claims that customers using Windows Server products who want to switch to the cloud are unfairly penalized if they want to use competing cloud services due to Microsoft's licensing conditions. Microsoft has already settled a separate complaint from a trade group representing European cloud-services providers over similar issues, agreeing to change some of its licensing practices.
Emerging Markets:
-No update
Commodities:
-Costco Wholesale, a discount chain known for its jumbo packs of paper towels and salmon, has seen a surge in gold sales, despite the ongoing bull market for gold. The company started selling 1-ounce gold bars last fall, coinciding with a bull market for gold. Wall Street analysts estimated Costco was hawking up to $200M a month worth of gold. Costco's gold sales were up "double digits" in the quarter, along with other categories like jewelry, toys, and housewares. The 24-karat gold bars are sold exclusively to Costco members and only through its website. The price varies based on market conditions, with the bars being priced at $2,699.99 on the retailer's website, although they were listed as out of stock. Gold has been one of the market's best-performing assets in 2024, returning nearly 30%, compared to about 21% for the S&P 500.
Streetwise:
-Sallie Mae, a US government-backed lender, has been attracting attention due to the student loan crisis. The company has been impacted by delinquencies, forbearance, and blocked attempts at forgiveness, as well as rival lenders fleeing the market. Over the past five years, Sallie Mae's stock has returned 164%, compared to 108% for the S&P 500 index. BofA Securities predicts a 24% price gain over the coming year, with a dividend yield of 2%. The government began making student loans in the 1950s to boost the supply of scientific brains during the Cold War. The government then expanded eligibility and began subsidizing and guaranteeing loans made by private companies. In the '90s, the government returned to direct lending to reduce costs, and by 2010, it switched entirely to direct loans. Sallie Mae controls just over half of the market for private loans, which make up 98% of its balance sheet. The average FICO score at approval was 752, and 80% of loans were co-signed.