Scion Asset Management (Michael Burry) discloses updated portfolio positions in 13F filing: New QRTEA IHRT HBI positions, Exited SBSW JD PACW HBAN
Highlights from Q2 2023 filing as compared to Q1 2023:
- New positions in: QRTEA (1.5 mln shares), IHRT (600K), HBI (400K), NEX (400K), WBD (375K), STLA (325K), HPP (~0.25 mln), CRGY (~0.24 mln), CRK (200K), SBLK (~0.18 mln), MGM (150K), SB (~128K), CMRE (125K), VTLE (100K), CVS (100K), EXPE (100K)
- Increased positions in: REAL (to 1.5 mln shares from ~685K shares), GEO (600K from 400K), CI (to 27.5K from 25K)
- Closed positions in: SBSW (from 800K shares), JD (from 250K), PACW (from 250K), HBAN (from ~0.18 mln), CTRA (from 150K), FRCB (from 150K), NOV (from ~0.14 mln), COHR (from 125K), WFC (from 125K), WAL (from 125K), BABA (100K), ZM (100K), COF (75K)
- Decreased positions in: NYCB (to 200K shares from 850K shares), LILAK (to 450K from 800K), SIG (to 85K from 125K)
After Hours Summary: GRND +13.9%, ACLX +9.7%, NVTS +7.2% higher on earnings; LL +13.6% after exploring strategic alternatives; DSGN -33.6%, GETY -14.3% lower on earnings; DFS -3.6% falling after CEO resignsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: GRND +13.9%, ACLX +9.7%, NVTS +7.2%, BOC +2.2%, XP +1.6%, HRTX +0.7%
Companies trading higher in after hours in reaction to news: LL +13.6% (exploring strategic alternatives), SWX +2.7% (Carl Icahn discloses increased position), DHI +2.4% (Berkshire Hathaway discloses new position), RKLB +2.4% (signs deal with NASA), LEN +1.7% (Berkshire Hathaway discloses new position), LYV +1.7% (Lone Pine discloses new position), NVDA +0.9% Saudi Arabia and UAE buying NVDA chips for AI, according to FT), NVR +0.8% (Berkshire Hathaway discloses new position), OTLK +0.6% (files stock offering), SNPS +0.4% (expands strategic partnership with INTC), INTC +0.1% (expands strategic partnership with SNPS), PHR +0.1% (acquires Access eForms)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: DSGN -33.6%, GETY -14.3%, DH -5.5%, SLRN -5%, RUM -3.5%
Companies trading lower in after hours in reaction to news: DFS -3.6% (CEO resigning), HRI -1.7% (Carl Icahn discloses closed position), MOS -1.5% (Soroban Capital Partners discloses closed position), NVTA -1.3% (appoints interim CFO), CRC -1.3% (Corvex Management discloses closed position), EDR -1.1% (Corvex Management discloses closed position), AKAM -0.5% (to offer $1.0 bln convertible notes), ZVIA -0.4% (appoints interim CFO), PSA -0.1% (files mixed shelf)
Neymar joins Saudi’s Al-Hilal from PSG, says state-owned media
Brazilian is arguably biggest football star to move to kingdom’s top league
Brazilian football star Neymar has joined Saudi Arabia’s Al-Hilal, the biggest coup in an unprecedented summer of transfer spending for the kingdom’s league, according to the country’s state-owned media.
Neymar, 31, is arguably the biggest star to move this summer to the Saudi Pro League, the highest level of professional football in the country.
PSG, owned by state-backed Qatar Sports Investments since 2011, is to receive in the region of €90mn for Neymar, according to one person with knowledge of the deal.
He can expect to earn several times the €25mn a year he earned at PSG, the person said. Neymar and PSG did not immediately respond to requests for comment.
Al-Hilal, which finished third in last season’s Saudi Pro League, had already spent roughly €178mn on players this summer, according to Transfermarkt, which tracks signings — more than any other Saudi club.
The Neymar transfer would take Saudi clubs’ spending this summer to more than €600mn.
Saudi Arabia’s $650bn sovereign wealth fund, the Public Investment Fund (PIF), in June took ownership of Al-Hilal and Saudi Pro League rivals Al Ittihad, Al Ahli, and Al Nassr, supercharging their ability to buy players.
The swoop for Neymar is symbolic of how Saudi Arabia has flaunted its financial might in the world’s most popular sport.
It also shows how the PIF has challenged Qatar — host of the 2022 Fifa World Cup — for sporting supremacy.
Saudi state television Al Ekhbariya reported that Neymar would play his first match with Al-Hilal on Saturday against Al-Fayha. Saudi sports officials did not immediately respond to a request for comment.
Neymar’s departure comes as PSG is in the middle of an overhaul that has already seen another big star, Lionel Messi, leave the club after the team failed to win the Champions League despite lavish spending.
Questions have also swirled around whether star French striker Kylian Mbappé will stay on at PSG since he has been embroiled in a spat with the club over not renewing his contract that runs out next year.
Seeking to capitalise, Al-Hilal made a bid of €300mn for him but was rebuffed by the French forward, who was this week “reinstated” into first-team training after “very constructive and positive discussions”.
The sale of Neymar may also afford PSG more time and money to negotiate a planned exit for Mbappé to prevent him from leaving for free next summer.
When PSG signed Neymar from FC Barcelona in 2017, the transfer was seen as a shift in the balance of power from a traditional football superpower to an ambitious state-backed group. The €222mn paid by PSG for Neymar remains the all-time transfer record.
Electric vehicles: Tesla gives China rivals a taste of price-driven competition
Local manufacturers have little choice but to cut prices faster and deeper than the US electric-car maker
What is the cheapest way to buy a Tesla? Buy it in China. Some models are now half the price in China compared with Europe and the US. The US electric-car maker is leading a cut-throat price war among EV makers in China. It is upending the world’s largest car market.
Tesla launched another round of price cuts on Monday. High-end, long-range versions of the Model Y sport utility vehicle dropped by Rmb14,000 to as low as Rmb299,900 ($41,300). Other models are even cheaper when an extended insurance subsidy is accounted for.
Tesla has slashed prices several times in China. The most recent round was last month. The difference this time has been a significant sell-off in local automaker stocks. Shares in China’s biggest EV maker BYD have dropped more than 5 per cent. Smaller peer Leapmotor Technologies is down 6 per cent.
The price war is partly the result of overcapacity. There were more than 500 registered EV makers in China back in 2019. Their prospects appeared to be underpinned partly by low costs. Purely indigenous businesses were not the only contenders. Byton, a Chinese-German electric vehicle brand co-founded by former BMW and Nissan executives, also bet big on China.
Four years later, the picture is bleaker. About 400 of the EV makers have disappeared. Two promising local makers that investors had expected to become China’s Teslas, Li Auto and Xpeng, still run on negative operating margins. BYD, which has become the world’s largest EV maker by sales, still has margins below 5 per cent despite record sales numbers this year.
Customers had been expected to buy Chinese for patriotic reasons. Instead Tesla’s popularity has continued to soar. The company is intent on locking in steep market share. Its sales hit a record in the second quarter.
Local manufacturers have little choice but to cut prices faster and deeper than Tesla. Defensive consolidation is inevitable. It is a good time for investors to cut holdings further.
Country Garden is not a repeat of Evergrande, but it’s in the same hole
Chinese arithmetic ≠ paid in full
German defence group Rheinmetall to ship drones to Ukraine
Company confirms unmanned aerial vehicles cannot be used for attacks on Russian targets
Germany’s largest defence contractor Rheinmetall will ship its Luna drone system to Ukraine before the end of the year, as part of an “extensive” military aid package launched by Berlin last month.
The Düsseldorf-based company said on Monday that the order, worth a low double-digit million amount, would give Kyiv access to “one of the newest systems” for unmanned airborne reconnaissance, real-time object detection and classification.
The announcement came as German chancellor Olaf Scholz has found himself under growing pressure to provide cruise missiles to Ukraine, as the country struggles with its counteroffensive against Russia.
Some of Berlin’s concern stems from a fear of being implicated in a growing number of drone attacks on Moscow. Rheinmetall has confirmed that the Luna drones are pure reconnaissance systems, meaning they cannot be used for attacks.
Germany’s finance minister Christian Lindner on Monday made a surprise visit to Kyiv — his first since Vladimir Putin’s full-scale invasion in February last year — to assure the Ukrainian government that Berlin would continue to steadfastly support it in the battle to repel Russian forces.
“Ukraine must not lose this war,” said Lindner, who leads the liberal Free Democrats (FDP). “This is about the future of the European order of peace and freedom,” he added.
Lindner, who said that his country had committed military support to Ukraine worth more than €12bn, added that the German finance ministry also wanted to support its Ukrainian counterpart in attracting sorely needed foreign direct investment.
Rheinmetall’s Luna system — which the German government has previously used under the name Husar — consists of a ground control station with several drones, as well as a launch catapult, safety nets for landing and equipment for quick repairs. The company said it had a flight time of 12 hours, with a capacity to scope for activity in a range of “several hundred kilometres”.
Oleksandr Dmitriiev, an adviser to Ukraine’s defence minister, described the German drones as a “very powerful system which could give us a strong advantage, because the enemy does not have its capabilities”.
He said Ukraine needed “hundreds of thousands of drones, both the ‘kamikaze’ and surveillance variants” as quickly as possible. Dmitriiev noted that increased use of drones since Russia’s full-scale invasion last year has shown that they can be a “game-changer that can in future wars replace missiles and artillery”.
Germany’s defence industry has been revived by the war in Europe, with companies such as Rheinmetall having become investor darlings not long after being considered largely untouchable due to ESG investment criteria at many funds.
Rheinmetall has been among the biggest beneficiaries of Scholz’s Zeitenwende — or “turning point” — in the defence policy of Europe’s largest economy, which has come alongside a €100bn special military fund.
It has also propelled Rheinmetall’s chief executive Armin Papperger to become one of Europe’s most outspoken defence executives, frequently criticising Berlin and other governments for not placing enough orders for Ukrainian military equipment.
Papperger has said he will eventually want to build Panther tanks on Ukrainian soil and Rheinmetall in May announced a “strategic partnership” with Kyiv-owned defence contractor Ukroboronprom that it said would “build a bridge between Rheinmetall and the existing state defence industry in Ukraine”.
Why Can’t U.S. Ports Get Automated?
American ports are behind Asia and Europe facilities in automating, but there are big hurdles to bringing robots to the docks
When cargo swamped Southern California’s big ports during the Covid pandemic, automated cranes and self-driving container carriers at the Long Beach Container Terminal swung into action.
The robotic equipment shuttled boxes from ships to growing stacks of containers on the docks and placed others on waiting trucks to carry them into inland distribution networks, efficiently handling the imports as cargo backups grew at other terminals at the ports of Los Angeles and Long Beach.
The operation offered a modest moment of stability amid the disruptions and delays that racked U.S. supply chains from 2020 to 2022. Yet few container terminals in Southern California or around the country are pursuing similar forms of automation.
That is frustrating many shipping executives, who point to highly-automated gateways in Asia and Europe, including Shanghai’s Yangshan Port and the Port of Rotterdam in the Netherlands, as models of how automation can help break the bottlenecks that can arise at ports that handle thousands of containers every day.
Some executives say U.S. ports must automate to ensure that the country’s supply chains can remain competitive with other countries that include cost- and timesaving efficiencies from automation at their ports.
“It will happen, whether it is in two years or 20 years, otherwise as a country we can’t keep up,” said Jon Monroe, a consultant who until recently was the North American representative of Transfar Shipping, an ocean carrier backed by Chinese e-commerce giant Alibaba Group Holding.
But U.S. officials say the country’s ports face big hurdles in adding robots, including space constraints, the tough economics of getting a return on hefty investments and, most prominently, fierce opposition from organized labor.
The labor concerns at ports are part of the questions over automation arising in the broader industrial economy as businesses look to use more robotics in a range of logistics operations, from warehouse work to self-driving trucks. Wrangling over automation was one reason recent contract talks between West Coast dockworkers and their employers dragged on for more than a year before the two sides reached a tentative agreement in June.
The hot-button issue is now shifting to the ports on the East Coast and Gulf Coast.
The leader of the union that represents East Coast and Gulf Coast dockworkers, the International Longshoremen’s Association, told a convention in July he intends to build an international coalition of maritime unions to stop automation in maritime operations.
“There’s going to be an explosion and the ILA and the dockers around the world are going to light the fuse,” ILA President Harold Daggett said. “It’s time we put companies out of business that push automation.”
Space is also a concern for U.S. facilities.
Major U.S. ports like Los Angeles, Long Beach and the Port of New York and New Jersey are hemmed in by sprawling metropolitan areas. They are expected to handle ever-growing volumes of cargo with no room to expand, a sharp contrast to some of the world’s most efficient ports, such as Khalifa Port in Abu Dhabi, that are built on greenfield or offshore sites where space is abundant.
The modern terminal at Long Beach can handle twice as many containers per acre than a conventional terminal. Yet it is one of just four terminals at Los Angeles-Long Beach, the nation’s busiest gateway for container trade, that have added automation or that say they plan to do so.
Operators at the other nine terminals at Los Angeles-Long Beach show little enthusiasm for automation.. The businesses, many controlled by ocean carriers or investment funds, say they can’t afford the billions of dollars needed for automated equipment.
They also say their terminals are too small or awkwardly shaped for automation to deliver the operating efficiencies that make an investment worthwhile.
“You’re going to give up a lot of terminal space while you are under construction,” said an official at a Southern California terminal who declined to be identified. “You’re going to have to sustain that loss of revenue for a period of time and getting the return on investment seems pretty difficult.”
Other shipping industry leaders say efficiency gains from automation aren’t guaranteed. Although major U.S. ports such as Los Angeles lag behind peers in Asia in the number of containers they move per hour—a common industry measurement for efficiency—they perform about as well as other advanced ports such as Rotterdam.
Turloch Mooney, a director of S&P Global Market Intelligence, said automation allows ports to use land more efficiently and to deliver greater operating consistency. But, he said, “the idea that automation automatically leads to faster vessel turnaround times certainly isn’t the case.”
China’s Shadow Banks Could Be Another Property Casualty
Missed payments from a well-connected trust firm come as China’s property market sinks again—and banks step back
China’s real-estate downturn is entering a more acute phase again. Problems are also popping up in another perennial trouble spot: the nation’s enormous and opaque shadow banking sector.
The last thing the nation needs now is tighter financial conditions. But if more shadow banking investment products start going belly up, that might happen anyway.
Three companies haven’t received payments from investment products managed by Zhongrong International Trust, according to exchange filings in recent days. Over the weekend, Shanghai-listed Nacity Property Service disclosed that it hasn’t received principal and interest due from a 30 million yuan ($4.2 million) Zhongrong trust product which came due last week. Materials company KBC Corp says it is missing 60 million yuan due from two maturing Zhongrong trust products. And tool manufacturer Xianheng International hasn’t received payments due from one Zhongrong product and two other products from a separate trust firm.
Trust companies, a venerable part of China’s “shadow banking” system of nonbank lenders, make investments on behalf of their clients. In addition to managing assets entrusted to them, many also sell high-yield investment products directly to companies and individuals. They then invest the proceeds in a variety of assets, or lend directly to companies or property projects—often ones that cannot secure regular bank or bond market financing.
The country’s trust industry had around $2.9 trillion of assets as of March, according to the China Trustee Association. About 72% are held by these so-called financing trusts which peddle investment products to wealthy investors and companies.
Unsurprisingly, the worsening crisis in China’s housing market has already dealt a blow to the trust industry. In mid-2019, around 15% of financing trust assets were invested in real estate. But defaults on trust investment products—especially those linked to real estate—picked up over the past couple of years, and many financing trusts scaled back their investments in property. Such outstanding investment in real estate has dropped 62% since 2019, and accounted for only 7.4% of total financing trust assets as of March. But the absolute outstanding amount—around $156 billion—is still rather sizable.
And though the size of the missed payments announced by the three companies isn’t that big in the grand scheme of China’s labyrinthine financial system, it’s still concerning since Zhongrong has some important backers. Zhongrong’s top shareholders are a state-owned enterprise, Jingwei Textile Machinery, and private asset-management company Zhongzhi Enterprise, which is one of the largest in the industry.
That raises the specter of further trouble in the industry: especially since China’s housing sector seems poised to sink even further.
Country Garden, one of the largest surviving private property developers, missed coupons on two of its bonds last week. The developer had been considered one of the sturdier private players remaining in the industry. And the new trouble in the trust sector comes with an additional ominous backdrop: Chinese banks in July extended the smallest amount of net new loans since 2009.
China’s trust sector isn’t quite the heavyweight it was before the shadow banking crackdown of recent years, but it’s still important to watch because it is a source of capital for marginal borrowers—and intimately connected with key sectors such as housing and infrastructure.
Investors would do well to keep a close eye on China’s trusts—especially if, as seems likely, the nation’s property sector takes another turn for the worse in the late summer.